The CEO of Imperial Oil Ltd. says the company will be cautious in ramping up spending despite a recovery in fuel demand following the collapse earlier this year amid the COVID-19 pandemic lockdowns.
Brad Corson said the company can’t talk about whether it will reverse this year’s spending cuts next year, but it’s unlikely spending will return to pre-COVID levels in 2021 because the market outlook remains so uncertain.
“A big question right now is what will the COVID situation look like as we finish up this year and move into next year,” he said on a conference call to discuss second-quarter results.
“Because of that, we’re going to maintain flexibility with our plans, just as we did this year.”
The caution is consistent with outlooks from the CEOs of Calgary-based rivals Suncor Energy Inc. and Husky Energy Corp. — companies that also own both oil production and refineries — on their recent second-quarter conference calls.
Corson said Imperial is well on the way to meeting its goal announced in March to cut $500 million from its 2020 capital spending plan of between $1.6 billion and $1.7 billion and find another $500 million in operating savings this year.
On Friday, Imperial reported a net loss of $526 million on revenue of $3.7 billion in the three months ended June 30, down from a net profit of $1.2 billion on revenue of $9.26 billion in the year-earlier period.
Analysts had expected a $188 million net loss and revenue of $4.24 billion, according to markets data firm Refinitiv.
Imperial, which is 69.6 per cent owned by American giant Exxon Mobil Corp., blamed the performance on lower oil prices and refinery profit margins due to the COVID-19-related economic slump.
Refinery utilization rates were about 66 per cent for the quarter thanks to demand weakness and maintenance interruptions, it said.
Corson said demand for Imperial’s gasoline and diesel have recovered to about 90 per cent of normal levels but jet fuel demand is still only at about one-third.
The company reported production of 347,000 barrels of oil equivalent per day in the second quarter, down from 400,000 boe/d a year earlier, as maintenance shutdowns at its Kearl oilsands mine were extended to better control spread of the coronavirus after an outbreak there.
Kearl’s average production of 190,000 barrels of oil per day was higher than expected due to the recent addition of supplemental ore crushers at the mine, Corson said.
The mine’s production peaked at 300,000 bpd during a two-week period between maintenance shutdowns at its two oilsands processing plants and it will be well-positioned to maximize production when the second plant is back online again in late August, he said.
The company estimates Kearl production will average about 220,000 bpd this year, down from earlier forecasts of 240,000 bpd.
Imperial Oil shares, which have fallen 37 per cent since Dec. 31, lost 96 cents or 4.4 per cent at $21.05 at afternoon trading in Toronto.