Husky Energy Inc and Crescent Point Energy Corp on Monday slashed 2020 capital spending for a second time and throttled back production, days after Canada’s federal government offered financial relief to the hard-hit sector.
Oil and gas producers are cutting output and spending to cope with the fallout from sweeping measures to contain the spread of the novel coronavirus, which has grounded commercial aircraft and shut down major cities.
Canada on Friday announced $2.5 billion in aid to help the industry, whose steam-driven extraction sites have borne the brunt of output cuts so far. .
The relief is targeted mainly at smaller companies and includes commercial loans worth $15 million to $60 million each offered by the Business Development Bank of Canada.
“We believe the liquidity measures largely support smaller industry firms and expect ongoing discussions between industry and governments to refine and expand programs in the coming weeks,” Royal Bank of Canada analysts led by Greg Pardy said in a Monday note.
Husky, whose majority investor is Hong Kong tycoon Li Ka-shing, reduced spending for a second time with an additional $700 million in cuts, citing a hit to oil prices from the coronavirus outbreak.
The Calgary, Alberta-based company said it now expects to spend between $1.6 billion and $1.8 billion, about half its earlier estimate of $3.2 billion to $3.4 billion.
Husky Energy also said it would also reduce production by more than 80,000 barrels per day, most of which is heavy oil.
Husky had previously cut its 2020 capital spending budget by $900 million in March, citing challenging global market conditions.
The company also suspended a strategic review of its Canadian retail and commercial fuels unit, and said it would delay maintenance work at its Sunrise oil sands plant.
A new $500 million term loan would increase total liquidity towards $5.2 billion, it said.
Credit Suisse analyst Manav Gupta said Husky should follow Cenovus Energy Inc’s lead and scrap its dividend to preserve cash.
Smaller-rival Crescent Point Energy Corp slashed its spending forecast for 2020 by another $75 million, or 10 per cent, to a range of $650 million to $700 million. Earlier in March, the company had lowered its estimates by 35 per cent.
Crescent Point also cut by 15 per cent its annual production guidance primarily due to the shut in of higher-cost production.