Canadian Manufacturing

List of oil producers cutting budgets continues to grow

The budget cuts are continuing in the wake of the sharp plunge in oil prices earlier this week

March 13, 2020  The Canadian Press

CALGARY – Canada’s oil and gas producers are continuing to cut billions of dollars from capital spending budgets and reduce payouts to investors in the wake of this week’s sharp plunge in oil prices.

Calgary-based ARC Resources Ltd. announced on March 13 that it will chop its 2020 spending budget from $500 million to no more than $300 million and cut its monthly dividend to two cents from five cents.

“The rapid decline in global commodity prices has created a significant headwind for energy producers, and we feel it is prudent to adjust our spending levels in order to protect our balance sheet and to ensure the sustainability of our business,” said ARC CEO Terry Anderson in a statement.

On March 12, Husky Energy Inc. announced it will cut capital spending this year by $900 million to about $2.4 billion, and said it will aim to find another $100 million in cost-saving measures.

The company slashed about 370 jobs last year and announced in Dec. 2019 it would cut capital spending plans for 2020 and 2021 by about $500 million from previous guidance due to changing market conditions.

Investment in resource plays and conventional heavy oil projects in Western Canada has been halted, Husky said, adding it has also suspended drilling of sustaining pads at all thermal oilsands operations.

Oil producers have been trimming spending and focusing on cost cutting for several years after oil prices fell dramatically in 2015 and 2016.

The cuts come as the novel coronavirus outbreak erodes global energy demand and a price war between top producers Saudi Arabia and Russia threatens to flood the oil market with cheap barrels.

Smaller Calgary-based energy players are also cutting budgets and payouts.

Work lodgings provider Horizon North Logistics Inc. announced it is cutting its dividend to zero and CES Energy Solutions Corp., which sells production chemicals and drilling fluid, slashed its shareholder payouts by 75%.

Calgary-based Gran Tierra Energy Inc. also said it plans to shut down wells producing 1,000 to 1,500 barrels of oil per day as it cuts its 2020 spending plan from about US$185 million to a “maintenance range” of between US$60 million and US$80 million.