As Canadian oil firms prepare to start reporting what would surely be bleak Q1 earnings and short-term outlooks, analysts expect that the companies will announce curtailments in production to the tune of around 1 million bpd in the coming months given the demand loss and low oil prices.
“It is hard for us to fathom how Western Canadian crude production can avoid a ~1 million+ bbl/d drop in output in the coming weeks,” Michael Dunn, an analyst at Stifel FirstEnergy, said in a note, as carried by Bloomberg.
Companies in Canada have already reacted to the oil price plunge, but analysts and investors will be looking for further clues in the earnings reports about how they plan to go through the second major oil crisis in just five years.
Husky Energy has cut its budget and production, Cenovus Energy slashed its 2020 capital spending by around 32 percent, Suncor cut capital guidance, and so did Canadian Natural Resources. Athabasca Oil Corporation also cut its capex and proactively curtailed heavy oil production at Hangingstone.
“I expect to see cuts everywhere … It’s a survival game right now,” Athabasca Oil’s CEO Rob Broen told Calgary Herald columnist Chris Varcoe last month.
“Being price takers has made us uniquely vulnerable to dramatic shifts in the oil price and what we’re seeing today will have immediate negative impacts on Canada’s economy,” Tim McMillan, President and CEO at the Canadian Association of Petroleum Producers (CAPP), said in early March when international oil prices crashed 25 percent.
According to Rystad Energy estimates, “Canadian curtailments are already in full swing, and the building storage crisis will continue to test operations as we approach May when global storage is likely to reach full functional capacity. Unless more significant upstream volumes are cut globally, Canadian curtailments may ultimately exceed 1.3 million bpd in the second quarter,” Rystad Energy’s senior analyst Thomas Liles said earlier this week.
