Canada’s energy sector stops production as low crude oil prices persist

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Calgary energy companies continue to cut output, cut expenses and cut costs as volatile oil prices persistently remain below profitable levels.

Enerplus Corp. announced Wednesday that it will cut its capital budget by an additional $ 25 million to $ 300 million, leaving it at around 55% of its original $ 545 million.

In an announcement two days after US benchmark oil futures fell into negative territory for the first time in history, the company said it was also closing wells to avoid producing on the current market.

Meanwhile, producer CEO Whitecap Resources Inc. told investors Wednesday at its annual virtual general meeting that it is also identifying operations to be temporarily closed and has decided to cut administrative and administrative costs by at least 10%. ‘exploitation.

“With personnel safety as a backdrop, we intentionally focus on the short-term survival of the business but, more importantly, what we look like when we are going through the current economic crisis,” said Grant Fagerheim during the meeting, held via webcast to reduce the risk of the spread of the COVID-19 pandemic.

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“We expect this quarter to be perhaps the most difficult to manage … we expect the energy space to be very different in the future.”



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Consolidation by mergers and acquisitions in the sector is likely to accelerate due to economic stress on the weaker players, but not after oil prices return to normal levels, he said.

Keyera Corp. announced on Wednesday that it and its partner, SemCAMS Midstream ULC, will delay the start of construction of their $ 1.3 billion condensate and natural gas pipeline network in the northwest Alberta for one year until the second half of 2021.

READ MORE: More stable prices don’t cure western Canadian natural gas producers’ problems

Benchmark price for West Texas Intermediate oil firmed on Wednesday, up more than 20% from the settlement price of US $ 10.01 per barrel on Tuesday, but has been down more than 75% since 1st January.

Investors’ attention will be focused on further production and spending cuts as the energy sector enters its first quarter and next reporting season this week, analysts at Tudor Pickering Holt & Co. have said. in a report on Wednesday.

“We expect to hear from each of our cover names on the magnitude of the barrels to be closed, apparently without any barrel safe from the regional differential [oil price] weakness, “he said.

“In addition, although the sharp drop in crude has so far resulted in good capital reductions, we suspect that a second round of reductions may be on the horizon, as the differential weakness increases the pressures on the flows of Treasury. “

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Analysts say global oil prices plunged this week due to oversupply concerns as storage tanks are almost full and refineries cut production amid slowing economic activity during the pandemic COVID-19.

A recent OPEC and other countries’ deal to cut production does not go far enough to balance supply and declining demand, they say.

READ MORE: Teck Resources Suffers $ 312 Million Loss on Impairment of Oil Sands Mine Interest

Enerplus said it has begun temporarily closing some wells in Montana and North Dakota, as well as in its Canadian operations.

April production is forecast to average about 88,000 barrels of oil equivalent per day, compared to an average of 98,200 boe / d in the first three months of 2020.

Larger, unspecified production cuts are expected in May – RBC analyst Greg Pardy said he expects oil and liquid closings at Enerplus to average 30,000 barrels a day at second trimester.

It is not yet known how much production Whitecap will take offline, said Fagerheim.

The company is aiming for a minimum reduction of 10% in administrative costs, including a voluntary reduction of 10% in executive salaries and directors’ cash compensation, he said.

Whitecap is also talking to provincial governments in Alberta and Saskatchewan about streamlining royalty payments, he added.

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© 2020 The Canadian Press



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