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article imageCanadian oil firms get ready to reveal first-quarter earnings

By Karen Graham     Apr 28, 2020 in Business
Canadian oilpatch companies are facing uncharted territory as they prepare to start reporting what would surely be bleak first-quarter earnings and short-term outlooks, seeing as there is too much oil being pumped and not enough demand for it.
Analysts are expecting companies to announce a curtailment of around one million barrels per day over the next few months, given the oversupply and lack of demand.
“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.
It seems that if the experts are all waiting with baited breath to see how the earnings reports turn out - Will there be profits, or perhaps, no profits? Whatever the answer, it will certainly be a sign of the industry's financial health going forward, according to CBC Canada.
Actually, everyone is waiting to see what the different oil companies have up their sleeves for how they plan to get through the second major oil crisis in just five years, and in particular, the rest of this year. “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.
So far, Husky Energy has cut its budget and production, while Cenovus Energy slashed its 2020 capital spending by around 32 percent, according to Oil Price.
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.
Suncor Edmonton refinery
Suncor Edmonton refinery
Suncor / Newsroom
Oil prices fall deeper into the red
Just four months ago, West Texas Intermediate (WTI), the North American benchmark, averaged about $57 per barrel. By March, WTI had fallen to $30 a barrel. In the same time frame, heavy oil in Alberta was selling for $37 a barrel at the beginning of the year, and it fell to $13 in March.
Today, crude oil prices continue their downward spiral as West Texas Intermediate fell 3.5 percent to $12.33 a barrel, after falling earlier to about $10 a barrel. Brent crude also fell Tuesday before recovering. The global benchmark was last up more than 1.0 percent at $20.22 a barrel.
As for Canadian oilpatch companies, investors will be looking to see how they handle this latest oil crisis and what kind of plans - if any - are being put into place. "Everybody recognizes these [earnings] will stink," said Denton Cinquegrana, the chief oil analyst with OPIS by IHS Markit. "You look for the cleanest of the dirty shirts."
Cinquegrana thinks the comments from companies will likely be more interesting than the quarterly earnings themselves since the focus will be on what strategies executives think will make the most sense to handling the crisis. "It's tough out there right now," he said. "What's the plan going forward?"
More about canadian oil companies, firstquarter earnings, historically low prices, financial health, survival plans
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