Canadian energy companies Cenovus and Husky posted huge quarterly losses on Wednesday, hit by the double whammy of a significant drop in demand for for crude oil caused by the coronavirus outbreak and a price war between Saudi Arabia and Russia.
Cenovus Energy said it lost $1.8 billion in the three months between January and March, as an increase in the amount of oil the company produced was offset by a huge plunge in the price of a barrel of oil.
In the same period a year ago, Cenovus posted a slight profit of $110 million.
It was a similar story at Husky Energy, which also posted earnings on Wednesday that showed a quarterly loss of $1.7 billion for the quarter ended March 31, compared with a profit of $328 million a year earlier.
Cenovus previously announced a temporary suspension of its dividend to deal with the slowdown. Husky made a similar move on Wednesday, slashing its quarterly payout to shareholders by 90 per cent from 12.5 cents per share, per quarter, to 1.25 cents from now on.
Below zero last week
Oil prices have plummeted in recent months, as COVID-19 caused a huge drop-off in demand for energy, and the pandemic has hit North America just as Saudi Arabia and Russia started a price war to gain world market share.
Those two factors have combined to push the price of oil lower than it has ever been. At one point early last week, the price of oil went below $0 US per barrel.
Husky chief executive Rob Peabody said the company was hit hard by that dramatic plunge in the price of oil.
“We have acted quickly to cut our planned capital spending by half, safely shut in production and reduce refinery throughput to avoid cash-negative margins, with a view that global oil and refined product prices could remain under pressure for a while,” Peabody said.
Both companies produced more oil in the quarter, but the massive sell-off in prices more than offset those gains. Cenovus said it produced the equivalent of 482,594 barrels of oil per day during the quarter. Husky, meanwhile, pumped about 299,000 barrels per day.
Cenovus said on average, it took in $22.74 for every barrel of oil it produced during the quarter, a plunge of 54 per cent from the same period last year.
And prices have fallen even more since the end of March, with the price of West Texas Intermediate at just over $15 US a barrel on Wednesday. Oil from Canada’s oilsands, meanwhile, is going for just $7.57 US a barrel.
Shares in both companies gained on the TSX on Wednesday, with Cenovus up about five per cent and Husky up seven per cent. But both companies have lost more than two-thirds of their value in the past year.