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Canada’s Husky Energy is the latest North American oil firm to slash spending amid collapsing oil prices, saying that it is reducing its capital budget by US$648 million (C$900 million) for 2020 and cutting or shutting in production where it is cash negative.
In light of the challenging market conditions—with oil prices down 30 percent from last Friday after the breakup of the OPEC+ deal and the relentless spread of the coronavirus outbreak—Husky Energy is cutting its capital spending to US$1.66 billion-US$1.8 billion (C$2.3 billion-C$2.5 billion) from previous guidance of US$2.3 billion-US$2.45 billion (C$3.2 billion-C$3.4 billion). The company also lowered its production guidance to 275,000 bpd–300,000 bpd from 295,000 bpd-310,000 bpd expected earlier.
Husky Energy is also suspending investment in resource plays and conventional heavy oil projects in Western Canada and halting drilling of sustaining pads at all thermal operations.
Husky Energy’s budget and production reductions came after Cenovus Energy said as early as on Monday that it is slashing its 2020 capital spending by around 32 percent in order to maintain the strength of its balance sheet in the price collapse.
“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 on Monday.
Drillers in Canada and the United States are turning into the first collateral victim of the Saudi-Russia oil price war as the former allies vow to turn on the taps in April and flood an already oversupplied market reeling from depressed demand amid the Covid-19 outbreak.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.