Cenovus Energy - President and CEO, Alex Pourbaix
President and CEO, Alex Pourbaix
Source: Cleveland
  • Cenovus Energy has cut its capital spending by more than 30 per cent, following yesterday’s stock drop-off
  • March 9 was Canada’s largest single-day drop in over thirty years and is being referred to as another Black Monday
  • The drop-off was the result of ongoing COVID-19 fears and Saudi Arabia’s severe cuts on oil prices
  • Cenovus is the first of Canada’s major oil companies to respond directly to yesterday’s impact
  • Cenovus Energy (CVE) was up 8.38 per cent, with shares trading for $4.14 at 11:33am EST

Oil giant Cenovus Energy (TSX:CVE) is the first major Canadian oil company to announce a revised outlook, after stocks plummeted yesterday.

March 9, 2020, now referred to as another “Black Monday”, saw Canada’s largest single day-drop in more than 30 years.

Over the weekend, the Brent Crude price dropped by almost a third after Saudi Arabia uncapped production amid a trade war with Russia.

This, combined with ongoing COVID-19 fears, caused the stock drop-off, with oil companies being most affected.

Consequently, Cenovus Energy has cut its capital spending by almost a third, reflecting the Brent. The company was expected to spend around C$1.4 billion in 2020. The revised outlook has dropped that figure to below a billion.

Cenovus is hoping to offset some of the damage caused yesterday. Over the course of the day, the company’s stock price dropped by more than half.

Cenovus is also suspending its crude-by-rail program and is holding all pending investments decisions on major growth projects. Cenovus has stated that it is working towards funding its current dividend. The company did not say if adjustments there would also be necessary.

Alex Pourbaix, Cenovus President & CEO, remains positive, despite the spending cut.

“We have top-tier assets, one of the lowest cost structures in our industry, and we’ve made significant progress in deleveraging over the past few years.

“Consistent with our commitment to balance sheet strength, we’re exercising our flexibility to reduce discretionary capital, while maintaining our base business and delivering safe and reliable operations,” he said.

Suspending the oil-by-rail program will adversely impact Cenovus’s oil-sands production by 6 per cent, which will further impact their bottom line.

Additionally, in order to adjust capital spending, the company is halting expansion projects at its Christin Lake and Foster Creek sites. In fact, the company has stated that no new projects will be green-lit for the time being.

However, other companies faired better. Jadestone Energy (TSXV:JSE) recently hedged half of its oil production at, what is now, a substantial premium to the Brent Crude price.

As a result, Jadestone has stated that it is still expecting to generate a positive cashflow in 2020.

Cenovus is currently the only one of Canada’s oil and gas giants to respond directly the the oil price crash. Other large companies like Husky Energy, Suncor, and Canadian Natural Resources, who all lost double-digits yesterday, have yet to comment.

Cenovus Energy (CVE) was up 8.38 per cent, with shares trading for $4.14 at 11:33am EST.

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