- Husky Energy (TSX:HSE) has reported a net earning loss of C$1.7 billion in its first quarterly report of the year
- The trade war between OPEC+ countries and Russia this year sent oil prices to historic lows, impacting Husky’s operating margin
- More recently, the ongoing COVID-19 pandemic has further depressed the global demand for oil
- Consequently, the company has reduced its quarterly dividend to 1.25 cents a share
- Husky Energy (HSE) is up 8.74 per cent, with shares trading for $3.98 and a market cap of $4.02 billion
Husky Energy (TSX:HSE) has reported a net earning loss of C$1.7 billion in its first quarterly report of the year.
Earlier this year, Husky had to radically adjust its planned 2020 spending, after a trade war broke out between OPEC+ countries and Russia. When Saudi Arabia uncapped production, it flooded the oil market, causing common oil price benchmarks to fall to historic lows.
Despite production being recapped in early March, the ongoing COVID-19 pandemic has caused a significant dip in oil demand. The decreased demand, coupled with an inflated supply, has created an unprecedented perfect storm for oil and gas companies. As a result, many oil and gas companies are now struggling to remain afloat.
The majority of the net earnings loss resulted from $1.1 billion in impairments, coupled with $274 million in write downs. This was due to the oil price drop impacting the value of Husky’s inventory.
Looking at the inventory as a whole, on a first-in first-out basis, the current oil price has devalued Husky’s stockpiled resource by over $397 million, after tax.
Husky’s net debt also increased by more than $1 billion to $4.6 billion. To help manage the debt increase, the company has increased its credit facility by a further $500 million.
Furthermore, Husky has reduced its quarterly dividend to 1.25 cents a share.
Husky’s CEO, Rob Peabody said that the company’s severe cost cutting measures will help it navigate an unprecedented market cycle.
“Severe pricing headwinds, amplified by geopolitical events, COVID-19 and the associated collapse of global oil and refined product demand, impacted our first quarter results.
“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. Global oil and refined product prices could remain under pressure for a while,” he said.
Husky Energy (HSE) is up 8.74 per cent, with shares trading for $3.98 at 10:37am EST.