Cenovus Energy Inc (TSE:CVE) revealed it has taken further steps to weather the slide in crude prices in the wake of the global economic downturn due to the coronavirus (COVD-19) pandemic.
Both Brent and West Texas Intermediate (WTI) crude have plunged more than 66% in the first quarter of 2020 - the largest ever quarterly loss. The Canadian benchmark - Western Canadian Select - stands at C$4.910 a barrel, down 3.35% on the day. It comes amid a drastic slump in demand for the commodity amid the coronavirus pandemic, which has been exacerbated by the price war between Saudi Arabia and Russia.
READ: Cenovus Energy unveils steps to protect balance sheet in wake of oil price slide
"Cenovus has decided to reduce its planned 2020 capital spending by an additional C$150 million which, combined with the $450 million reduction announced March 9, 2020, is a $600 million decrease from the budget released in December," the Canadian oil and gas producer said in a statement on Thursday.
The oil major is also suspending its dividend and forecasting operating cost reductions of about C$100 million and general and administrative (G&A) cost reductions of around C$50 million compared with the initial December budget.
The firm said it would also roll back salaries across the company, with an emphasis on board, executive and senior leaders. With effect from May 1 this year, all board members will receive a 25% reduction in compensation.
Highlighting its strong balance sheet, Cenovus said it had C$4.5 billion of undrawn committed credit facilities, with renewals in late 2022 and late 2023, along with a further C$1.6 billion of demand lines and no bond maturities until late in 2022.
The company also said its mix of oil sands and conventional assets enables it to ramp production up and down quickly to respond to market conditions and maximize returns.
"We are taking proactive steps to address the current business environment while continuing to focus on the safety of our people and assets and maintaining reliable performance at our operations," said Alex Pourbaix, Cenovus president and CEO
"It is challenging to predict the duration and depth of these unprecedented low commodity prices. We have positioned the company with ample liquidity and a strong balance sheet to manage through this unpredictable global downturn."
Contact the author at giles@proactiveinvestors.com