- Gear Energy Ltd (TSX:GXE) is shutting in production in its second quarter, after a volatile couple months in the oil and gas sector
- After oil prices hit record lows earlier this year, the company has determined that production from its Alberta and Saskatchewan facilities is not currently viable
- Furthermore, Gear Energy is immediately implementing a number of cost saving measures, including a 20 per cent reduction in salaries across the board
- Production will remain shut-in and stored until volatility in the market subsidies and the oil price improves to viable levels once again
- Gear Energy Ltd (GXE) is holding steady, with shares trading for C$0.12 and a market cap of $25 million
Gear Energy Ltd (TSX:GXE) is ceasing production at its Alberta and Saskatchewan facilities, after a turbulent period for the oil and gas sector.
The company is expecting the historically low oil price to continue on through to the second quarter. As a result, Gear Energy is immediately implementing a number of cost saving measures, including a 20 per cent reduction in salaries across the board.
Furthermore, Gear Energy’s operational sites will undergo a substantial production storage and shut-in program.
Two thirds of the company’s two operating costs remain variable in the current market. Consequently, by curtailing production the company can retain liquidity, during the depressed market.
Average production in the company’s first quarter is expected to be around 6,700 barrels of oil per day. However, in the second quarter production will be shut in and stored, with sales production in April and May expected to be around 3,600 and 800 barrels of oil a day, respectively.
Production will remain shut-in until the oil market improves enough to support recommencement.
No further details were given in the announcement, regarding per unit costs or future outlooks.
The company stated that any further outlooks will be revised when the market volatility has subsided and will be dependent largely on the oil price and other macroeconomic factors.
The oil price initially plunged earlier this year, after a trade war between OPEC and Russia caused oil production to be uncapped, resulting in a flooded oil market.
Despite an agreement to recap production being met earlier this month, the oil price remains depressed.
This is largely due to the ongoing COVID-19 pandemic driving down demand for fuel, as well as an oversupply of oil, which has been stockpiled during the uncapped period.
Gear Energy Ltd (GXE) is holding steady, with shares trading for C$0.12 at 10:37am EST.