- Oil sands producer, Suncor Energy Inc (TSX:SU), has been forced to revise its previous 2020 outlook
- Suncor has cut its capital program by C$1.5 billion, or 26 per cent, to help retain liquidity in the coming months
- Suncor has also halted its crude-by-rail program, which is no longer economically viable
- The company was forced to take these measures after a steep oil-price drop earlier this month and COVID-19’s ongoing economic impact
- Suncor Energy Inc (SU) is up 6.68 per cent, with shares trading for $16.44 and a market cap of $23.5 billion
Oil sands producer, Suncor Energy Inc (TSX:SU), has been forced to revise its previous 2020 guidance due to major market forces over the last few weeks.
Most notably, Suncor has cut its capital program by C$1.5 billion, or 26 per cent. Following that, the company withdrew its 2020 guidance entirely and has not announced when a new one is expected.
Suncor’s hostile market conditions have been the result of two independent factors. Firstly, the ongoing COVID-19 crisis has been causing havoc across all industries, particularly airlines. The resulting travel bans, and self-isolation measures have cut the demand for oil significantly.
On the supply-side, oil production negotiations between OPEC and Russia recently broke down. This led to a number of countries, including Saudi Arabia, uncapping production entirely.
This had flooded market with supply at a time of lower-than-expected demand. Suncor’s dire announcement today reflects just how much upheaval the oil industry has seen in the past month.
The combination of these forces has led to steep drop-off in Suncor’s market share. Since late February, when the economic crisis first took hold, Suncor’s share price has dropped more than 60 per cent.
The company has also cancelled a number of planned developments and initiatives. These include the crude-by-rail program, which is no longer economically viable at the current oil-price.
Mark Little, President and CEO of Suncor, believes these steps are necessary, given the industry climate.
“The simultaneous supply and demand shocks are having a significant impact on the global oil industry. We are adjusting our spending and operational plans to be prepared in the event the current business environment persists for an extended period of time.
“Our business model and financial strategy are designed to withstand volatile environments,” he said.
Suncor Energy Inc (SU) is up 6.68 per cent, with shares trading for $16.44 at 9:37am EST.