Two of Canada’s largest oil sands producers, Husky Energy and Suncor, had some bad news for investors this week. Husky said it will slash capital spending for next year and 2021 by more than US$370 million (C$500 million) combined, while Suncor warned it will spend only as much on oil projects next year as it will this year.
Husky also said it will cut 370 jobs next year in a further sign that the industry’s troubles continue to take their toll.
Bloomberg reports, however, that there was also some good news in the spending updates by Husky and Suncor. Both companies expect to produce more oil next year; Husky expects to produce 4 percent more oil in 2020 and Suncor plans a 5-percent increase in output.
These are not the only two oil sand producers that are holding their purse strings tight. MEG Energy last month said it will spend less in 2020 than it spent in 2019. The company announced an initial budget of US$188 million (C$250 million) for 2020, down by US$15 million (C$20 million) from what analysts expected. However, MEG has kept its production targets unchanged.
Now, the lower spending plans no doubt have a lot to do with the chronic shortage of pipeline capacity for the heavy oil that Alberta produces. It also has a lot to do with the production curtailment introduced by the previous Alberta government and maintained by the current one in a bid to keep a floor under oil prices. While the cuts exclude smaller producers, all large oil companies in Alberta are subject to the limits.
The production cuts were initially planned to last until the end of 2020, with little chance of a change in the pipeline situation until then, but recently Alberta’s Premier Jason Kenney said the caps might be lifted earlier.
“We hope it will end by this time next year at the latest,” Kenney said in late November.