Husky Energy lost $1.7 billion Canadian in the first quarter of 2020 as oil prices hit extreme lows amid a price war and depressed demand during the COVID-19 pandemic.
“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,” Husky CEO Rob Peabody said in a news release Wednesday morning.
Oil prices fell below zero dollars last week as a glut of oil built by some nations that continue to produce oil at high rates coupled with a lack of demand as people shelter-in-place to help curb the spread of COVID-19, the respiratory illness caused by the new coronavirus.
The company spent about $43 million in the first quarter rebuilding the Superior refinery, which was severely damaged in an April 2018 fire and explosion, before halting work on it last month over COVID-19 concerns.
In its fourth-quarter earnings report, Husky told investors that the estimated cost of the Superior rebuild had grown nearly 90% from its initial prediction of $400 million to a revised $750 million price tag.
"A schedule for resumption will be determined in due course," the company said in Wednesday's release. "Rebuild costs are expected to be substantially covered by property damage insurance."
Last month, the company said it would cut 2020 capital spending by $1 billion, but last week, the company said it would cut spending for the year by $1.7 billion.
In a call with investors Wednesday morning, Husky's Chief Financial Officer Jeff Hart said halting the Superior rebuild accounted for some of this year's capital reductions, as did stopping work on other projects including its West White Rose field off the coast of Newfoundland and Labrador, new gas fields in the Madura Strait off Indonesia and its Lloyd thermal bitumen projects in western Canada.
“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, with a view that global oil and refined product prices could remain under pressure for a while,” Peabody said in the release. “These capital reductions and additional cost efficiencies are providing further resilience as we manage the business through this unprecedented market cycle.”