Obsidian Energy reported Wednesday its net loss was $746 million during the first quarter of 2020 and was due to $763 million of non-cash, property, plant and equipment (PP&E) impairments resulting from lower forecasted commodity prices.
It said impairment losses related to PP&E may be reversed in future periods if commodity prices forecasts improve.
The loss compares to a $54 million net loss in the first quarter of 2019.
“The demand destruction caused by the COVID-19 global pandemic and the potential supply increase from the OPEC+ price war has caused a significant decrease in oil prices and Obsidian Energy has reacted quickly to this significant change in market conditions,” said the company in a news release.
“At this time, our plan is to significantly limit further capital spending for the foreseeable future, temporarily shut-in uneconomic production and to continue to optimize all aspects of our business to reduce costs and maintain financial liquidity during this challenging time. The Board of Directors and executive team implemented a temporary salary reduction of 20 per cent across all head office staff and a 10 per cent reduction for field staff. In addition, the Company has suspended the employer contributions to the Employee Retirement Savings Plan and the Board of Directors have taken a temporary 10 per cent reduction on their annual retainer fees. These initiatives have reduced operating costs by over $8 million and personnel costs by approximately $10 million if annualized.
“Obsidian Energy continues to monitor the commodity price environment and evaluate our portfolio to improve the overall financial flexibility of the business. The Company is prepared to take further action to shut-in additional production should oil prices not improve in the near term. Alternatively, we can quickly restart shut-in production once oil prices permit doing so. Our current first half 2020 guidance is provided below. Given the current volatility in the commodity markets we are not providing full year guidance at this time. We will provide updates as further production or financial decisions are implemented.”
