Energy giant Imperial Oil announced Tuesday it was reducing spending by $1 billion in response to market conditions resulting from the COVID-19 pandemic and decreases in commodity prices.
“The current COVID-19 pandemic, as well as business and commodity price environment, poses many challenges for our industry,” said Brad Corson, chairman, president and chief executive officer of Imperial, in a news release. “Imperial’s integrated business model, high quality asset portfolio, and strong balance sheet offer valuable stability during this period, and we are taking steps to exercise flexibility in our plans to respond to market conditions by reducing our capital investment and operating costs.
“As we continue to face these challenging conditions, I am extremely proud of the dedication and hard work by Imperial’s workforce across the country to maintain safe and reliable operations as they also look after the well-being of themselves and their coworkers, their families, communities and our customers.”
The company said spending will focus on ensuring ongoing safe and reliable operation of Imperial’s assets, and paced investments to continue work on key growth-related projects at a level reflective of the current challenges presented by COVID-19 and the business environment. These deferrals have resulted in an updated capital outlook of $1.1 billion to $1.2 billion for 2020, a $500 million (30 per cent) reduction compared to original guidance of $1.6 billion to $1.7 billion, it said
“In addition to this reduction in capital spending, Imperial has identified opportunities to reduce operating expenses by $500 million compared to 2019 levels. As part of this exercise, the company has identified opportunities that drive efficiency, effectiveness and a degree of pacing due to COVID-19 impacts while ensuring ongoing safe and reliable operations,” it said.
“As Imperial continues to assess the impact of COVID-19, scope reductions have been identified for the planned second-quarter turnaround at our Sarnia facility, and a planned coker turnaround at Syncrude has been deferred until the third quarter. The company continues to assess other turnaround activity across the business. More broadly, the impact of COVID-19 and the current business environment on demand is expected to result in negative impacts on Imperial’s Upstream production, and Downstream refinery utilization and product sales over the near term. While the magnitude of these impacts is uncertain, our scenario planning approach is ensuring we are prepared and positioned to respond to a broad range of potential outcomes.”
A spokesperson said no staff reductions were involved in the company’s cost-cutting measures.
“While the current combination of falling oil demand and increasing supply may be uniquely challenging, Imperial has a long history of weathering market volatility,” said Corson. “We have flexibility in our plans to respond to market conditions as they unfold and remain focused on maximizing long-term shareholder value in whatever business environment we operate.”
