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Dropping oil prices force Calgary's Seven Generations, MEG Energy to make cuts

Published 2020-03-11, 01:16 p/m
© Reuters.
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Brenda O’Farrell

Investing.com – The dramatic drop in the price of oil is being felt by Canadian companies, with two major players reacting by scaling back their capital spending for 2020.

Seven Generations Energy Ltd (TSX:VII) yesterday announced it will reduce its capital investment budget for the current year by 18%. The move to rein in investments will allow the company to keep spending in line with an expected drop in cash flow. Its capital investments will drop to $900 million, down $1.1 billion.

The Calgary-based company said the drop reflects a temporary deferral of investment activity due to the drop in world oil prices. It will also allow the company to focus on high-grade drilling operations and improve efficiencies.

The company also updated its 2020 guidance, now predicting it will produce between 185,000 and 190,000 barrels a day.

Shares of Seven Generations were down more than 9% Wednesday morning, trading at $2.25. Yesterday, they closed at $2.42. In the last year, this oilpatch company’s stock has lost more than 75%.

Last fall, MEG Energy Corp (TSX:MEG) announced it was cutting its 2020 capital spending budget by $50 million to $200 million.

The Calgary-based oilsands producer had also downgraded its 2020 production guidance. It now expects to produce between 93,000 and 95,000 barrels per day, down from its previous guidance of 94,000 and 97,000.

Shares of MEG Energy were down more than 4.5% at just after 1 p.m. Wednesday, trading at $2.75. The company’s shares closed Tuesday at $2.89. The company’s stock has dropped more than 43% in the last year.

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