Moody’s Investors Service downgraded holdings in Cenovus Energy and Encana Corporation to junk status last week, just days after cutting its credit ratings for Suncor Energy and Canadian Oil Sands, all in response to low global oil prices and the companies’ high operating costs.
The decision places Cenovus and Encana two steps below investment grade, the Globe and Mail reports, on a day when benchmark West Texas Intermediate oil prices stood at US$29.64 per barrel.
“The 20-month price rout has crimped industry returns and forced producers to make deeper cuts to spending and employment levels after a year of aggressive pullbacks,” Lewis writes. “Already, scores of small and mid-sized Canadian producers have been placed into receivership, and several others have sought creditor protection or concessions from lenders.”
Cenovus has about $8 billion in available cash flow and its existing loans aren’t due until 2019, so it will see no immediate impact from the downgrade, the Globe notes. But the company slashed its quarterly dividend by almost 70% and its 2016 budget by 16%. It also announced plans to cut more jobs, after dropping 24% of its positions last year.
CBC News attributed Moody’s downgrades of Suncor to low oil prices, and of Canadian Oil Sands to the company’s “very high cost base”.