How Integrated Oil Can Best Navigate Covid Crisis

North American integrated oil and gas operators with highly diversified portfolios have better chances to navigate the Covid-19 crisis, according to GlobalData.

The data and analytics company - which assessed the short-term impact of the crisis on Husky Energy, Cenovus Energy, Suncor Energy, ConocoPhillips, Chevron Corporation and Exxon Mobil Corporation – highlighted the importance of asset type and geographical diversification in the current market climate.

Other factors such as debt-to-equity ratio, cashflow sensitivity to price changes and announced capital expenditure cuts “play their part”, GlobalData conceded, but the business emphasized that companies which are limited geographically have more difficulty in re-adjusting plans.

“Both Exxon Mobil and Chevron Corporation have operations in U.S. shale plays and oil sands in Canada, where pretty much all operators had to significantly reduce rig count and capital spent or suspend completely to mitigate the negative impact of low oil prices,” Svetlana Doh, an oil and gas analyst at GlobalData, said in a company statement.

“However, both oil and gas giants are present in more than 20 countries worldwide, which gives them better flexibility in re-balancing capital and operating expenditure across the assets,” Doh added.

Companies with a predominant exposure to oil sands production in Canada are considered most vulnerable in the current oil price scenario, according to Doh.

“Husky Energy and Cenovus Energy announced more than 43 percent capital expenditure cuts each in response to low oil prices caused by the Covid-19 pandemic,” Doh said.

“The companies’ upstream business ranks as one of the most impacted by low oil prices in the selected sample due to high debt to equity ratio, an oil-sands-dominant portfolio and lack of geographical diversification of their operations,” the GlobalData representative added.

As of June 23, there have been 8.99 million confirmed cases of Covid-19 globally, with 469,587 deaths, according to the latest figures from the World Health Organization (WHO). The Americas have been the worst affected region as of June 23, with 4.4 million confirmed cases and 224,207 deaths, WHO data shows.

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