TORONTO/WINNIPEG, Manitoba (Reuters) – Canada’s oil patch has endured five years of existential threats that have pruned weaker companies, but now its strongest firms are trying to navigate the coronavirus pandemic, which has set off the worst crisis in the oil industry in 40 years.

Economic shutdowns have ground travel to a halt, cutting fuel demand by roughly 30% worldwide. With consumption down, oil producers around the globe cut production sharply.

Canada, the fourth-largest oil producer, has shut in 644,000 barrels per day, according to Eight Capital, among the highest in the world and 13% of February’s production. The nation’s biggest companies face weak demand while managing high levels of debt, forcing them to cut spending to levels not seen since early in the oil sands boom 15 years ago.

Canada’s Suncor Energy Inc (SU.TO), Cenovus Energy Inc (CVE.TO) and Husky Energy Inc (HSE.TO) all posted quarterly losses in the billions of dollars, cut or scrapped dividends and slashed budgets.

Those three, along with Canadian Natural Resources Ltd (CNQ.TO), sport a debt-to-total-equity percentage of 48.5% on average, compared with 28.3% for U.S. majors ConocoPhillips Co (COP.N), Chevron Corp (CVX.N) and Exxon Mobil Corp (XOM.N), according to Refinitiv data.

“The balance sheets of some very good companies are not as strong as they should be,” said Tim McMillan, president of the Canadian Association of Petroleum Producers.

The industry has reduced spending by $7 billion and oil sands investment looks to hit its lowest in 15 years, according to consultancy IHS Markit. Spending had already plunged from more than $30 billion in 2014 to under $10 billion last year.

That may not be enough. Oil sands companies will need to focus on shaving operating costs due to the discounted price for Canadian heavy oil and higher operating expenses for generating steam and running trucks and equipment to extract crude, said April Read, senior upstream analyst at consultancy Wood Mackenzie.

Canadian Natural, Canada’s biggest oil and gas producer, said it requires a U.S. West Texas Intermediate crude oil price (WTI) CLc1 of $30 to $31 a barrel to cover sustaining costs and its dividend, which it maintained even as it posted a quarterly loss of C$1.3 billion.

U.S. crude closed at $24.74 a barrel on Friday. A barrel of Western Canada Select (WCS) sells for around $21.

Canadian Natural has C$1.9 billion in debt maturing this year, but executives said banks remained supportive and that it foresaw no issues funding the dividend. It has cut about 120,000 bpd of production for May and could extend curtailments to June if prices remain low, President Tim McKay told Reuters.

“We just have to cross that bridge when we get there,” he said.

Debt-saddled Cenovus, a top-four Canadian oil producer, scrapped its dividend entirely as its first-quarter loss swelled to C$1.8 billion. Chief Executive Alex Pourbaix said last week that the company is in “strong financial position,” having repaid C$2 billion since last year.

However, Cenovus may be forced to issue more shares, diluting the investments of current holders, said Jason Mann, chief investment officer at EdgeHill, which sold its Cenovus shares in February.

“They’ve just got a stressed balance sheet,” he said. “Too much debt, not enough cash flow.”

Suncor, Canada’s No. 2 oil and gas producer, cut its dividend for the first time ever on Tuesday as it reported a first-quarter loss of C$3.53 billion.

PIPELINES FEEL THE HEAT TOO

Unlike the United States, Canada’s oil industry has been under fire since the 2014 crash, as any recovery was snuffed by congested pipelines. Now, finally, those lines have space, due to demand destruction.

Canadian pipeline operator Enbridge Inc (ENB.TO) posted a C$1.4 billion quarterly loss. The company, accustomed to rationing space on its Mainline system, now has spare capacity.

It may have to revisit plans to overhaul Mainline terms as producers shelve expansions, said Ryan Bushell, president at Newhaven Asset Management, which owns shares.

“People aren’t going to want to commit volumes over a 20-year basis when they don’t know if they’re going to get through the next 20 days,” he said.

GLIMMERS OF HOPE

Canada does have some advantages.

The nation’s heavy crude is well-suited for making asphalt for road construction. Consultancy Rystad Energy expects U.S. demand for “other refined products” including asphalt will fall just 11% in the second quarter, compared with a 68% drop for jet fuel and 24% for gasoline.

Storage has not filled as rapidly as in the United States, so production is not likely to slow more than needed.

Canada has also already announced C$2.5 billion ($1.8 billion) in measures to help the industry. Banks are relaxing lending standards for energy firms to avert a wave of bankruptcies – marking a different stance from lenders in the United States.

Still, Alberta’s unemployment could spike to 25% from the current 13.4%, Premier Jason Kenney has said. Oil and gas extraction workers make up 6% of Alberta’s employment, according to Statistics Canada, not including refineries and petrochemical plants.

“This is probably the biggest existential crisis the Alberta oil industry has faced,” said Mike Ashar, who led Suncor’s oil sands and refining units through the 1990s.

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