Impairment Pushes 7Gen to Q1 Loss
Canada’s Seven Generations Energy (7Gen) said May 7 a C$1.44bn (US$1.03bn) pre-tax impairment loss based on prevailing commodity prices pushed it to a C$1.01bn net loss in Q1 2020, compared with earnings of $82.6mn a year ago.
“This is an unprecedented time for our industry,” CEO Marty Proctor said. “The demand destruction associated with Covid-19 will take time to resolve [and] we must plan for an extended period of price weakness and make responsible decisions to best position our company for a rebalanced market.”
Heading the list of those actions, Proctor said, is another $250mn reduction in 7Gen’s 2020 capital programme and delaying the start-up of 11 new wells until later this year, when commodity prices are expected to improve. The company initially set its 2020 capex guidance at C$1.1bn, but cut C$300mn from that budget in March; the latest reduction pushes 2020 spending down to C$650mn.
And with much of the Covid-19 demand destruction aimed at crude oil and refined products, 7Gen will re-focus the rest of its 2020 activity on its gas-weighted assets, the company said.
“Given the weakness in liquids pricing and the relative strength in natural gas forward pricing, 7Gen’s current 2020 activity will be tilted away from its condensate-rich Nest 1 asset towards its gas-weighted Nest 3 asset,” it said.
Natural gas sales volumes averaged 489.1mn ft3/day in Q1 2020, up from 483.6mn ft3/day in the comparable year-ago period but down from a Q4 2019 average of 523.1mn ft3/day.