The Globe and Mail reports in its Saturday edition that Canada's energy industry is buckling under the weight of twin crises: a global pandemic and an oil price war. The Globe's Jeffrey Jones writes that now, governments are poised to act. With survival at stake for many companies, a massive aid package, expected in the coming week, has to address the two biggest problems threatening them now. The first is access to credit, and the second is cutting costs as cash flows dry up.
The credit and liquidity issue will require co-ordination with the banks, which have shown in recent days they are worried about their exposure. Almost all companies have slammed the brakes on spending and cut payouts to shareholders to preserve capital, but with cash dwindling, such measures, as drastic as they are, will not save companies without deep pockets.
That puts the focus on credit, and whether oil and gas producers have the access to it that they assumed they did as the crisis began. One company, Bonavista Energy, said last week that it tried to make a withdrawal from its line of credit, which was not near fully drawn, and was denied.
Industry, government and banks must find a way to deal with the implications of sector-wide failures.
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