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Consumer demand for fuel is growing slightly after a sudden decline due to measures to deal with the COVID-19 pandemic but the CEO of Suncor Energy Inc. says he doesn't expect a full recovery for his company or the Canadian energy sector until at least 2022.

The Calgary-based oilsands and refining giant surprised analysts by cutting its quarterly dividend by 55 per cent to 21 cents per share as it reported a first-quarter net loss of $3.525 billion on Tuesday.

It had 18 years of consecutive annual dividend increases, with the latest announced in February.

The cut was necessary as the company resets its target of breaking even at a West Texas Intermediate price of US$35 per barrel, down from the previous mark of US$45, said CEO Mark Little on a conference call on Wednesday.

"Although we expect the crude market to substantially recover by 2022, the risk of an extended period of economic uncertainty, translated into weaker commodity prices and higher volatility, remains possible," he said.

"In the second quarter, we know our industry is being challenged by ... a significant supply and demand imbalance which has resulted in the largest collapse in crude prices ever. These market conditions require decisive leadership and action."

The company, which sells fuel across Canada through its Petro-Canada network, has seen a reduction in demand of 50 per cent for gasoline, 70 per cent for jet fuel and 20 per cent for diesel, Little said.

As North American oil storage fills to near capacity, any rebound in upstream oil production must be led by recovery in the downstream and that means it depends on when governments reopen the economy and consumers feel confident about travelling again, Little said.

There will be further delays as the high level of crude inventories is drawn down, he added.

Chief financial officer Alister Cowan said on the call he expects that Suncor's gross debt of about $20 billion will grow by $2 billion or $3 billion this year, but the company will break even on a cash flow basis in 2021.

In a report, analyst Michael Dunn of Stifel FirstEnergy estimated the dividend cut will save Suncor about $1.56 billion per year.

Suncor CEO predicts slow recovery for sector from pandemic demand crunch

"While not altogether surprising, the cut was not a sure thing given Suncor's liquidity and track record of dividend increases. We agree with the move," he said.

Suncor's capital spending plan for 2020 is being cut to $3.8 billion, a further reduction of $400 million compared with its recent guidance and down $1.9 billion or about one-third compared with its original 2020 plan.

It added it intends to cut operating costs by $1 billion or 10 per cent this year compared with 2019 levels.

Suncor registered an impairment charge of $1.38 billion on its 54.1 per cent share of the Fort Hills oilsands mine it operates and $422 million against its share of the East Coast offshore White Rose and Terra Nova assets.

Suncor also recorded a $397-million after-tax inventory writedown, as well as a $1-billion unrealized after-tax foreign exchange loss on U.S. dollar denominated debt.

Due to lower demand for refined products, Suncor is reducing its outlook for refinery throughput to between 390,000 and 420,000 barrels per day from the previous goal of between 440,000 and 460,000 bpd.

This report by The Canadian Press was first published May 6, 2020.

Companies in this story: (TSX:SU)

People have talked about "peak oil" for a couple of generations now but we had apparently not seen any evidence of it. Analysts have been busy most recently in enumerating the many challenges facing the fossil fuel industry all while the oil executives have been publicly touting their ambitious plans for expansion/diversification; plastics/petro chemical products?

It is actually possible now that peak oil has slipped into its final decline as the forces aligned against it and its increasingly toxic products, gather strength.

We can not only hope, but actively pursue individual life changes to make that decline more rapid.

Well, the peak in CHEAP oil occurred in 2005/06. That was the period when expensive unconventional production (oil sands, deep sea, shale) caught up to declining cheap n' easy conventional production (i.e. easy Jed Clampett crude bubblin' up from the ground).

The cost of unconventionals hasn't gone down much, even with newfangled techie stuff. And that cost is measured not just in money/debt, but in the energy required to get the stuff out of the ground. Jed Clampett oil used one barrel of oil energy to get 20-100 barrels to take to market. Unconventionals get 3-5 barrels of oil for every one barrel of energy expended. What's left is called net energy. Lots of money/debt and low net energy = a big problem for oil-dependent societies.

Today we have a glut in both types of oil. US shale overproduced through to the 2014 drop-off in world prices. They cranked it wide open to maintain a revenue stream simply to make their debt payments. Debt has plagued shale since the beginning. Alberta also overproduced at the same time, grew the glut even more and exacerbated the problem. This was a classic mismanagement of Alberta's resource, a follow-up on industry's take over of their government over 30 years ago once Peter Lougheed left the scene.

Recently, Saudi Arabia and Russia had a stupid price war just as the coronavirus was spreading. Talk about bad timing, but also more world-class stupidity that could be reduced to infantile male posturing between Putin and bin Salman. Demand destruction of oil took hold and the glut is now worldwide, and the price of oil arrived in the sub, sub basement. Yes, the price could climb again as people get back to driving to work and flying, but that's not going to happen overnight. Meanwhile, all be big carmakers are set to start realizing their huge effort in production of electric vehicles in a couple of years. Oh, and action on climate change ramps up even more.

If there's a lesson here it's to encourage the feds to use their financial might to electrify our domestic economy as part of their post-pandemic reboot. And to not listen to anything Jason Kenney has to say. He will be put into place soon enough with global economic change, which is a language he doesn't care to understand in his quest to keep power. It's best to encourage Albertans to think for themselves come the next election ... just as young Calgarians are buying the new and cheap electric VW Golf.