Canadian oil and gas companies continue to lop off more from 2020 capital budgets, with Suncor Energy the latest to announce its plans on weathering the Covid-19 pandemic and poor commodity prices.

Suncor joins Precision Drilling, which has indicated it would halve its 2020 capital expenditures (capex) and cut CEO and board compensation salaries by 20%. Suncor, a top oilsands developer, cut projected 2020 capex by 26% to C$3.9-4.5 billion ($2.9-3.4 billion) from its original plan to spend C$5.4-6 billion ($4-4.5 billion).

The two reductions deepened the sector’s total estimated pruning to about C$6 billion ($4.5 billion), or 16% off the 2020 spending of C$37 billion ($28 billion) predicted in January by the Canadian Association of Petroleum Producers.

The Suncor budget cut is projected to have little immediate effect on production. The firm forecasts total 2020 output of 740,000-780,000 b/d. The firm’s previous 2020 guidance for investors put output at 743,000 b/d.

Precision’s budget reduction, though much smaller, stood out as a sign of low expectations for 2020 field activity in both Canada and the United States. The company straddles the border by operating 104 drilling rigs in the United States as well as 109 in Canada, six in Kuwait, four in Saudi Arabia, two in Iraq and one in Georgia.

The field contractor described its 2020 budget cut as a “response to the expected reduction in demand [for drilling services] as customers reduce spending due to lower-than-anticipated commodity prices. Further adjustments may be considered depending on activity levels realized as the year progresses.”

Exploration and production (E&P) companies Canadian Natural Resources Ltd. (CNRL) and Husky Energy Inc. also have announced major spending reductions.

However, contractors like Precision contend with stiff competition while having no counterpart to reserves inventories that producers keep flowing while postponing growth and replacement projects.

“There are hundreds of companies in the service sector to supply the E&P companies with services like engineering, drilling, well completions, camps, fabrication and assembly,” said the University of Calgary’s public policy school in a paper published Tuesday.

“With the weak economic conditions over the past few years, some of these service sector companies had moved a portion of their operations to the U.S., where there was more active spending and production was growing. Today, that option is no longer viable -- the Russia-Saudi Arabia price war and Covid-19 response have essentially closed that option.”

To help the Canadian oilfield service and supply contracting sector survive for the next producer activity revival, the public policy school’s paper suggests governments could inject cash into the companies by buying preferred shares.