DOB’s Pandemic Survey Results, Part 3: How Financial Services And Governments Can Help Industry Weather The Storm

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Image: Repsol Canada

The Daily Oil Bulletin surveyed over 600 people — ranging from field workers to executives representing companies of all sizes from across the oil and gas supply chain — from March 30 to April 3 to get an understanding of how industry is responding to the dual challenges of the COVID-19 pandemic and the resulting collapse in oil prices. 

We asked the survey respondents about how the pandemic has affected their work environment, how their organizations are responding to the dire economic challenges industry is facing, and how financial institutions and governments can help the industry survive through the downturn. We also asked how long they expect the current downturn to last, and what the industry will look like when the dust settles.

In this, the third part of a four-part series based on the survey results, we look at how financial institutions and governments can help the industry survive the downturn. Part 1 looked at how companies have transitioned their work environments in response to the COVID-19 epidemic, while Part 2 examined how companies are managing their finances in the face of the massive downturn in commodity prices.


With the collapse in oil prices hammering industry cash flows, many oil and gas companies are looking for help from the financial community and governments to survive until the crisis abates.

The survey respondents said financial services companies could help by ensuring liquidity throughout the downturn. This includes allowing access to previously negotiated lines of credit. It includes easing or deferring principal loans and interest payments. The survey respondents also said relaxing debt covenants so companies don’t fall outside of compliance would also help.

“Defer not only payments, but interest as well,” said one comment. “Deferring payments, but not interest just digs a deeper hole to get out of at a later date. By deferring payments, but not interest, banks are not really making any sacrifice; in fact, you will be paying interest, on top of your interest, until your loan or mortgage is paid off.”

“Spring redeterminations of corporate borrowing bases, especially for the small and midcap and service spaces, could be a bloodbath,” said another respondent. “The chartered banks won't want to shoulder more risk than they have to. There may need [to be] alternative financial institutions to step in to support liquidity or else many, many companies could go under.”

A number of respondents also requested creditors to stand down on forcing the sale of valuable assets at horrendous discounts due to the downturn.

Other respondents, however, said financial institutions should allow some companies to fail.

“I think that some companies need to be looked at a little more closely before banks or creditors take their Chapter 11 and restructure them,” said one respondent. “We need to stop bringing bad companies back to life.”

There are a variety of different actions the federal government could take to help industry, said the respondents. Survey feedback generally highlighted the need to stimulate the economy and ensure that individuals and companies had financial support they needed. This included things like timely and easy access to financial support, income support and tax relief. Many respondents suggested packaging all this help in a stimulus package for the industry.

There was considerable feedback and distrust regarding the continuing issues between the industry and the federal government, including longstanding issues like market access and support for pipelines, carbon taxes and Alberta transfer payments to the federal government.

Keeping people employed was a major focus of the respondents. A few suggested the federal government support employers that can implement work sharing programs and maintain headcount as much as possible, as the people will be needed once a rebound takes place. Others suggested the federal government needed to ensure that oil and gas service firms have access to capital, liquidity, and employment assistance for employees.

 Respondents suggested the federal government take a broader role by working with the U.S. and Mexico and advocate for Canadian oil and gas use within North America. This included securing action on pipeline projects including Keystone XL that require co-operation with the U.S.

Survey feedback for provincial and municipal governments was similar to the feedback targeting federal help. It generally highlighted the need to stimulate the economy and ensure that individuals and companies had the financial support they needed.

“Support the private sector and people who lost their jobs,” said one respondent. “We need people to have confidence in the economy in order for us to see a bounce back.”

However, there were a number of specific needs highlighted. These included tax relief at the municipal level, a long-standing issue for many smaller producers in Alberta and municipal governments that rely on the taxes to fund operations.

There was also demand for an abandoned well program to stimulate work for oilfield services companies, something the Alberta government is already working on.

A few operators said provinces should look at royalty reductions, although with royalties tied to prices this would provide minimal help.  

Regulatory relief through the relaxation of the Licensing Liability Rating (LLR) and Licensing Management Rating (LMR) was also suggested.

However, some respondents said there is a need to strike the right balance in any aid programs to ensure that the weaker and poorly run companies are addressed through industry consolidation. Not every company should be saved, was one comment.  

There was suggestion that in Alberta the government use its investment fund AIMCO to help keep some companies afloat.

Many respondents said governments should continue investing in long-term projects that will help the industry once the downturn ends like Alberta’s recent investment in the Keystone XL pipeline.

Other respondents said provincial governments should focus on lessening the impact of the pandemic, and then worry about advancing longer term goals.

“Do what is necessary to fight COVID-19 and help us get back to normal as quickly as possible,” said one respondent. “Put political goals aside for the short term.”

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