Two of Australia’s leading resource companies say they’re capable of withstanding the turmoil and disruptions caused by coronavirus crisis.
Fortescue Metals says it had planned for the strict border controls announced by the South Australian government on Sunday while Santos says it is confident in its business continuity and contingency plans.
Santos said that by delaying major projects and reducing capital expenditures by $550 million, or 38 per cent, it would be able to be cashflow breakeven even if the price of oil stays at $US25 a barrel.
Santos said given the volatility it would likely delay a decision on whether to develop the Barossa gas field 300km north of Darwin, a $4.7 billion project that would extend the Darwin LNG by more than 20 years.
“We are taking decisive action to ensure Santos is well-positioned in a lower oil price environment,” Santos chief executive Kevin Gallagher said.
Santos said its debt covenants have sufficient headroom and wouldn’t be under threat at current oil prices for a number of years.
Iron ore giant Fortescue said the majority of its workforce are based in Western Australia and wouldn’t be hit by the travel ban and self-quarantine provisions, which includes exemptions for mining industry workforces.
Fortescue said it would use a variety of measures including charter flights from eastern Australia to ensure that site-critical functions aren’t impacted.
Shipments from Port Hedland continue and mining and processing activity are in line with guidance, Fortescue said.
Oil Search meanwhile said that a state of emergency announced Sunday in Papua New Guinea, which includes a two-week ban on domestic flights, had been planned for.
“The company’s business continuity plans are well developed and currently being implemented,” it said.
Caltex Australia expects demand for jet fuel could drop by 80 to 90 per cent due to flight cancellations and travel bans to limit the coronavirus.
The fuel refiner and petrol station owner also said it was closely monitoring Australian demand for gasoline and diesel given the coronavirus situation.
ASX-listed but Texas-based Freedom Oil and Gas, a fracking company, said it had entered voluntary administration and appointed Nicols + Brien.
“The current oil price environment combined with COVID-19’s impact on the global equity markets has impacted the Company’s opportunities to recapitalise,” the company said.
At 1408 AEDT, shares in Caltex were down 9.4 per cent at a six-year low of $18.57 as part of another broad market plunge.
Fortescue shares were down 8.7 per cent at $9.45, Santos stock was down 2.0 per cent at $2.99 and Oil Search was down 15.4 per cent to a 15-year low of $1.98.