CALGARY -- Calgary-based energy companies are continuing to reduce production, cut spending and trim costs as volatile oil prices remain stubbornly below profitable levels.

Enerplus Corp. announced Wednesday it will cut its capital budget another $25 million to take it to $300 million, leaving it at about 55 per cent of its original $545 million.

In an announcement two days after benchmark U.S. oil futures prices fell into negative territory for the first time in history, the company said it is also shutting down wells to avoid producing into the current market.

Meanwhile, the CEO of producer Whitecap Resources Inc. told investors at its virtual annual general meeting on Wednesday that it, too, is identifying operations to temporarily shut down and has resolved to cut at least 10 per cent of administrative and operating costs.

"With personnel safety as a backdrop, we are intentionally focused on near-term corporate survival but, more importantly, what we look like when we come through the current economic crisis," said Grant Fagerheim in the meeting, held via webcast to reduce the risk of COVID-19 pandemic spread.

"We expect this quarter to be perhaps the most difficult one to manage through ... we expect the energy space will look quite different in the future."

Consolidation by mergers and acquisitions in the sector will likely heat up due to economic stress on weaker players but not until after oil prices return to normal levels, he said.

On Wednesday, Keyera Corp. announced it and its partner, SemCAMS Midstream ULC, will delay the start of construction of their $1.3-billion condensate and natural gas liquids pipeline system in northwestern Alberta for a year until the second half of 2021.

Oil prices strengthen

Benchmark West Texas Intermediate oil prices strengthened Wednesday, rising by more than 20 per cent from a settlement price of US$10.01 per barrel on Tuesday, but remained down by more than 75 per cent since Jan. 1.

Investor attention will be focused on more production and spending cuts as the energy sector enters its first-quarter reporting season this week and next, analysts at Tudor Pickering Holt & Co. said in a report Wednesday.

"We expect to hear from each of our coverage names on the magnitude of barrels to be shut-in, with seemingly no barrel safe from regional differential (oil price) weakness," it said.

"In addition, while the sharp drop in crude has prompted a healthy amount of capital cuts to date, we suspect a second round of cuts may be on the horizon as differential weakness further pressures cash flows."

Analysts say global oil prices plunged this week on oversupply concerns because storage tanks are nearly full and refineries are reducing output amid slow economic activity during the COVID-19 pandemic.

A recent agreement by OPEC and other countries to reduce production doesn't go far enough to balance supply with falling demand, they say.

Deeper cuts expected

Enerplus said it has begun to temporarily shut-in certain wells in Montana and North Dakota, as well as in its Canadian operations.

April production is expected to average about 88,000 barrels of oil equivalent per day, down from an average of 98,200 boe/d in the first three months of 2020.

Unspecified deeper cuts to production are expected in May — analyst Greg Pardy of RBC said he expects oil and liquids shut-ins at Enerplus to average 30,000 barrels per day in the second quarter.

It's not clear yet how much production Whitecap will take offline, Fagerheim said.

The company is targeting a minimum 10 per cent reduction in administrative costs, including a 10 per cent voluntary reduction to management salaries and director cash compensation, he said.

Whitecap is also talking to the provincial governments in Alberta and Saskatchewan about relief from royalty payments, he added.

This report by The Canadian Press was first published April 22, 2020.