Why Suncor Energy, Continental Resources, and Occi...

What happened

The news that Saudi Arabia is cutting the price at which it sells oil for October delivery sent Brent crude prices down 5% in Tuesday trading, and WTI off by more than 7%.

U.S. and Canadian oil stocks predictably took it on the chin, and at the close on Tuesday, shares of Suncor Energy (NYSE:SU), Continental Resources (NYSE:CLR), and Occidental Petroleum (NYSE:OXY) were all down nearly 10%.

So what

Some oil stocks fell so much harder than oil prices themselves partly because of the financial condition the companies find themselves in, which leaves them ill-prepared to withstand a prolonged period of weak oil prices. Continental, with a $5.3 billion market capitalization, is the most cash-poor of the three, with less than $7 million in the bank, but $5.8 billion in debt -- more than its own market cap.

Suncor's doing a bit better. Valued at $21.3 billion in market cap, it carries 'only' $16.6 billion in debt and has the biggest cash cushion of the three oil companies at $1.4 billion, according to data from S&P Global Market Intelligence.

Occidental is arguably the most vulnerable. Valued at just $10.3 billion, it's only half the size of Suncor but carries far more debt on its books ($41.7 billion) and has only $1 billion in cash.

Now what

None of these three oil companies is profitable currently. Continental lost $239 million last quarter, and Suncor lost more than $450 million. Occidental reported a $8.1 billion loss. Perhaps worse, Suncor and Occidental have been losing money since Q4 of 2019, before the coronavirus even arrived to torpedo the economy and drive down demand and the price for oil.

With the revival of oil prices since April having morphed into flatlined prices for the past three months, and now the beginnings of a new downturn perhaps emerging as a result of the Saudis' move, the future for these three oil stocks is anything but certain.

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