Thank you, Chairman.
Good afternoon and thank you for inviting me to speak to the finance committee regarding the federal government's response to the COVID-19 pandemic.
I am the president and CEO of McCoy Global Inc. McCoy was established in 1914 as a blacksmith shop in Edmonton, Alberta. Over the decades, the company has adapted, evolved and grown. McCoy is now a publicly traded company listed on the TSX. We have operations in Texas, Louisiana and the United Arab Emirates. Edmonton remains home to our corporate headquarters, which is where I am based.
I do want to add that I very much appreciate the inclusion of all the universities and colleges and the groups that represent them today. I am a graduate of the Northern Alberta Institute of Technology. Over the years McCoy has been a big supporter of NAIT and other institutions, including the U of A. When I look at our corporate folks here in Canada, most of them have graduated from one institution or another. Particularly in Alberta, NAIT has been a big difference for us. I wanted to give a shout-out there.
What do we do at McCoy? We design, produce and distribute technologies that are used by global service companies during the completion stage of well construction. Typically, our customers are drilling for oil or natural gas, both land and offshore, but may also serve customers servicing geothermal wells. Our technologies are both mechanical and digital. Typically, we ship products or provide technical support to an average of 50 countries across the globe annually.
What has been the COVID-19 impact on McCoy? McCoy Global has been significantly impacted by the COVID-19 pandemic. As well as for most of our industry peers, the February production war between Russia and OPEC provided the perfect storm for a historic industry collapse. McCoy has not yet felt the full impact that the pandemic will have on the demand for our products and services. Our issue is not the present; our issue is the headwinds we will face over the second half of 2020 and well into 2021.
In our business, we entered 2020 with a reasonable backlog of orders that has provided the company with work that can carry us through the first half of this year. However, order intake for the back half of this year has been, and will continue to be, significantly challenged. McCoy has taken proactive steps to prepare the company for what we are expecting to be a very difficult period. These actions include salary and wage rollbacks globally, unfortunately some layoffs, negotiations with landlords, significant reductions in general and administrative expenses, and curtailment of budgeted capital expenditures for technology development plans.
McCoy has a history of prudent balance sheet management, but this market backdrop has created a significant liquidity crisis for the entire oil and gas industry. Major banks in Canada and the United States have almost zero appetite for providing credit facilities in our industries, and the capital markets are not open for business in the current environment. We have been communicating with several Canadian chartered banks to partner with us so that McCoy can restructure its debt in order to provide relief and so that we can weather this storm. We have a great relationship with EDC and are currently in discussions with them and a Canadian chartered bank to bring two credit facilities together.
McCoy has significant operations in the United States. We were fortunate to qualify for the paycheck protection program, or PPP, loan, which will be a critical piece to our survival as well.
I would like to make some points on the Canadian government COVID-19 response to businesses. I will keep my comments focused on McCoy's experience as a business and on specific areas for improvement.
My first comment is regarding clock speed. It has been frustrating, frankly, to hear announcements of funding and to then wait and wait for details, rules, application forms and so on. These things take time, and I understand that.
The designated funding for oil and gas companies was expected in days, if not hours, after the announcement. That turned into weeks. This eventual announcement was very specific to well abandonment efforts, which was welcome, but nothing was done to support the ongoing industry specifically.
Businesses are desperate for help. I urge the federal government to break through any of the barriers to speed up the process. As company leaders, we are also navigating through a business environment with no charts or instruments, but we have to pivot and be decisive quickly.
Our application for funding from EDC was made on March 10. We are anticipating funding, at the earliest, in August 2020.
In the U.S. as a comparison, our application for the PPP was clear and straightforward. Application submission to full receipt of funds in our bank account occurred over five business days.
My second point on the COVID-19 response is on the confusing and changing rules for funding. Canadian banks, BDC and EDC have all been challenged in understanding the application requirements and the rules under which programs companies can apply. For example, when the BCAP was announced, it appeared to be an easy decision for a chartered bank to step up to the plate, since the federal government, via EDC and BDC, was backstopping the bank loans significantly.
The problem was the 12-month support period, which in business terms is a blink of the eye. Finally, this issue was addressed with an extension to 60 from 12 months, but here again we were told the rules for the change were not yet clear, and they have not yet been clearly communicated.
There also seems to be a lack of transparency. McCoy appeared to qualify for debt facility from BDC, and that application was made prior to COVID-19. This application in turn was eventually sent up the chain for final committee approval, where we were denied. The criteria looked like a perfect fit, but the final decisions appeared subjective. These programs should be based on clear, transparent rules applied on a fair and consistent basis.
In summary, McCoy and many of our peers in Alberta either need liquidity help now or very soon. My message today is that the oil and gas industry in many cases is just beginning to experience the full impact the COVID-19 pandemic will have on revenues. Contracts and order backlogs are being completed with nothing coming in to fill these voids. If we are left to our own capital resources, bankruptcies and continued layoffs will result.
We are definitely not looking for a handout. What we are asking for is balance sheet support to survive and eventually thrive again. I ask that the finance committee look at these programs and consider how to clearly and efficiently support Canadian companies through fair and transparent loan financing before it's too late.
Thank you for your time. I appreciate having the opportunity to provide our view on the impact of COVID-19. I look forward to any questions later.