Energy stocks were walloped Monday by a double-digit drop in oil prices, which could prove disastrous for U.S. shale energy stocks if the decline continues, according to one industry analyst.

“I think the U.S. companies are actually in worse shape than the Canadian companies,” Randy Ollenberger, managing director of oil and gas equity research at BMO Capital Markets, said in an interview with BNN Bloomberg on Monday. “We’re likely to see more carnage south of the border than we will here.”

“About one-third of the U.S. E&P (exploration and production) stocks really break even at about a US$55 WTI price. So, those companies are struggling. They will potentially go under and that will start to sow the seeds for this recovery.”

The crash in worldwide oil prices – fuelled in part by a price war between Russia and Saudi Arabia, as well as COVID-19 worries forcing a dip in demand – worsened as markets opened on Monday. The U.S. benchmark West Texas Intermediate crude April futures contract was down more than 17 per cent to US$34.07 as of 11:15 a.m. ET on Monday. The May contract for Brent crude, meanwhile, had sunk 18.7 per cent to US$36.77 as of the same time.

Ollenberger said that the damage to Canadian energy players may only be temporary.

“It’s obviously exaggerated just because of the uncertainty that’s out there right now,” he said.

“There’s no reason that Cenovus should be down 40, 50 per cent unless you believe that these sorts of oil prices are going to last indefinitely. They’re not.”  

Cenovus Energy Inc. lost almost half its value at the opening of a volatile Monday trading session, which saw trading halts on major Canadian and U.S. stock exchanges. The company’s TSX-listed shares opened Monday’s session at $4.15, down 47 per cent from Friday’s close of $7.90. Shares were trading at $4.25 as of 11:15 a.m. ET.

Ollenberger noted that Cenovus’ debt levels leave it “reasonably well-positioned to survive.” 

For its part, Cenovus says it’s well-equipped to withstand the turmoil because it’s been paying down debt to improve the health of its balance sheet. 

“We are continuing to assess the current situation and looking for additional opportunities to streamline our spending,” a company spokesperson said in a statement emailed to BNN Bloomberg.

- With files from Noah Zivitz