Cenovus, Suncor choose different paths on restoring oil output as prices recover

Cenovus, Suncor choose different paths on restoring oil output as prices recover

CALGARY — Two of Canada’s biggest oilsands producers are taking different approaches to restoring production that was shut down during the pandemic lockdowns as signs of an economic recovery and higher oil prices emerge.

Both Cenovus Energy Inc. and Suncor Energy Inc. reported millions of dollars in losses in the second quarter as they throttled back oil production amid a global crude market awash in surplus barrels.

However, while Cenovus brought back 60,000 barrels a day in June to take advantage of higher bitumen prices, Suncor signalled Thursday the shutdown of one of the two production trains at its 194,000-bpd Fort Hills oilsands mine could remain in place for some time.

“In response to the sharp decline in oil prices in April, we quickly reduced production volumes at our oilsands operations while continuing to steam and store the mobilized oil in the reservoir,” said Cenovus CEO Alex Pourbaix on a Thursday conference call.

“When the market price for Western Canadian Select (bitumen-blend oil) increased almost 10-fold in June compared with April, we acted fast to ramp our oilsands production back up to take advantage of the improved pricing.”

The increase in WCS to an average of C$46.03 per barrel in June from C$4.92 in April prompted a boost in production to record levels at Cenovus’s Christina Lake operations in northeastern Alberta, the Calgary-based company said.

Pourbaix said Cenovus is currently producing more oil than allowed under Alberta’s crude curtailment program by buying credits from other companies who have been producing less than their quota either because of voluntary reductions or maintenance work.

Although some of the industry’s nearly one million bpd of production taken offline in Western Canada has been restored, Cenovus chief financial officer Jon McKenzie estimated about 500,000 bpd is still not being produced.

On a separate conference call Thursday, Suncor CEO Mark Little reiterated his contention that the energy sector recovery will be led by consumers of refined products, with higher demand for fuel translating into more demand for oil.

“The pace of demand recovery will be influenced by a number of factors,” he said, listing risks including a possible second wave of virus outbreaks, offset by government stimulus spending.

“We won’t bet the financial health of our company on the pace of recovery, which is outside of our control.”

Suncor’s production was 655,500 boe/d during the second quarter ended June 30, down 11.4 per cent from 739,800 boe/d in the first quarter of 2020 and 18.5 per cent from 803,900 boe/d in the same quarter of 2019.

Little said bringing back production from the second train at Fort Hills depends on oil prices, the ongoing Alberta oil output curtailment program which has prevented full production there and Suncor’s ability to control costs.

“Given the high level of global crude inventories and the return of production which was shut in during the second quarter, we expect (oil) pricing and crude spread volatility to remain through 2020, although obviously not as extreme as we saw in the second quarter,” he said.

Cenovus production in the second quarter was 465,415 barrels of oil equivalent per day, down from 482,600 boe/d in the first quarter when it took advantage of an Alberta program to allow higher quotas for producers who employ crude-by-rail options.

Since then, Cenovus has halted its rail shipping, which moved as much as 100,000 barrels per day, because it has been able to find sufficient pipeline capacity. McKenzie estimated not using its rail terminal is saving Cenovus about $60 million a month.

Neither Cenovus nor Suncor said they plan immediate changes to their 2020 capital budgets which were reduced in March and April.

Suncor reported late Wednesday a second-quarter net loss of $614 million or 40 cents per share, down from net earnings of $2.73 billion or $1.74 per share in the same period of 2019.

On Thursday morning, Cenovus reported a net loss of $235 million or 19 cents per share for the period ended June 30, compared with a profit of $1.45 per share or $1.78 billion a year earlier.

This report by The Canadian Press was first published July 23, 2020.

Companies in this story: (TSX:CVE, TSX:SU)

Dan Healing, The Canadian Press

Note to readers: This is a corrected story. A previous version contained incorrect Cenovus production numbers.

oil & gas

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Village of Halkirk investing in technology upgrades

The upgrades will be done in order for the municipality to safely secure resident information

PHOTO: Village of Halkirk Mayor Dale Kent presents two cheques to Castor District Housing Authority Manager Trudy Kilner

The cheques were presented as a matching grant by the Federation of Gas Co-ops to be given to a registered charity

76 new cases of COVID-19 reported Thursday

Active cases at 1,036, 10,713 recovered cases

County of Paintearth raising alarms over proposed oil and gas assessment changes

A change in the assessment model used for oil and gas will impact the tax revenue rural municipalities collect

COVID-19 tests urged for all teachers and school staff

121 new cases Wednesday, active cases up to 1,040

Charges likely in fatal attack at central Alberta medical clinic: RCMP

A vigil was held Monday night to mourn the victim

Wetaskiwin Regional Public Schools receive grant from Indigo Love of Reading Foundation.

WRPS has received $15,975 from the Indigo Love of Reading Foundation.

Three people drown at Crescent Falls

Rocky Mountain House RCMP say the incident occurred Tuesday

Feds seeking private consultant to design firearm buyback program

The ban covers some 1,500 models and variants of what the government considers assault-style weapons

Face masks for teachers can impact learning on young children, experts say

Face coverings, mandatory in most indoor public places across the province, can help limit the spread of COVID-19

New Tory leader must build a strong team in Commons and for the campaign: Scheer

Scheer marked his final day in the House of Commons today as leader of the Opposition

Man accused of killing Red Deer doctor says he does not remember attack

Appearing before a judge, Deng Mabiour, 54, rambled about being sick and needing a doctor

Deaths feared after train derails amid storms in Scotland

Stonehaven is on the line for passenger trains linking Aberdeen with the cities of Edinburgh and Glasgow

Man, 54, charged in connection with fatal attack of Red Deer doctor

Doctor was killed in his walk-in clinic on Monday

Most Read