Cenovus cuts crude production amid severe discounts, low pricing
Canadian oil producer Cenovus Energy Inc said on Wednesday it was limiting output due to severe discounts and the price of domestic heavy crude should rise by mid-2019 as increased rail volumes ease transport bottlenecks.
The company did not specify how much production it was restricting, but said it has slowed output at both its Foster Creek and Christina Lake sites. Chief Executive Officer Alex Pourbaix told Reuters that the entire industry needed to do its part to reduce excess supply.
“We’re not going to carry the industry on our backs. We’re going to do this as long as we can justify that we’re creating value for our shareholders by deferring this production,” Pourbaix said on a conference call.
Pourbaix said there has been no effort among producers to coordinate reductions.
The discount on Canadian heavy oil to U.S. crude widened to a record this month, on rising production from Alberta’s oil sands and pipeline constraints.
Last month, Cenovus signed three-year deals with Canada’s two major railways to transport roughly 100,000 barrels per day of crude from Northern Alberta to the U.S. Gulf Coast, starting in the fourth quarter.
The company expects industry-wide crude by rail volumes to reach 300,000 barrels per day (bpd) by year end, up from 230,000 bpd in August.
Cenovus faced investor ire following its deal to buy some of ConocoPhillips’ oil sands assets last year and took on a huge debt. The company has been since taking steps to turn around its business through layoffs and asset sales.
Total production rose 4 per cent to 495,592 barrels of oil equivalent per day in the third quarter ended Sept. 30.
The company’s net loss was $242 million, compared with a profit of $275 million a year earlier.
On an adjusted basis, the company lost three cents per share. Analysts on average had expected earnings of 21 cents per share, according to Refinitiv data.
The company’s shares rose 2.6 per cent to $11.38 on the Toronto Stock Exchange.