Cenovus CEO touts benefits of Alberta oil production cuts
Alberta's oil production curtailment program will benefit the province’s taxpayers this year thanks to stronger Western Canadian Select crude prices, the chief executive of Cenovus Energy Inc. said Wednesday.
Cenovus swung from a royalty credit position of $29 million when oil price differentials reached record highs in the fourth quarter of 2018, to paying $191 million in royalties to Alberta in the first quarter of this year. Alex Pourbaix called the change a prime example of the energy industry’s recovery after provincially-mandated production curtailments.
“If you look at the results that my company delivered versus the results that we delivered in [Q4], it’s just a completely stark difference,” Pourbaix told BNN Bloomberg in an interview.
“You’re talking almost a quarter-billion dollar change in royalty payments,” he added. “If you extrapolate that over a year, you can see the benefit that curtailment is providing to the province, and Cenovus and our industry and our shareholders are seeing a similar benefit.”
The curtailment program which was instituted on Jan. 1 aimed to clear up a supply glut that had led to a steep decline in oil prices. The plan was to keep 325,000 barrels per day off the market, but is expected to fall to roughly 175,000 bpd by June.
Pourbaix was one of the energy industry’s loudest advocates for production cuts amid a steepening WCS crash in November.
However, he told BNN Bloomberg on Wednesday that the curtailments can’t remain as a permanent fixture in the oil patch.
“I think we would all agree that you don’t want to see curtailment as a permanent element, but the solution – let’s be clear – right now the province of Alberta is producing several hundred thousand barrels a day more oil than it has pipeline takeaway,” he said.
He cautioned the province to ease off curtailments gradually to prevent another dip in Canadian crude prices.
“The only way we’re going to solve that problem is pipelines in the longer-term or more oil moving by rail in the shorter term. If we were to come off curtailment aggressively, I would suspect we would have the exact same pricing pressures we saw in Q4 with the catastrophic impact they would have on the province and on our industry,” Pourbaix said.
Cenovus beat analyst expectations, reporting adjusted first-quarter income of just over $1 billion on revenue of $5 billion on Wednesday. By comparison, the company reported adjusted income of $432 million on revenue of $4.6 billion in the first quarter of 2018.
Alberta’s newly-elected United Conservative Party government has indicated it will cancel outgoing Premier Rachel Notley’s plan to add rail assets to ease the province’s takeaway capacity and has also taken a combative approach to relations with the federal government over both its carbon tax and pipeline policies.
However, Pourbaix said he has faith in premier-designate Jason Kenney and his ability to champion the energy industry.
“I have a lot of hope going forward with Jason Kenney’s leadership and the UCP,” Pourbaix said. “He’s clearly shown a great deal of passion and commitment to Alberta’s energy industry and I’ve spent a lot of time with Jason over the years. I think he’s a good listener and I think he’s smart, and I suspect he’s going to be a good advocate for our industry in the province.”
- With files from The Canadian Press