Getting oil to refineries has been a challenge: Cenovus CEO
Two of Canada’s largest oil-sands producers plan to conserve cash until they have more confidence that a recovery from crude’s historic price crash has staying power.
Cenovus Energy Inc. Chief Executive Officer Alex Pourbaix said he’s following data on miles driven and refinery runs to gauge the pace of oil demand recovery in the U.S., and so far it seems “robust.” However, the aviation and cruise industries will take longer to rebound, and the current uptick in COVID-19 cases in the U.S. is causing some uncertainty about how durable the current improvements may be.
“It’s quite unlikely that we’re going to go back to the complete lockdown that we were experiencing in April,” Pourbaix said in an interview. “I suspect there will be more regional issues and we will continue, albeit with some fits and starts, with the recovery of demand.”
While Cenovus has been able to bring back essentially all of the production it idled to cope with the pandemic, the company said during its second-quarter report on Thursday that it’s sticking to a decision to suspend its dividend for the foreseeable future and instead focus its free cash flow on paying down its debt.
Suncor Energy Inc., Canada’s largest integrated oil company, said on Thursday that it’s not yet ready to restart a production line at the Fort Hills mine that it idled as crude prices crashed earlier this year. The company also maintained its dividend payment of 21 Canadian cents a share, down from 46.5 cents before the pandemic hammered oil demand.
West Texas Intermediate crude prices are trading around US$41 a barrel in New York. That’s a swing of more than $80 from the negative $40 that futures touched in April after an OPEC+ output-cut deal broke down just as the global pandemic decimated demand.
Still, Suncor wants more certainty before restarting the second production line on its 194,000-barrel-a-day Fort Hills mine. The company is discussing that possibility with venture partners Teck Resources Ltd. and Total SA and sees a “reasonable chance” of the line coming back online this year, CEO Mark Little said. He said he doesn’t want to “bet the financial health of the company on the pace of the recovery, which is outside of our control.”“Uncertainty is high,” Little said on the company’s second-quarter conference call. “You’ve seen it all across North America with economies starting, stopping, restarting. The jury is still out.”