The Cenovus Christina Lake oilsands facility steam-assisted gravity drainage pad southeast of Fort McMurray, Alta., on April 24.AMBER BRACKEN/The Canadian Press
Work on a massive floating production, storage and offloading (FPSO) vessel for the expansion of the West White Rose oil field off the coast of Newfoundland and Labrador is now complete, and Cenovus Energy Inc. CVE-T says the project is on-track for first oil in 2026.
The SeaRose FPSO is on its way back from Ireland where it had been undergoing dry dock work in Belfast – a “major milestone” for the project, Cenovus president and chief executive Jon McKenzie said on a Thursday-morning conference call about its third-quarter results. Production from the existing White Rose field is expected to resume by year-end, he said.
The White Rose field sits around 350 kilometres east of St. John’s. It produces about 26,000 barrels a day, but that number is falling as its oil reserves decline. The extension project will add about 75,000 barrels a day to production and extend the life of the field to 2038.
Husky Energy Inc., which owned the lion’s share of the expansion before Cenovus acquired the company in 2021, hit the brakes on the half-completed West White Rose project in March, 2020, when the COVID-19 pandemic obliterated oil demand and prices. In May, 2022, Cenovus said it would restart the oil field expansion following an overhaul of Newfoundland and Labrador’s provincial royalty structure.
The expansion project is costing Cenovus $700-million to $800-million each year, but Mr. McKenzie said it is expected to generate well in excess of $1-billion a year when it begins operations. The project is now around 85 per cent complete, which TD Securities analyst Menno Hulshof said in a research note was “reassuring.”
But Cenovus wasn’t so lucky with all of its operations in the third quarter – particularly its refinery in Lima, Ohio, which shut down in July owing to an undisclosed issue. Mr. McKenzie acknowledged there is still work to do.
“We’ve really attacked the downstream on a lot of different fronts. We’ve made a lot of changes on personnel and we’ve been doggedly going after our reliability issues, both in Canada and the U.S.,” he said.
The quarter ending Sept. 30 was the first full period of operations of the expanded Trans Mountain pipeline.
Mr. McKenzie said the resulting narrower, less volatile differential between Canadian and U.S. benchmark oil prices has in turn strengthened the price for all Canadian production.
Canadian Natural Resources Ltd. CNQ-T, the country’s largest oil and gas producer, is also benefiting from its position as a major committed shipper on the pipeline.
President Scott Stauth said Thursday that, beginning Dec. 1, the company will increase its contracted crude oil capacity on the pipeline by 75,000 barrels a day, to a total of 169,000 barrels a day.
The company’s heavy crude oil production averaged 76,808 barrels a day in the third quarter, a 1-per-cent increase year-over-year owing to strong drilling results from the company’s multilateral well program.
Even so, CNRL will further reduce its spending on drilling natural gas wells in the face of persistent low prices for the fuel. It now plans to drill 74 wells in 2024, 17 fewer than it forecast in its 2024 budget, Mr. Stauth said on a conference call.
Over the summer and fall, natural gas prices in Western Canada fell to their lowest levels in years. On certain days, the Alberta natural gas benchmark AECO price declined to mere pennies per gigajoule. Prices have improved with cooler temperatures, as Canadians begin to turn on their natural gas-fired furnaces, but are still well below 2023 averages.
Mr. Stauth told The Globe and Mail that CNRL would continue to look for efficiencies to ensure it can keep costs low and profits high in a low-price environment.
“We have the assets that will enable us to focus on moving capital to projects that create the best return of capital based on commodity pricing,” he said.
CNRL reported a third-quarter profit of $2.27-billion, down from $2.34-billion in the same quarter last year owing to lower commodity prices.
RBC Capital Markets analyst Greg Pardy called the company’s third-quarter results “flawless” and said in a note Thursday that CNRL remains his “favourite senior producer.”
Cenovus posted a 56-per-cent slump in third-quarter profit. Its total revenue was approximately $14.2-billion in the third quarter, down from $14.9-billion in the second quarter. The company attributed that to lower commodity prices and a decline in production and processing volumes.
Mr. Hulshof of TD Securities said that, on a positive note, maintenance at the company’s Christina Lake site in Alberta was completed ahead of schedule, which helped drive oil sands production.
With a report from The Canadian Press