Scaling back growth in oilsands output eyed

The company also indicated Wednesday that it could scale back further production growth, including at a 50,000 bpd under-construction oilsands project, if new export pipelines are not built to carry oil out of Alberta.

“From a pipeline perspective, I remain an optimist that most if not all of the three major projects would go,” Pourbaix said of Kinder Morgan Canada’s Trans Mountain pipeline expansion, TransCanada Corp.’s Keystone XL pipeline and Enbridge Inc.’s Line 3.

“In the interim, as production grows in Alberta, we obviously are going to need rail,” he said.

Pourbaix would not say how much oil Cenovus is shipping by rail, but indicated the firm is scaling up. The lack of pipeline capacity and challenges securing railway cars has led to large discounts for Canadian oil, which also impacted Cenovus’ hedging program in the first quarter.

Canaccord Genuity analyst Dennis Fong said Cenovus’ hedging program was understandable given the need to manage debt obligations. “The way to think of it was for downside protection in that type of a scenario,” Fong said.

In the future, Pourbaix said the best way for Cenovus to manage through volatile commodity prices — including swings in the discounts Canadian oil producers accept for their crude — is to de-leverage. “I’m very, very focused on paying down our debt,” Pourbaix said.

Pourbaix took over from previous CEO Brian Ferguson six months ago and has since overhauled the company’s executive team. The company hired new chief financial officer Jonathan McKenzie away from competitor Husky Energy Inc. to replace Ivor Ruste, who is retiring at the end of the month.

But Pourbaix denied that changes at the executive level were a result of the problems with its hedging program. He said he was looking for a CFO that would stay with the company over the long term and that McKenzie “has a great deal of runway in front of him.”

The company has also put up two other Calgary oilpatch veterans to join its board of directors, which angry shareholders has also said is in need of renewal.

Shareholders will vote on adding Keith MacPhail, the executive chairman at Bonavista Energy Corp. and chairman of NuVista Energy Ltd., and former TransCanada and Talisman Energy Inc. CEO Hal Kvisle to the board.