Rising oil price doesn't shake producers on spending discipline

Focus remains returning money to shareholders

TORONTO • The price of oil has been on a steady climb all year, but the talk at Canada's biggest oil and gas conference is still focused on spending discipline.

Industry leaders at the Canadian Association of Petroleum Producers conference, held in Toronto this year, have been emphasizing their predictability and focus on returning money to shareholders, rather than talk of growth.

Suncor Energy chief executive Rich Kruger said his goal is to bring clarity and simplicity to the company.

“I want to become consistently and boringly excellent,” said Kruger. “I'm not a big one for surprise parties.”

Kruger has been working to create a steadier production plan, in contrast to some of the more rushed decisions when growth was the answer to all of the industry's questions.

The early development of the Fort Hills oilsands site, for example, saw mine plans that had slope angles too steep, and not enough was done to check for water issues, in what were fairly short-sighted decisions made to feed the processing plant faster, he said.

“If you go back 10-plus years ago, we lived in a world we thought had resource scarcity, oil prices are going be $100 or better, where growth in production volumes was synonymous with growth in value, a different world than we live in today.”

Even with oil up about US$15 per barrel so far this year to US$85, industry leaders at the conference have been emphasizing that they no longer see production growth as so deeply tied to value, and that each added barrel has to be weighed against returning money to shareholders.

The shift is happening as investors worry about longterm demand prospects for fossil fuels as the push to reduce carbon emissions ramps up. However, forecasts do show that oil demand is still growing, said Bank of Montreal analyst Randy Ollenberger.

“We often hear the narrative that oil demand has peaked, that it's not growing and how that's negative for the space. That's not true, oil demand is actually continuing to grow, and in fact, it's continuing to grow at a pace that's higher than the average over the last 13 years.”

Still, with investors looking for the industry to reliably pump out cash, as much, if not more than they're looking for growth, company leaders are eager to assure they won't be lost in exuberance as prices rise.

Cenovus CEO Jon McKenzie said his firm is planning restrained and strategic growth, reducing bottlenecks and finishing shelved projects. “Growth that we've kicked off in 2023 is very different than the kind of growth you would have seen 10, 15 years ago,” he said.

JEFF MCINTOSH / THE CANADIAN PRESS FILES Oil has been on a steady climb all year, but sector talk still emphasizes keeping expenditures on a tight leash.