Cenovus cuts oilsands production
Cenovus Energy Inc. said Thursday it has been running its oilsands operations at reduced production rates and storing excess barrels due to wider-thannormal light-heavy oil price differentials and pipeline capacity constraints.
The company has been operating its Christina Lake and Fos- ter Creek facilities at reduced production levels since February, CEO Alex Pourbaix said in a statement.
“We’re taking steps to respond to a critical shortage of export pipeline capacity in Western Canada that is beyond our control and is having a negative impact on our industry and the broader Canadian economy.”
The company has resorted to using its significant oil storage capacity because Canadian heavy oil is selling at a wide discount to West Texas Intermediate. It plans to sell the crude when pricing improves, he said.
Cenovus stock was trading down as much as five per cent at $10.99 per share in midday trading on the Toronto Stock Exchange.
But the move is a “sensible commercial decision” in the face of a challenging set of pricing conditions, RBC analyst Greg Pardy wrote in a note.
Cenovus is also evaluating opportunities to optimize the scheduling of maintenance and holding talks with rail providers to resolve a shortage of locomotive capacity.
Railways have been hesitant to add oil shipping capacity because they fear the business will evaporate once new export pipelines come on stream, demanding long-term take-or-pay contracts and higher rates to take on the risk.