CALGARI – Chief Executive Officer of Cenovus Energy Inc.CVE.TOsays the company is continuing its plans to increase its crude deliveries to 100,000 barrels a day this year, despite criticism from other major manufacturers, that the forced reduction in Alberta's production has destroyed the profitability of the railways.
The Calgary-based company is confident the province will encourage crude oil growth as an alternative to delayed new export pipelines ahead, said Alex Purbai on Wednesday during a conference call.
"I remind everyone that although we are currently in a very low differential (price) period, we are literally six weeks in this restraining initiative," he said.
"I think there is a lot of noise … but I expect the government will act to continue looking at these volumes to ensure they are at the right level to stimulate rail transport."
Pourbaix's comments are in sharp contrast to criticism of the impact of the provincial program on the rail transport economy by Steve Williams, CEO of Suncor Energy Inc., and Rich Krueger, Chief Executive Officer of Imperial Oil Ltd.
Kruger said Imperial will cut shipments to "near zero" this month from around 168,000 barrels a day in December because the gap between Western Canadian and US benchmark oil prices has been reduced to such an extent that it does not cover the extra cost of using rail to send oil to the Gulf Coast refining complex.
Pourbaix said in an interview that Cenovus does not do much but does not lose money on 20,000 bpd of oil now supplied by rail in the US and expects profitability to improve when the company begins to receive and replenish about 4,000 newly built rail tanks over the next few weeks.
He pointed out that the Western Canadian Select bitumen blends from time to time a Texas premium for Texas prices in New York to the Gulf Coast refineries due to a shortage of competitive raw material from Venezuela and Mexico.
Cenovus also announced on Wednesday that it has increased its commitment to deliver on the proposed Keystone XL pipeline from Alberta to the Gulf Coast from 50,000 to 150,000 barrels per day.
Pourbaix said that part of the increase was provided free of charge by the government of Alberta without being specific.
When a province took over a year ago with the developer TransCanada Corp. to take 50,000 barrels a day for the pipeline, she agreed to stay away as long as there is demand from the private sector, Prime Minister Rachel Notley later said at a Calgary event.
"It is not surprising that (Transscanada) has found that there is huge demand in the private sector … so we are pleased that we can do that with Cenovus," she said.
Cenovus had mixed news about the 50000 barrel expansion a day in the Christina Lake thermal oil plant in northern Alberta.
He reported that the wells in the project were steam injected five months ago and capital spending was about 25% lower than expected, but production that could begin in the second quarter may be delayed depending on the containment plan and market access,
Cenovus reported a net loss of $ 1.36 billion from continuing operations in the fourth quarter of 2018 due to low oil prices, voluntary production cuts, conventional oilfield write-offs, and dematerialized shocks due to stock accounting in its refineries in USA.
The company missed analysts' expectations, with the net loss for the year rising to 2.9 billion dollars.
Similar to Suncor and Imperial, Cenovus reported lower oil prices, blamed for lack of access to pipelines on US markets, but better profit margins for refining, partly due to the lower cost of raw materials.
CIBC analyst John Morrison said in his report that the revenue report was negative, but failures should not last long.
"In particular, the differences are now narrow, reflecting the constraints of production in Alberta, and although we expect the differences to widen in the second half of 2019, Cenovus should be more secured by the harsh rail transport agreements that previously were announced, "I said.
The loss amounted to $ 1.10 per share for the quarter ended December 31, compared to a profit of $ 620 million or 50 cents per share in the last three months of 2017 when its results were driven by the sale of assets in Alberta and Saskatchewan.