Jul 28, 2016
Cenovus CEO Brian Ferguson calls on Ottawa to clear up regulatory uncertainty
Spending from one of Canada’s largest oil sands producers is set to resume after years of budget cuts, but only if Ottawa can offer more cost certainty.
Cenovus Energy CEO Brian Ferguson expressed a “high level of confidence” on Thursday in the company’s ability to maintain 24 per cent cost reductions in its oil sands operations, making it possible to move forward with 80,000 barrels per day worth of production expansions that were put on hold more than a year ago.
The only holdup, Ferguson implied, was uncertainty around what impact pending federal climate change legislation might have on Cenovus’s cost structure.
“I’m optimistic about the potential to resume construction on some of our deferred projects,” Ferguson said in a statement released alongside the company’s second-quarter results, which showed a narrower-than-expected loss and cash flow that exceeded estimates. “However, we still need additional clarity on federal fiscal and regulatory policies that could impact our operating environment.”
A spokesperson for federal Environment and Climate Change Minister Catherine McKenna told BNN her office was in the process of preparing a response to Ferguson’s statement. McKenna is currently leading efforts to forge a pan-Canadian climate change plan; a process she described earlier this month as “cumbersome.”
After cutting roughly $50 billion in capital investment plans since 2014, marking the steepest two-year decline since 1947 when the Canadian Association of Petroleum Producers began tracking industry spending, the negative trend has been steadily reversing in recent months.
Last week, Encana Corp. added US$200 million to its 2016 budget as CEO Doug Suttles told BNN “we are seeing recovery.” The extra spending from Encana followed similar moves announced the month before from Canadian Natural Resources and Northern Blizzard.
Even MEG Energy, which saw second-quarter cash flow plummet 93 per cent from the same period in 2015, is committed to spending $30 million on growth projects later this year.
“We are continuing to capture efficiencies across the business that are enabling us to reduce our sustaining capital requirements,” MEG CEO Bill McCaffrey said in a release Thursday. “These incremental improvements allow us the opportunity to refocus a portion of our capital investment toward growth.”
