As the recession fades and costs begin to rise across its operations, Cenovus Energy Inc. is rolling out new technology that will allow it to substantially increase production at some of its southern Alberta operations.
The company has begun using a new chemical cocktail to squeeze out oil from places it wouldn't normally flow, adding a decade of life to some wells and boosting the quantity of crude it can recover from some fields by 40 per cent.
The process, called an "alkaline surfactant polymer flood," has been the subject of experiments over the past few years, but will now be applied to a series of new pools. It will allow the company to extract an additional 10 million barrels - a relatively modest bump in output since it applies primarily to oil resources in southeastern Alberta, rather than the oil sands, where Cenovus has a large land position.
But Cenovus pointed to the advance as evidence that its research and development is uncovering better ways to extract crude.
"Technology is going to continue to drive increasing recoveries across the board for us - whether that's on our oil sands assets or our other heavy oil assets. Where we can improve recoveries, we can drive down costs," chief executive officer Brian Ferguson said in an interview.
Later this year, Cenovus plans to seek regulatory approval for a new oil sands project, called Narrows Lake, that it expects will incorporate a new technology that will extract 30 per cent more bitumen while using 30 per cent less energy.
The technological advances come as costs begin to once again creep higher.
In Saskatchewan's Bakken play, costs have risen 10 per cent in the past year. Other parts of Cenovus's operations have seen inflation approaching 5 per cent, enough to make it a concern.
"The last 18 to 24 months have been unusual, to see no inflation or in some instances deflation," Mr. Ferguson said. "It's one of the business or macro issues that we absolutely have to have a plan in place to manage."
Cenovus posted earnings Thursday from its first full quarter as an independent company after breaking away from Encana Corp. last December.
The company reported first-quarter profit of $353-million or 47 cents a share. Its oil sands production of 58,546 barrels a day was a 66 per cent increase from the same quarter last year, and beat consensus analyst estimates by 4 per cent. Cash flow came 10 per cent ahead of expectations.
"The company continues to demonstrate its strong execution capabilities within its oil sands division," Peters & Co. analyst Kam Sandhar wrote in a note to clients.
The Cenovus split from Encana, the company revealed in a series of numbers given to reporters, involved considering 350 company names, sitting down for 109 meetings with investors and analysts, moving offices for 1,300 people, replacing 350 signs and ordering 6,000 Cenovus mugs.
Mr. Ferguson said he is "absolutely tickled pink" with how the change has gone.
"When you're going through a major transition, it can be disruptive to your operations. And we did not miss a beat," he said. "In fact, our results are better than budget."