Cenovus Energy Inc posted a better-than-expected profit on Thursday, benefiting from higher crude prices because of government-imposed production curbs and rise in U.S. sales, and a tight leash on costs.
Canada’s main oil-producing province, Alberta, ordered curtailments on oil production this year to deal with pipeline bottlenecks that had led to a glut in crude storage and record price discounts.
Cenovus, which has gained from a smaller discount on Canadian oil compared to U.S. oil, has been one of the most vocal supporters of the government intervention.
The company said average realized crude sales price from its oil sands operations rose 11.3 per cent to $54.94 per barrel in the third quarter, helped by the smaller discount on Canadian oil and higher crude-by-rail U.S. sales.
Cenovus and several other producers have proposed the provincial government allow some companies to produce more than what they are allowed, as long as that incremental crude can be moved to the market by rail.
The Alberta government, elected in April, inherited $3.7 billion worth of crude-by-rail contracts from the previous administration that it has been trying to offload onto the private sector.
The company said it transported an average of 80,000 barrels per day of oil by rail to the U.S. in Sept, and is on track to ramp up its crude-by-rail volumes to 100,000 barrels per day by end of the year.
Cenovus added that including barrels shipped by pipeline, it is now moving about one-third of its oil sands production to the U.S. markets, compared with less than 20 per cent in 2018.
The company said total operating costs for oil sands in the quarter remained unchanged from the previous year, and fell to $6.90 per barrel from $8.70 in the previous quarter.
The Calgary-based company reported a net profit of $187 million, or 15 cents per share, for the third quarter, compared with a loss of $242 million, or 20 cents per share, a year earlier.
Excluding items, the company reported a profit of 23 cents per share beating analysts’ average estimate of 20 cents per share, according to IBES data from Refinitiv.
Total production fell 9.5 per cent to 448,496 barrels of oil equivalent per day(boe/d) as the company stuck to the mandatory production limits.
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