Cenovus Energy, the first major Canadian oil firm to report Q1 figures and one of the early proponents of a production curtailment in Alberta, said on Wednesday that the mandatory cuts are working and benefiting both the industry and the province, thanks to increased Canadian oil prices.
“It should now be crystal clear that the government’s temporary curtailment program is doing what it was intended to do and has had an immediate, positive impact not only for our industry, but for all Albertans, in the form of improved royalty revenue,” Alex Pourbaix, Cenovus
president and chief executive officer, said in the company’s Q1 results release today.
Pourbaix was one of the first Canadian oil managers to call for cuts from all companies.
“I remain convinced that this curtailment is the right thing for our industry and for Albertans,” Pourbaix said on the Q4 earnings call in mid-February.
“Ultimately people need to keep in mind that this has been a short-term solution for an extreme situation that was many years in the making,” he said two months ago.
In the Q1 earnings release on Wednesday, Cenovus said that the after the cuts were implemented the spread between WTI and Western Canadian Select (WCS) narrowed to an average of US$12.37 a barrel in Q1, with the price of WCS up to an average of US$42.53 a barrel, more than double the average price in Q4 2018 and up 10 percent from Q1 2018.
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“The significant improvement in WCS pricing resulting from the government’s mandatory curtailment program more than offset the impact of reduced oil production and increased oil sands operating costs during the first quarter,” Cenovus said.
The company revised down by 7 percent its production guidance for full-2019 “to reflect the anticipated impact of curtailment.” Cenovus now sees its total oil sands production averaging 350,000 bpd-370,000 bpd this year.
While pro-curtailment Cenovus praised Alberta’s drastic policy, other producers—including Imperial Oil, Suncor Energy, and Husky Energy—have yet to report Q1 figures and take stock of the mandatory production cuts.
These three companies have repeatedly said the Alberta government has been wrong to intervene in the free market, and has created an additional layer of uncertainty and unpredictability of the business and investment climate in Canada’s oil industry.
By Tsvetana Paraskova for Oilprice.com