Page 5 - NorthAmOil Week 49 2022
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NorthAmOil                                   COMMENTARY                                          NorthAmOil


                                                                                                  Cenovus is investing
                                                                                                  in new projects
                                                                                                  including West White
                                                                                                  Rose, which will be
                                                                                                  based offshore Eastern
                                                                                                  Canada.





















                         especially if natural gas prices remain favourable   Further details of Imperial’s plans for 2023
                         and the company proceeds with plans to develop  still need to be disclosed, but it does not appear
                         new output.                          likely that the company would deviate away
                           “It will depend on opportunities and econom-  from the path it is already on. Oil prices remain
                         ics but we are spending about 20-25% more in  volatile, encouraging producers to be cautious,
                         capital and over time it should not surprise any-  but nothing has happened in recent weeks to
                         one to see production grow around that level,”  make them rethink existing plans.
                         Cenovus’ CEO, Alex Pourbaix, told Reuters in   CNRL for its part anticipates that output
                         early December.                      will grow by 4% in 2023 to reach 1.33-1.37mn
                           The company anticipates that its production  boepd (See: CNRL targets 4% production growth
                         will grow by around 3% year on year in 2023 to  in 2023, page 6). The company’s capex budget is
                         800,000-840,000 boepd, while its capex will rise  forecast to rise to CAD5.2bn, and it described
                         by roughly 21% to CAD4.0-4.5bn ($3.0-3.3bn).  the budget as “disciplined”.
                         Pourbaix noted, however, that Cenovus had   Notably, CNRL has also set a new target for a
                         largely been able to keep its operating costs flat  40% reduction in total corporate absolute Scope
                         y/y across most of its business areas.  1 and Scope 2 greenhouse gas (GHG) emis-
                           The 2023 budget includes CAD2.8bn  sions by 2035, from a 2020 baseline. All four
                         ($2.1bn) of sustaining capital to maintain base  companies are part of the Pathways Alliance,
                         production, as well as CAD1.2-1.7bn ($887mn  which accounts for the majority of oil sands
                         to $1.3bn) that will be directed towards optimi-  production and aims to cut oil sands emissions
                         sation and growth. The latter figure includes the  to net zero by 2050. Efforts on this front will
                         construction of the West White Rose project  be slow-moving, but emissions targets will be
                         offshore Eastern Canada.             closely watched, and CNRL noted that federal
                           Debt reduction – another priority for all of  and provincial support for the Pathways Alli-  Over the
                         the major companies – also features in Ceno-  ance initiatives gave it the confidence to set an
                         vus’ plans, and the producer expects to hit its  “aggressive” new emissions reduction goal.  longer term,
                         target of reducing its net debt to CAD4.0bn next                          decarbonisation
                         year. Once it has reached this target it is plan-  What next?
                         ning to return 100% of excess free funds flow to  There is still plenty that could complicate the   pressures are
                         shareholders.                        four companies’ plans, including further oil
                                                              price volatility, pressure to cut emissions more   expected to
                         Imperial and CNRL                    quickly, ongoing cost inflation and unexpected
                         When Imperial reported its third-quarter results  operational challenges. However, the producers’   play into the
                         in late October, the company said it anticipated  strategies have been relatively consistent during   companies’ plans
                         a capex budget of CAD1.4bn ($1.0bn) in 2023.  recent months, and it looks as though efforts to
                         This includes spending for ongoing production  balance shareholder returns with growth will   more and more.
                         optimisation projects at the company’s Cold  continue.
                         Lake and Kearl oil sands operations.  Over the longer term, decarbonisation pres-
                           Imperial’s plans for the final quarter of 2022  sures are expected to play into the companies’
                         involved continuing to operate at maximum lev-  plans more and more. Against this backdrop, it
                         els while also reducing its outstanding debt. The  would not be surprising to see them focus on
                         company also raised its quarterly dividend and  operations beyond the oil sands. Indeed, Ceno-
                         announced plans to buy back more shares at the  vus’ expectations about natural gas prices and
                         time, illustrating its efforts to keep focusing on  future growth suggest that this could already be
                         shareholder returns as well.         happening to some extent.™



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