Page 14 - NorthAmOil Week 30

NorthAmOil PERFORMANCE NorthAmOil

Oil sands giants report quarterly losses

CANADA SUNCOR Energy and Cenovus Energy – two of
the four leading producers in Canada’s oil sands
– have reported losses for the second quarter of
2020.
The losses were expected, given that the oil
price downturn began at the end of the first quar-
ter, hitting particularly hard in the second quar-
ter as the coronavirus (COVID-19) pandemic
took an increasingly heavy toll on demand for
oil. And oil sands producers were among those
severely affected, having already been struggling
with both project economics and their public
image. Indeed, Imperial Oil and Canadian Nat-
ural Resources Ltd (CNRL) – the other two lead-
ing oil sands players – are also anticipated to post
losses in the coming days.
Nonetheless, Cenovus’ second-quarter
results came in above analyst expectations. The
company reported a net loss of CAD235mn
($175mn), which was higher than the aver-
age estimate of five analysts surveyed by Zacks environment to remain volatile for some time.” Suncor has shut
Investment Research. However, this marked On Cenovus’ earnings call, Pourbaix said the down one of the two
a year-on-year drop from a net profit of company was currently producing more oil than production trains at its
CAD1.78bn ($1.33bn) in the second quarter of allowed under Alberta’s crude curtailment pro- 194,000 bpd Fort Hills
2019. gramme by buying credits from other producers oil sands mine.
Cenovus noted a loss of CAD529mn whose volumes are below their quotas either
($395mn) related to product sold in the second because of voluntary reductions or maintenance
quarter that had had its value written down at work.
the end of the first quarter. This had a significant Suncor, meanwhile, announced sec-
impact on the company’s funds flow during the ond-quarter results that came in below analyst
second quarter, it said in a July 23 statement. expectations. The company reported a net loss
The producer pointed out, however, that of CAD614mn ($458mn) for the quarter, com-
while low oil prices at the start of the second pared with a profit of CAD2.73bn ($2.03bn)
quarter had an impact on its financial results, it a year ago. The loss included a CAD478mn
was able to respond quickly to the rise in West- ($356mn) unrealised after-tax foreign exchange
ern Canadian Select (WCS) prices later in the gain on the revaluation of US dollar-denomi-
quarter, ramping up production to capture value. nated debt, Suncor said. It added, however, that
WCS prices rose almost tenfold between April the result excluded a CAD397mn ($296mn)
and June to an average of CAD46.03 ($34.33) after-tax hydrocarbon inventory loss that was
Cenovus said it per barrel. recognised in the first quarter.
As a result of its response to this price
Suncor’s total production in the second quar-
achieved record increase, Cenovus said it achieved record levels ter fell 18.5% y/y to 655,500 boepd from 803,900
levels of output at of output at its Christina Lake oil sands project in boepd as the company reduced its output in
June, as well as achieving free funds flow of more response to lower demand. The measures it took
its Christina Lake than CAD290mn ($216mn) for the month. included shutting down one of the two produc-
This helped the company to raise its production tion trains at its 194,000 bpd Fort Hills oil sands
oil sands project on a y/y basis to 465,415 barrels of oil equiva- mine in northern Alberta.
lent per day (boepd), compared with 443,318
And Suncor’s CEO, Mark Little, warned on
in June. boepd in the same quarter of 2019. The oil sands the company’s earnings call that returning the
accounted for 373,189 barrels per day, also mark- second Fort Hills train to service depended on a
ing an increase from the second quarter of 2019, number of factors, including oil prices, Alberta’s
when the figure reached 344,973 bpd. However, curtailment programme and Suncor’s ability to
both oil sands and overall production volumes control costs.
fell compared with the first quarter of 2020, “Given the high level of global crude inven-
when they came in at 387,036 bpd and 482,594 tories and the return of production which was
boepd respectively. shut in during the second quarter, we expect
“We view the second quarter as a period of [oil] pricing and crude spread volatility to
transition, with April as the low point of the remain through 2020, although obviously not as
downturn and the first signs of recovery tak- extreme as we saw in the second quarter,” he said.
ing hold in May and June,” Cenovus’ president This more cautious approach stands in con-
and CEO, Alex Pourbaix, said in a statement. trast with Cenovus’ move of returning 60,000
“That said, we expect the commodity price bpd of crude to the market in June.™

P14 www. NEWSBASE .com Week 30 30•July•2020