Canada

Cenovus CEO says inflation ‘manageable’ as company posts huge second-quarter profit rise

CALGARY — The CEO of Cenovus Energy Inc. Alex Purbe said on Thursday that inflation has been “manageable” for the energy company so far, but is something he is certainly keeping an eye on.

On a conference call with analysts, Pourbaix said inflation likely won’t “meaningfully change” any of the company’s investment decisions and plans next year.

He noted that the oil sands part of the business in particular is not feeling the effects of inflation because of long-term contract contractors and materials that were delivered much earlier.

“Most of our activities are really planned and organized years in advance,” he said.

However, he said more pressure was being felt on the conventional side of the business, namely items such as drilling and fracking rigs, drill pipe casings and completions equipment.

“We’re seeing cost escalation to that 10 percent range,” he said on the call.

“My challenge to the team is always to try to find a way to eat inflation or offset inflation. Some years we can do that … next year it might be a bit of a challenge.”

His comments come after the Calgary-based company reported a huge second-quarter profit rise on the back of higher commodity prices and higher margins.

The Calgary-based oil producer had net earnings of $2.4 billion, or $1.23 per basic share, in the second quarter, compared with $224 million, or 11 cents per share, a year earlier.

Revenue for the three months ended June 30 was $19.2 billion, up from $10.58 billion in the second quarter of 2021.

Total upstream production reached 761,500 barrels of oil equivalent per day, down from 765,900 barrels of oil equivalent per day in the year-ago period, and total downstream production reached 457,300 barrels per day, down from 539,000 during the period of the previous year.

Pourbaix said the company met its commitment to return 50 percent of excess free cash flow to shareholders during the quarter.

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He said the oil producer also maintained strong operational and financial results during a period of significant planned repairs and maintenance.

“We are well positioned for an even better performance in the second half of the year as our assets return to operating at normal levels across the portfolio,” Pourbaix said in a statement on Thursday.

Cenovus also updated its corporate guidance for 2022 to reflect changes in the commodity price environment, the restart of the West White Rose project, the Sunrise oilsands acquisition, accelerated upstream development and increased downstream operating costs.

The company increased total capital investments for the year by $400 million in the middle to an updated range of $3.3 billion to $3.7 billion.

It also updated its overall guidance for upstream production to between 780,000 barrels of oil equivalent per day and 810,000 barrels of oil equivalent per day, an increase of 15,000 barrels of oil equivalent per day at the midpoint.

Cenovus shares were up 30 cents, or 1.3 percent, at $23.93 in early afternoon trading.

This report by The Canadian Press was first published on July 28, 2022.

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The Canadian Press