Cenovus Energy Inc. chief executive Alex Pourbaix warned that the federal government’s proposed cap on oil and gas emissions could result in future production cuts in the Canadian oilpatch, casting a pall over the massive second-quarter profit of $2.4 billion his company reported Thursday.
“I am very worried that if we remain on this path, it could lead to shutting in production at a time when the world is literally crying out for more oil and gas production,” Pourbaix said during a conference call with investors.
Pourbaix made the comments on the heels of the oilsands giant reporting record cash flows and second quarter net earnings of $2.4 billion — a huge increase compared with a profit of $224 million in the same period last year — fuelled by high commodity prices.
The federal government recently opened consultations with industry on a proposed cap on oil and gas emissions in the form of either an industry-specific cap-and-trade system or a modified carbon pricing system. The Trudeau government has called on the sector to reach a target of 110 million tonnes by 2030 — equivalent to a 42 per cent cut from 2019 levels.
I am very worried that if we remain on this path, it could lead to shutting in production at a time when the world is literally crying out for more oil and gas
Pourbaix said the federal targets significantly exceed the 30 per cent reduction by 2030 that oilsands producers have committed to under the Pathways Alliance — a consortium of six major oilsands firms who have pledged to decarbonize production to reach net-zero by 2050.
“Those are much more aggressive goals than are being asked of any of the other industrial sectors in in the country, including agriculture, heavy industry, and transportation,” Pourbaix said. “I think they’re going to be incredibly difficult — I don’t think they’re possible to hit.”
The company announced Thursday that it generated approximately $2 billion in excess free cash flow during the quarter and returned half of that to shareholders through share repurchases and dividends.
Cenovus also said it will increase capital spending this year to a total of $3.7 billion.
The company said it expects to spend around $400 million more this year on capital expenditures, including $200 million as a result of taking over British oil major BP Plc’s remaining 50 per cent stake in the Sunrise oilsands project and $100 million on preliminary work for the restart of the West White Rose offshore project. The company said a further $100-million increase in spending is due to inflation in labour and equipment and increased drilling activity and other costs.
Cenovus said it expects to produce between 780,000 and 810,000 barrels of oil equivalent per day (boe/d) in 2022 — an increase of 15,000 boe/d thank to the deal with BP.
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The company also released its 2021 ESG report Thursday.
Cenovus reported that it has reduced methane emissions by 25 per cent from 2020 levels.
The company has been evaluating the feasibility of carbon capture and storage (CCS) projects at several of its upstream and downstream facilities.