Not a pipe dream: Cenovus ships first crude to China, happy to get $40 a barrel more
Cenovus Energy on Wednesday said its fourth-quarter earnings were more than three times that of last year – $266 million versus $78 million – thanks to increased output and higher achieved oil prices.
The Alberta oil and gas producer, which was spun off from natural gas major Encana three years ago, also upped its quarterly dividend 10% to 22c/share.
The $29 billion company is a backer of the Northern Gateway pipeline project to carry crude from the Alberta oilpatch to markets in Asia via a new marine terminal in British Columbia in an effort to realize world prices for Canadian crude.
According to Canada.com Cenovus last week shipped its first 250,000 barrels to China, locking in relationships with refiners there:
[CEO Brian] Ferguson said last week’s shipment was made possible by Cenovus gaining 12,000 barrels per day of service on the TransMountain Pipeline that runs from Edmonton to the Westridge Terminal in Vancouver.
Most of the oil shipped starting late last year has been bound for California customers and, although it’s less than 10 per cent of overall company oil output, it has helped the bottom line, Ferguson said, because it is fetching a premium by being priced in relation to Brent crude instead of West Texas Intermediate.
North Sea Brent was trading at $117 per barrel on Wednesday while West Texas Intermediate (WTI) fetched just under $102 in New York. Canadian crude in turn trades at a steep discount to WTI.
Western Canada Select, a combination of heavy oil from the oil sands and conventional sources, traded at a $24 discount to WTI on Wednesday. Last week it hit multi-year lows of $35 below WTI.
The discount for Syncrude, a light oil made from oil sands after undergoing an expensive upgrading process, last week traded at its widest in at least six years after dropping to $23 below the value of WTI. That gap has since closed to only $1.00 because of an outage at the Horizon oil sands upgrader, cutting supply.
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2 Comments
Biddulph Art
This just shows how good the americans treat Canada. The oposition to the pipeline in northern b.c. should take note. They should also look at how many spills have hapened
from the pipelines that allreadd go through b.c. mountains.It easy to see why the usa has put 70 million into environmental groups in our country. The americans want to keep our oil at the
huge discount dictated as it is now.
Happy
Although the price is notably discounted the price structures were agreed upon by both sellers and buyers.
Further more the Canadian heavy crude oil is of low grade and produces lower grade, less valuable refined products and or less of the higher value refined products.
The Tar Sands projects are good for the next 100 years so the oil company participants are not going to lose money, rather it will simply take longer for their initial investments to pay off.
The combined production target is 3 million barrels a day by around 2020 to 2025
They will not lose money and even if the price drops to around 40 US dollars a barrel there is still money to be made on volumes of production…but marginally so.
The existing Kinder Morgan ( Transmountain Pipeline ) operation is going to be expanded to 600,000 barrels per day capacity allowing “some more” of the Tar Sands oil production to be delivered to the Asian markets.
Canadian producers will continue to deliver oil to the U.S. refinery infrastructure as long as the politics in America support the building of pipelines.
If not then the increased tar sands production will go to the Asian markets.
Canada has 2 options now and the oil industry more or less does not wait for politics to dictate how they spend their money and or let politics effect their investments , especially when and if they have profitable alternatives.
The Tar sands developments have been ecouraged and supported by all the previous governments and of course the current government and it will be supported by the future governments.
The time and money spent and the commitments made by many entities are far and beyond environmental concerns at this point and the development of Canadian oil resources is not dictated by political opposition or environmental concerns…although they do effect the ability of the developments.
Build the pipelines and deliver the products and get the money and share the wealth and spread the wealth