CALGARY – Cenovus Energy Inc. CEO Alex Pourbaix said Thursday that inflation has been “manageable” for the energy company so far, but it’s something he’s certainly keeping an eye on.
In a conference call with analysts, Pourbaix said inflation is unlikely to “significantly change” any of the company’s investment decisions and plans over the coming year.
He noted that the oil sands part of the business in particular is not feeling the effects of inflation due to contractors on long-term contracts and materials that were purchased well in advance.
“Most of our activities are really planned and organized years in advance,” he said.
He said, however, that more pressure is being felt on the conventional side of the business, namely in items such as drilling and fracking rigs, drill pipe casing and completion rigs.
“We’re seeing cost escalation into that 10 percent range,” he said on the call.
“My challenge for the team is always to try to find a way to eat inflation or offset inflation. Some years we can do that … next year might be a challenge.”
His comments come after the Calgary-based company reported a massive increase in profit in its second quarter amid rising commodity prices and higher margins.
The Calgary-based oil producer had second-quarter net income of $2.4 billion, or $1.23 per basic share, 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 output reached 457,300 barrels per day , down from 539,000 in the previous year’s period.
Pourbaix said the company met its commitment to return 50 percent of excess free cash flow to shareholders during the quarter.
The story continues
He said the oil producer also maintained good operational and financial performance during a period of major planned changes and maintenance.
“We are well positioned for even better performance in the second half of the year as our assets return to operating at normal rates across the portfolio,” Pourbaix said in a statement on Thursday.
Cenovus also updated its 2022 corporate guidance to reflect changes in the commodity price environment, the restart of the West White Rose project, the Sunrise oil sands acquisition, accelerated development activity and the ‘increase in operating costs down.
The company increased total capital investments for the year by $400 million at the midpoint to an updated range of $3.3 billion to $3.7 billion.
It also upgraded its total production guidance upward 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 from 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.
Companies in this story: (TSX:CVE)
The Canadian press