Earlier today, Canadian oil and gas producer Cenovus Energy Inc announced it raised its full-year production forecast. Accordingly, it posted a near 2% rise in profit in the second quarter. Particularly, these results came as crude prices returned to pre-pandemic levels.
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Rising global crude prices
Indeed, global crude prices have averaged around $69 in the quarter. According to Reuters, this trend furthered a recovery that began late in 2020. Moreover, earlier this Thursday, prices were trading around $75 Thursday.
However, Cenovus, one of Canada’s largest producers, said its total production fell 0.4% to 765,900 barrels of oil equivalent per day (boepd); particularly in the quarter and compared with the first of this year.
In this sense, the company raised its production forecast range for the entire year; specifically, by about 2% to between 750,000 boepd and 790,000 boepd.
Similarly, the Calgary, Alberta-based company’s net earnings rose to C$224 million ($179.67 million), or 11 Canadian cents per share; mainly, in the second quarter ended June 30, from C$220 million, or 10 Canadian cents per share, in the first quarter.
Cenovus on the announcement
Accordingly, Cenovus chief executive Alex Pourbaix on a conference call with analysts, commented; “Indeed, we expect an accelerated pace of deleveraging in the third quarter; and also, through the back half of the year.”
Additionally, “once we’re in range of that $10 billion mark, there will be room to consider other forms of capital allocation; for instance, including increasing shareholder returns.”
In fact, and it is worth noting, Cenovus, like many other Canadian energy companies, has been focusing on cutting costs and reducing debt. Particularly after the pandemic-related energy market volatility of 2020.
However, with energy prices on the rebound as global economies reopen and travel resumes, companies like Cenovus are suddenly awash in cash.
Further Outlook
In this sense, the Petroleum Services Association of Canada (PSAC) revised its forecast Thursday; particularly for the number of wells drilled in Canada for 2021. Accordingly, the association forecasted 4,250 wells, up from the 3,600 wells forecast in April of this year.
Moreover, PSAC president and chief executive Gurpreet Lail said fiscal discipline and paying down debt is still the order of the day. However, companies are starting to revise their capital expenditure budgets for the second half of the year.
Finally, Lail added that as the economy improves, inflation will become more of a concern. Also, shortages of steel, chemicals and raw materials are already hitting oil and gas producers.
