The one-two punch of Saudi-Russian supply aggression and the world staying at home during COVID-19 slammed oil prices and crippled demand for refined fuel products, sending North American benchmarks to historic lows in the spring. Chief executive officer Alex Pourbaix is now cautiously optimistic about West Texas Intermediate prices rebounding into the US$40 range, and the company’s ability to pivot its assets to address changes in the market.
“We view the second quarter as a period of transition, with April as the low point of the downturn and the first signs of recovery taking hold in May and June,” Pourbaix said in a news release on Thursday. “That said, we expect the commodity price environment to remain volatile for some time.”
Speaking on a post-earnings conference call with analysts on Thursday, he called the three months ended June 30 the “worst quarter our industry has witnessed in recent memory.” He said while COVID-19 is far from in the rearview mirror, strong trends that emerged in June are expected to carry to some degree throughout the summer.
In April, the company voluntarily reduced oil sands production to just under 344,000 barrels per day (bbls/d). Production climbed to 405,658 bbls/d in June as the company leveraged its transportation, storage and pipeline capabilities to capture rising prices.
Calgary-based Cenovus said it achieved record volumes at its Christina Lake oil sands project last month as prices jumped almost tenfold from April to an average of US$46.03 per barrel in June. That month saw the discount on Western Canadian Select oil narrow to just over US$4 per barrel, a historically tight differential. Pourbaix said the company’s “quick action” in June resulted in free cash flow of more than $290 million.
“The differentials are still narrow for both July and August, and the condensate pricing is still quite favourable,” he said. “Though I don’t expect July and August to be as good as June, directionally they are consistent with June.”
Revenues fell to $2.17 billion in the company’s second quarter from $5.6 billion a year earlier. The company swung to a net loss of $235 million, or $0.19 per share. That’s compared a profit of $1.78 billion, or $1.45 per share, during the same period last year. On an adjusted basis, Cenovus posted a loss of $0.34 cents per share. Analysts polled by Bloomberg called for an adjusted loss of $0.38 per share.
“We are maximizing value for our shareholders even in this challenging economic environment,” Pourbaix added.
Toronto-listed shares climbed 1.42 per cent to $6.78 at 12:33 p.m. ET.
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