Cenovus Energy said Thursday it is reviving an oilsands project it had shelved two years ago due to the downturn in crude prices, the latest sign of a possible rebound in the oilpatch.
The Calgary-based oil producer announced Thursday it will go ahead with an expansion of its Christina Lake development in northern Alberta, making it the second oilsands project in as many months to be given new life.
The company also said it plans to invest between $1.2 billion and $1.4 billion in its operations next year, up 24 per cent from this year, and increase oil production by about 14 per cent to approximately 230,000 barrels per day.
READ MORE: Cenovus to boost 2017 spending by 24%, resume work on Christina Lake expansion
“I am confident and I am optimistic about our prospects for the year ahead,” said CEO Brian Ferguson on a conference call.
The news came as the Conference Board of Canada released a report Thursday saying Alberta is expected to emerge from its recession next year, with real gross domestic product growth of about 2.2 per cent, thanks to anticipated rising oil prices and the rebuilding of fire-ravaged Fort McMurray.
READ MORE: Worst may be over for Alberta economy, modest growth expected in 2017: Conference Board
A day earlier, Alberta Finance Minister Joe Ceci and a panel of economists meeting in Edmonton agreed the worst is over for the provincial economy.
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Construction of the Christina Lake expansion is to resume next spring, Cenovus Energy said, and first oil production is scheduled for the second half of 2019.
Cenovus said it anticipates spending an additional $800 million to $900 million to complete the 50,000-barrel-per-day, steam-driven project, bringing the total capital cost to about $1.1 billion. That would be about $500 million less than the original budget.
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Last month, Canadian Natural Resources also cited lower costs as it announced it would resume construction of its Kirby North oilsands project, designed to produce about 40,000 barrels per day. The company said it had spent about $700 million on the project before it was halted in 2014. It expects to spend $650 million more on the development for a total of $1.35 billion, $100 million less than the original cost.
Cenovus also announced Thursday it would spend $160 million next year to drill 50 horizontal oil wells into its Palliser conventional oil block in southern Alberta after halting exploration there two years ago.
Ferguson said the field is expected to deliver profits for Cenovus at benchmark U.S. oil prices below US$35 per barrel. On Thursday, the January crude oil contract closed at US$50.84 per barrel.
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On Wednesday, Calgary-based Crescent Point Energy, the most active conventional oil producer in Saskatchewan, announced a $1.45-billion capital spending budget for 2017, up 32 per cent from $1.1 billion expected to be spent this year.
Cenovus promised Thursday to update in mid-2017 the status of two other oilsands projects it stopped in 2014. It said it would continue planning for both an expansion of its existing Foster Creek project and the first phase of a new oilsands project called Narrows Lake.
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Despite such momentum, oilsands analyst Michael Dunn of GMP FirstEnergy Capital said Thursday he doesn’t expect a surge in oilsands project approvals.
He said the Cenovus and Canadian Natural projects have the advantage of being partly built projects made profitable by costs savings, despite oil prices that haven’t changed much since they were deferred.
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