Cenovus Energy Inc ( CVE ) shares on the NYSE are down about 10 per cent from last Wednesday when the company warned that the transport bottleneck in Alberta province, western Canada, will affect its ability to move crude oil to market and to feed its joint venture refineries with Phillips 66, and therefore its earnings in the first quarter of the year.
The shares have fallen from just below $9 last Wednesday to just above $8, and are down 25% from the end of January, when they stood at $10.73.
The company chief executive, Alex Pourbaix, said in an operations update on Wednesday that "when Canadian heavy oil is selling at a wide discount to West Texas Intermediate due to transportation bottlenecks, we have significant capacity to store barrels in our oil sands reservoirs to be produced and sold at a later date when pipeline capacity improves and differentials narrow."
The Canadian heavy discount (WCS @ Hardisty) narrowed last week to $23.40 and traded there on Monday, but it has been as wide as $30 during the quarter -- about twice what it was at the end of the year -- as the breach on the Keystone pipeline in November, and subsequent slowdown in its run rate, exacerbated the logistics issue in Alberta, backing up crude supplies in storage.
Pourbaix indicated that the situation could ease as the year goes on, with rail shipments ramping up. He said the company's oil sands volume for the year should be within its previous forecast of 364,000 to 382,000 barrels per day, even if first-quarter production will be between 350,000 and 360,000 bpd.
(First Oil reports are produced by MT Newswires' global team of oil reporters. This story is also disseminated in real time to energy industry professionals via the First Oil Chat service on the ICE Instant Message application.)
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