​Cenovus gearing up for second SAGD construction restart

Cenovus Energy CEO Brian Ferguson. Image: Cenovus Energy

Cenovus Energy’s three-year business plan includes the completion of not just one but two new SAGD expansions, CEO Brian Ferguson told analysts on Thursday.

The company, which restarted construction of its 40,000-bbl/d Christina Lake Phase G expansion in late 2016 after suspending work in late 2014 amid the oil price collapse, has about 600,000 bbls/d of SAGD growth already stamped with regulatory approval.

Ferguson said that no matter what happens to the price of oil in 2017, Cenovus is evaluating its projects on a $60 mid-cycle Brent price and a balance sheet that is strong enough to see two SAGD growth projects over the finish line by 2020.

Details on the timing and cost estimates for the 30,000 bbl/d Foster Creek Phase H and 45,000 bbl/d Narrows Lake Phase A (a first commercial application of solvent co-injection) will be released in June.

“We literally have the next five years of investment opportunity ahead of us,” Ferguson said.

“We are staffed to be able to proceed with two oilsands growth phases concurrently, but we’re going to be very disciplined and very measured about that because we want to make sure that we are delivering good solid value as we go forward.”

He said Cenovus took advantage of the downturn in 2015/2016 to reduce costs and improve capital efficiencies, details of which were outlined when the company restarted Christina Lake Phase G.

These optimizations include smaller wellpads, longer wells and wider spacing.

“Those are the sorts of things that we are now currently working through as it relates to Foster Creek H and Narrows Lake A,” Ferguson said.

“We could be in the position where we’re reactivating one more phase in 2018 and then potentially one more phase in 2019 but stay tuned for details on that in June.”

Cenovus anticipates that Phase G will carry a capital cost between $16,000 to $18,000 per flowing barrel when it is completed in the second half of 2019. In 2015 the average SAGD project cost more than $45,000 per flowing barrel, according to data from TD Securities.

Cenovus expects to grow production from Foster Creek and Christina Lake by about 19 percent this year on the back of two recently completed expansions that took combined gross capacity to 390,000 bbls/d.

The company, which operates the project on behalf of its 50-50 partnership with ConocoPhillips, realized net oilsands production of 164,396 bbls/d in the fourth quarter of 2016, up from 139,413 bbls/d in the fourth quarter of 2015.

Cenovus expects to produce between 172,000 and 184,000 bbls/d from its oilsands assets in 2017 as production ramps up from the new expansions.

The company recorded a net loss of $545 million in 2016, compared to net earnings of $618 million in 2015 when it realized an after-tax gain of approximately $1.9 billion from the sale of its royalty interest and mineral fee title lands business.