CALGARY, Alberta (Reuters) - Two Canadian energy companies on Thursday outlined preliminary plans to add new oil sands production at their northern Alberta operations, a sign that the industry may have come to grips with the slump in crude prices after two years of heavy cost-cutting.
Cenovus Energy (CVE.TO) said, as it released second-quarter earnings, that it was doing engineering and rebidding work on phase G of its Christina Lake thermal project, which was put on hold in 2015. It said it would decide whether to proceed with the 50,000 barrel per day expansion by December.
MEG Energy (MEG.TO) said in its earnings release that it could invest up to C$30 million ($22.81 million) in its existing project to boost production by 30,000-40,000 bpd. The cash would come from this year’s cost savings and not increase MEG’s projected 2016 capital expenditure of C$170 million.
Around 20 projects in northern Alberta’s vast oil sands, home to the world’s third-largest crude reserves, had been put on hold since mid-2014. Analysts cautioned against concluding that oil sands growth would rebound rapidly, and said most companies would remain cautious given volatile crude prices.
Indeed, Canada’s largest oil and gas producer Suncor Energy (SU.TO), said on Thursday it was unlikely to approve any big growth projects for the next couple of years.
“This is a very company-specific thing,” Desjardins Securities analyst Justin Bouchard said in a telephone interview. “For Cenovus it (Christina Lake) is probably the best project out there and they have got C$3.8 billion in cash.”
Cenovus shares jumped 6.5 percent on the Toronto Stock Exchange to C$18.64, outperforming the broader energy index .SPTTEN.
Cenovus Chief Executive Brian Ferguson told analysts on a conference call on Thursday the company has structurally reduced its costs after “playing defense” for the past 18 months.
“I want to take advantage of low industry activity and a better cost environment to start redeploying some of that cash we have got on the balance sheet,” he said.
MEG shares fell 5.1 percent to C$5.42. TD Securities analysts said in a note they suspected some investors would rather see the C$30 million in cost savings earmarked for debt reduction.
Reporting by Nia Williams; Editing by Richard Chang