Stock Watch – Cenovus will use SAGD facilities at its planned Grand Rapids oil sands project.
Canadian oil sands producer Cenovus Energy Inc (TSE:CVE, Mkt cap 24.20B, P/E 36.61, Div/yield 0.27/3.33, EPS 0.87, Shares 756.51M) has bought steam-assisted gravity drainage facilities from French oil and gas major Total SA that will be used at its planned Grand Rapids oil sands project.
The processing facilities, which have the capacity to produce around 10,000 barrels of oil a day, were built for Total’s Joslyn oil sands project but were eventually abandoned after an over-pressurized well blew up. The equipment will be now moved to the Grand Rapids site where Cenovus expects to produce 180,000 barrels of oil a day.
The Calgary-based company, which ended the first quarter with higher-than-expected earnings, obtained approval from the Alberta Energy Regulator for the Grand Rapids thermal oil sands project in northern Alberta in the first quarter of the year. The first phase of the project is expected to start producing oil in 2017.
CEO John Brannon said in the company’s quarterly conference call that the facilities have been adequately maintained but he declined to disclose the price Cenovus paid for the assets, saying that the information was confidential.
Cenovus reported net income of C$247 million, or C$0.33 a share, for the three months to March, up from C$171 million, or C$0.23 a share, in the same quarter of 2013. Its operating earnings slipped 3% on the year to C$378 million, or C$50 per share, but were above the average estimate of C$48 a share among analysts polled by Thomson Reuters.
Production at company’s Foster Creek operations stood at 54,706 b/d in the quarter, down 2% from 2013, while the company’s other major oil sands project, Christina Lake, had an average output of 65,738 b/d, an increase of 48% year-on-year.
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