Cenovus Warns Oil Sands Development Is Drying Up as Policy Uncertainty Mounts

• Cenovus reported Q1 2026 secure earnings of C$1.57 billion, up 83% 300 and sixty five days-over-300 and sixty five days, with fable upstream production of 972,100 BOE/d and a 10% dividend hike.
• CEO Jon McKenzie known as Canada’s vitality protection debate “myopically inquisitive in regards to the native weather agenda,” warning that regulatory charges and a carbon tax new to Canada are riding capital to the U.S. and Middle East.
• Most attention-grabbing one new greenfield oil sands conducting has been authorized and inbuilt Canada since 2013, while Ottawa and Alberta remain deadlocked on an industrial carbon pricing deal now weeks previous its April 1 closing date.

Cenovus Energy (TSX, NYSE: CVE) accurate posted one of its strongest quarters on fable. Its CEO earlier the earnings name to bring one of many starkest warnings the oil sands enterprise has heard in years.

Jon McKenzie suggested analysts on Wednesday that Canada’s national dialog spherical oil sands constructing has develop into “myopically inquisitive in regards to the native weather agenda” — and that the penalties are already enjoying out within the investment numbers. The country, he argued, has spent over a decade making itself one of many least magnificent areas on earth to bear new oil production.

The numbers abet him up. Most attention-grabbing one new greenfield oil sands conducting has been authorized and inbuilt Canada since 2013, at the same time as global demand of for oil has persevered to develop. What announce Cenovus and its chums have managed has come through acquisitions and wringing extra out of existing sources — no longer by breaking new ground.

“Greenfield constructing comes on the next cost and the next damage-even than the announce that you have considered to this point,” McKenzie acknowledged. “We deserve to be somewhat thoughtful about a enviornment of protection environments that if truth be told attain allow us to develop and have a pipeline.”

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The protection atmosphere he’s relating to is, in share, Alberta’s mute-unresolved carbon pricing standoff with Ottawa. Top Minister Impress Carney and Alberta Premier Danielle Smith signed a memorandum of concept final November that committed to a new pipeline and an industrial carbon ticket of C$130 per metric ton. They enviornment an April 1 closing date to finalize the deal. It blew previous without resolution and talks are mute ongoing.

McKenzie made his views on that tax obvious. “The industrial carbon tax is new to Canada,” he acknowledged, in conjunction with that it provides corporations a stronger incentive to make investments in a abroad country. Canada is one of many few oil-producing worldwide locations to levy the kind of fee on its vitality enterprise — one reason, he acknowledged, that capital has been step by step migrating toward the U.S. and formula of the Middle East, the build approval processes are shorter and working charges are lower.

File Quarter, Bigger Portray

The warning came alongside a solid enviornment of numbers. Cenovus reported Q1 secure earnings of C$1.57 billion, up 83% from the same length a 300 and sixty five days earlier, driven by better oil costs, stronger refining margins and a fleshy quarter of contribution from its MEG Energy acquisition. Upstream production hit a fable 972,100 barrels of oil equal per day, up 19% 300 and sixty five days-over-300 and sixty five days, while the firm pulled in C$3.4 billion in adjusted funds waft.

Total revenues came in at C$12.4 billion. Downstream operations ran at 97% utilization. Cenovus returned C$1.0 billion to shareholders within the quarter through dividends, buybacks and hottest part redemptions, and raised its sinister quarterly dividend 10% to C$0.22 per part.

The results speak what the enterprise can bring when it has room to feature. McKenzie’s level is that room is getting more durable to salvage — and the most fresh production announce that fueled these earnings has largely been the manufactured from deals and optimization as an different of new capital investment in new projects.

A Standoff With Excessive Stakes

The unresolved carbon pricing talks need to no longer the most easy thing rising headaches for the sphere. Canadian Natural Resources earlier this 300 and sixty five days deferred its US$6 billion Jackpine carbon capture expansion at its Albian oil sands space, citing “lack of finalization of authorities regulatory policies” spherical carbon pricing and methane. The conducting is on aid except the foundations are obvious.

Carney, for his share, has no longer backed a ways from the commercial carbon ticket. He has described the global context for oil and gas as “very magnificent,” but has emphasised that Canada’s skill to compete lengthy-time frame hinges on getting its barrels to new export markets — no longer accurate the U.S., which mute absorbs roughly 95% to 97% of Alberta’s grievous. That argument relies on the same new pipeline infrastructure McKenzie says requires a greenfield-pleasant protection atmosphere to if truth be told have.

The circular common sense is no longer if truth be told lost on somebody paying attention. Canada wants new pipelines to develop its oil sector. Rising the sphere ample to define new pipelines requires new greenfield projects. And greenfield projects require the roughly cost and regulatory certainty that, accurate now, Canada is no longer if truth be told turning in. Cenovus shares closed Thursday down 1.7% at C$38.84. Earlier within the week, they’d touched an all-time high of C$42.01.

By Charles Kennedy for Oilprice.com

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Charles Kennedy

Charles is a author for Oilprice.com

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