Cenovus, a Canadian company, beats its fourth-quarter profit expectations and begins redevelopment at the former MEG site

Cenovus Energy announced on Thursday that it has begun drilling new oil wells at its Christina Lake Oil Sands site in 'northern Alberta,' formerly owned MEG Energy. The plan will increase the company’s production this year as well as by 2027.

The Canadian oil sands company, which exceeded market expectations for adjusted profits in the fourth quarter on Thursday, bought smaller MEG Energy after a bitter battle with Strathcona Resource.

Cenovus' portfolio was immediately boosted by approximately 100,000 barrels of oil equivalent per day. This acquisition cemented its position as the world's largest heavy-oil producer. Cenovus produced 917,900 barrels equivalent to oil per day during the fourth quarter. This is up from the 816,000 boepd of a year ago, largely due to the acquisition of the MEG site in Christina Lake.

Cenovus says it can increase the Christina Lake plant's production above and beyond what MEG achieved at the site. On a Thursday conference call, CEO Jon McKenzie announced that the company had begun drilling 42 wells at the site as part of a redevelopment program.

McKenzie added that the company is also working on an expansion of the processing facility at Christina Lake. This will increase the production from the former MEG sites to over 150,000 bpd in 2027-2028. Cenovus and other Canadian oil sands companies have been able to remain resilient in the face of a global oil downturn. Years of investment have helped them become one North America's low-cost producers.

According to data compiled and analyzed by LSEG, the Calgary-based company reported an adjusted profit per share of 50 Canadian 'cents' for the three months ending December 31. This compares with analysts’ average estimates?of 39 Canadian?cents?per?share.

Oil producers in Canada also benefit from the expanded Trans Mountain Pipeline, which gives them access to international markets and reduces their dependency on the U.S. system of pipelines.

McKenzie stated on Thursday that Cenovus is closely monitoring plans by Trans Mountain, Enbridge and other rivals to incrementally increase their existing pipeline systems in order to meet the rising output of Canada. McKenzie also said Cenovus will "likely" pursue long-term agreements on any new export capacity.

McKenzie stated, "We are actively evaluating all the options available to us and you shouldn't surprise if we act on some of them."

(source: Reuters)