June 26, 2022

International vitality large BP PLC BP-N is promoting its remaining stake in Alberta’s oil sands as a part of a $1.2-billion deal that may even see it decide up half possession of the Bay du Nord oil mission off Canada’s east coast.

Calgary-based Cenovus Power Inc. CVE-T will purchase BP’s 50-per-cent stake within the Dawn oil sands mission for $600-million in money, together with a variable fee of $600-million primarily based on oil costs, which expires after two years. As a part of the deal, BP may even purchase Cenovus’s 35-per-cent stake in Bay du Nord, an undeveloped mission off the coast of Newfoundland and Labrador accredited by the federal authorities in April.

The transfer represents BP’s exit from oil sands manufacturing, reflecting its broader purpose of pursuing vitality manufacturing that comes with fewer greenhouse fuel emissions.

As a substitute, the corporate says it’ll shift its focus to rising its offshore portfolio, including to the record of six exploration licences it already holds within the Jap Newfoundland area.

“This is a crucial step in our plans to create a extra targeted, resilient and aggressive enterprise in Canada,” Starlee Sykes, BP’s senior vice-president, Gulf of Mexico and Canada, mentioned in a press release.

Cenovus, then again, sees immense worth in rising its holdings in northern Alberta.

It has operated Dawn because the starting of 2021, when it purchased earlier proprietor Husky Power Inc. Cenovus is now within the early phases of making use of its oil sands working mannequin on the web site, which incorporates lowering the variety of new nicely pads (due to this fact utilizing much less steam in manufacturing) and growing nicely lengths.

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Alex Pourbaix, Cenovus president and chief govt, mentioned in a press release the corporate expects to extend manufacturing at Dawn by about 10,000 barrels a day. whereas driving down working prices and emissions depth. Present manufacturing is roughly 50,000 barrels a day.

“Buying the remaining working curiosity in Dawn allows us to totally profit from the numerous optimization alternatives obtainable,” Mr. Pourbaix mentioned.

However that doesn’t imply Cenovus is ditching its offshore portfolio.

Talking on the International Power Present in Calgary final week, Mr. Pourbaix mentioned onshore and offshore initiatives each have a job within the firm’s future oil manufacturing.

The corporate continues to carry its stake within the White Rose area, round 350 kilometres east of Newfoundland.

White Rose produces about 26,000 barrels a day, however that quantity is falling as its oil reserves decline. A mission to increase the sphere had been below a cloud of uncertainty since Husky placed on the brakes in 2020, however Cenovus (which purchased Husky in 2021) introduced final month the West White Rose growth mission would go forward, including about 75,000 barrels a day to manufacturing.

Mr. Pourbaix mentioned final week that whereas the oil produced there could have decrease carbon depth than crude from the oil sands, that needs to be juxtaposed with the manufacturing challenges that accompany the offshore area’s tough local weather and the actual fact the useful resource sits tons of of ft underwater.

“It’s a really difficult place to function,” he mentioned.

“In consequence, capital prices, working prices are a lot, a lot greater than now we have within the oil sands, the place we all know precisely the place the oil is. There’s no exploration danger. We have now largely perfected the strategies of getting it out and might achieve this very reliably and at a really low value.”

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A analysis word from the Nationwide Financial institution of Canada Monday morning mentioned the deal wasn’t an enormous shock. The financial institution had beforehand flagged the chance of Cenovus choosing up extra oil sands property, given the corporate’s “current confirmed success in making use of its working mannequin … to boost operational efficiency and margins.”

A word from Financial institution of Nova Scotia BNS-T mentioned the transaction falls in keeping with Cenovus’s technique of consolidating and optimizing oil sands property, including it provides potential upside from growing Dawn’s manufacturing and enhancing its value construction.

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