Cenovus CEO says inflation 'manageable' as company posts massive upswing in Q2 profit

Cenovus Energy Inc. chief executive Alex Pourbaix said Thursday that inflation has been "manageable" for the energy company so far, but is something he is certainly keeping an eye on.

On a conference call with analysts, Pourbaix said inflation likely won't "meaningfully change" any of the company's investment decisions and plans over the coming year.

He noted that the oilsands part of the business in particular is not feeling the effects of inflation because of contractors on long-term contracts and materials that were procured far ahead of time.

"Most of our activities are really planned out and staged years in advance," he said.

He did say, however, that there is more pressure being felt on the conventional side of the business, namely on items like drilling and fracking rigs, drilling pipe casing and completion rigs.

"We're seeing escalation of costs up towards that 10 per cent range," he said on the call.

'Eat inflation'

"My challenge to the team is always to try to find a way to eat inflation or make up for inflation. Some years we're able to do that ... next year might be a bit of a challenge."

His comments come after the Calgary-based company posted a massive upswing in profit in its second quarter amid increased commodity prices and higher margins.

The Calgary-based oil producer had net earnings of $2.4 billion in the second quarter, or $1.23 per basic share, compared with $224 million or 11 cents per share a year earlier.

Revenue for the three months ended June 30 was $19.2 billion, up from $10.58 billion in the second quarter of 2021.

Total upstream production reached 761,500 barrels of oil equivalent per day, down from 765,900 barrels of oil equivalent per day in the prior year period, and total downstream throughput reached 457,300 barrels per day, down from 539,000 in the prior year period.

Pourbaix said the company executed on its commitment of returning 50 per cent of excess free funds flow to shareholders in the quarter.

He said the oil producer also maintained strong operational and financial performance during a period of significant planned turnarounds and maintenance.

"We're well positioned for even better performance in the second half of the year as our assets return to operating at normal rates across the portfolio," Pourbaix said in a statement Thursday.

Cenovus also updated its 2022 corporate guidance to reflect changes in the commodity price environment, the restart of the West White Rose Project, the Sunrise oilsands acquisition, accelerated upstream development activity and increased downstream operating costs.

The company increased total capital investments for the year by $400 million at the midpoint to an updated range of $3.3 billion to $3.7 billion.

It also updated its total upstream production guidance to between 780,000 barrels of oil equivalent per day and 810,000 barrels of oil equivalent per day, an increase of 15,000 barrels of oil equivalent per day at the midpoint.

Shares of Cenovus were up 30 cents, or 1.3 per cent, to $23.93 in early afternoon trading.