67 WALL STREET, New York - February 7, 2012 - The Wall Street Transcript has just published its Oil & Gas: Exploration & Production Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
Topics covered: International Increase in Capital Expenditures - Rising Costs of Equipment and Services - Shale, Offshore and Deepwater Drilling - Consolidation to Achieve Economies of Scale
Companies include: Anadarko (APC); BP (BP); Baker (BHI); Cameron (CAM); Cenovus Energy Inc. (CVE); Chevron (CVX); and many more.
In the following brief excerpt from the Oil And Gas Special Report, expert analysts discuss the outlook for the sector and for investors.
Ian Young is Vice President, New Resource Plays, at Cenovus Energy Inc. He is responsible for the company's undeveloped oil sands assets and new venture activity. Mr. Young graduated with a B.Sc. (Hon.) in geology from the University of Calgary in 1985. Before the Cenovus/Encana split, he held a series of positions at Encana including Vice President, Rangeland Business Unit and Vice President New Ventures. Mr. Young is a Member of the Canadian Society of Petroleum Geologists, Association of Professional Engineering Geologists and Geophysicists Alberta and American Association of Petroleum Geologists. He is Past President of the Canadian Federation of Earth Sciences, the national umbrella organization for geoscience organizations in Canada.
TWST: In your third-quarter news release, the Chief Executive Officer at Cenovus mentioned the company's 10-year strategic plan. Would you give us an overview of that plan and tell us some of the indicators Cenovus is on track to execute on it?
Mr. Young: I think the thing to recognize is that Cenovus is a company with a vast resource, and we have an enormous quantity and quality of heavy oil in the in-situ thermal area of northern Alberta. And really, our strategic plan is unlocking that vast potential. And the 10-year plan is to go from currently - we, last year, were forecasting about 135,000 barrels a day of oil, but this year, we're planning to grow that by 21% - but we're taking that all the way to 500,000 barrels a day in the 10-year period. So we're anticipating a fourfold increase in production over that time. So really what it is kind of planning out to unlock that oil sand resource from the various areas. So it's really staging both expansions at our existing core properties, Foster Creek and Christina Lake, and then layering in the new properties, Narrows Lake, Telephone Lake and Grand Rapids over that time to get to that vast production. Now there's, of course, some conventional oil as well on top of that. We talk a little bit about growing our tight oil from current numbers up to somewhere around 30,000 barrels a day.
TWST: Please tell us about the joint venture with ConocoPhillips and the value you believe it will ultimately deliver for shareholders of Cenovus.
Mr. Young: ConocoPhillips bought into 50% of our Foster Creek and Christina Lake properties in the upstream, and we bought into the two refining assets in the downstream, Wood River in Illinois and Borger, Texas. But ultimately, back when we entered into this deal, we could see that there was considerable risk in the heavy, light oil price differential, and one of the things that we really wanted to do was to have an integrated solution to address that risk. I talked about it earlier that when we talked about our 10-year plan and kind of laying out the various expansions and phases of our oil sands, that requires massive upfront capital investment. And we know from painful historical experience that once you start on a project and you get going, it's very difficult to slow that down. When we - a while back at Encana, the predecessor company, was very focused on gas, the oil sands business was a small subset of the entire business, and it was difficult to fund the oil sands to the degree that we needed funding. And in fact, a few years ago, we had to slow down at Christina Lake and what we found was that for every $1 we cut back, it cost us between $1.50 and $2 to get back on track. So once you're building on that long-term strategy, it's very expensive to slow down. We don't want to be in a position to do that. So a couple of things - one is you've got to make sure that your supply cost is very reasonable.
TWST: In summary, why would an investor want to take a closer look at Cenovus, particularly at this point in time?
Mr. Young: Well, I think this year is a great year for it. I mean we've come out and said, 21% oil growth in 2012, and we see many years of predictable growth. And so I think just the fact that we finished our CORE expansion in the downstream, we've got a very strong balance sheet, and we've got the opportunities to go with it. We've got cash to fund the $3 billion to $3.5 billion that we're going to need every year for the next 10 and probably after that the next five years. We're in a very good position to grow and prosper for a long period of time.
The Wall Street Transcript is a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
The Wall Street Transcript does not endorse the views of any interviewees nor does it make stock recommendations.
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