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West White Rose project owner Cenovus Energy releases 2021 budget

CEO says East Coast operations largely on hold while company evaluates options

ST. JOHN’S, N.L. — News on the future of the West White Rose project in Newfoundland and Labrador was limited as the new operator Cenovus Energy released its 2021 capital budget Thursday.
Weeks after the company finalized its acquisition of Husky Energy, Cenovus CEO Alex Pourbaix addressed the future of East Coast operations during a conference call with investment analysts and media.

“I think the right way is really to think about all of those assets together and when you hear (chief operating officer Jon McKenzie) or myself talk about that East Coast business, we have put it largely on hold for the time being,” he said Thursday. “Right now, with energy prices where they are, it remains a very challenged business unit for us, and we’re going to take the entirety of this year at least, to assess the viability of that business going forward.”

Last month, the provincial government announced an agreement with Husky that would see the company match a $41.5-million contribution from the federally-funded $320-million industry recovery fund in order to keep West White Rose in warm-idle mode. This 50-50 funding will keep 169 project managers and engineers working in 2021 along with 162 tradespeople at construction sites in Argentia and Marystown. The expectation is this will at least keep the option open for Cenovus to restart work on the offshore oil project in 2022.

Cenovus expects to spend between $2.1 billion and $2.4 billion on capital projects in 2021, with about $200 million to $250 million dedicated to offshore assets. That includes development and drilling in the Asia-Pacific market and what it calls “baseline preservation capital” for the deferred West White Rose project. Pourbaix said the company’s planned expenditures for the Asia-Pacific market are expected to help accelerate the company’s deleveraging efforts over time.

Through combining the two company’s offices and assets, a lot of workers are being laid off. There were approximately 8,600 employees between the two companies when the acquisition was first announced last fall, and Cenovus has targeted a reduction of about 20-to-25 per cent.

“We would be getting a good way through that with what we’ve done in the first month of the year here,” Pourbaix said Thursday.

While he would not go into a specific breakdown of where those positions are being eliminated, Pourbaix said the majority of those cuts are coming out of Calgary.

Construction of the West White Rose concrete gravity structure in Argentia was 60 per cent complete when Husky suspended that work last March as the COVID-19 pandemic began to pose a health and safety risk. A global downturn in the oil and gas sector and poor commodity prices further complicated the project’s future.

Located in the Jeanne d’Arc Basin, approximately 350 kilometres east of the island, the West White Rose project would have expected peak capacity of 75,000 barrels of oil per day. The provincial government expected to receive $3 billion in royalties and taxes from the project.

Husky laid off some staff at its St. John’s office not too long before it was announced Cenovus would purchase the company for $3.8 billion in a cashless, all-stock deal.

Source: The Telegram | This text was excerpted from the media outlet cited on January 29, 2021 and is provided to Noia members for information purposes only. Any opinion expressed therein is neither attributable to nor endorsed by Noia.