CALGARY – As oil and gas companies come under increasing scrutiny over how they are choosing to use their record profits in 2022, the chief executive of Cenovus Energy Inc. took aim at critics on Wednesday, pointing out the billions of dollars that the industry should contribute to taxes and royalties this year.
On a conference call to discuss the company’s third-quarter earnings, Cenovus CEO Alex Pourbaix cited a recent analysis by investment firm Peters & Co. that predicts the oil and gas sector will yield about $50 billion in royalties and taxes to the Canadian federal government. and provincial governments this year.
“It’s money that pays for health care, education, arts and culture and so much more across the country,” Pourbaix said. “To put that into perspective, our sector’s projected government contributions this year are equivalent to more than two-thirds of the funding for all hospitals in Canada last year.
Pourbaix’s comments come just days after President Joe Biden accused US oil and gas companies of ‘war profiteering’ and raised the possibility of a ‘windfall tax’ on the sector unless he agrees. is using some of its record revenue to help lower fuel prices for American consumers.
Canada’s oil and gas sector has also come under fire from critics who say companies should use more of their sizable profits to invest in decarbonization projects. Federal Environment Minister Steven Guilbeault said the industry should invest more in clean energy projects rather than stock buybacks and dividend increases.
The oil and gas industry is making eye-popping profits in 2022 following Russia’s invasion of Ukraine, which destabilized global energy markets and sent commodity prices skyrocketing.
On Wednesday, Cenovus Energy Inc. reported that its third-quarter profit nearly tripled from a year ago. The company earned $1.61 billion or 81 cents per diluted share for the quarter ended Sept. 30, up from $551 million or 27 cents per diluted share a year earlier.
Revenue for the quarter was $17.47 billion, compared to $12.70 billion in the same quarter last year, and the company also declared a variable dividend payment of 11.4 cents per share in addition to its base dividend of 10.5 cents per share.
However, this year’s oil boom follows nearly a decade of falling prices, layoffs and industry consolidation. Companies that have weathered the tough years are choosing in 2022 to spend their excess cash on paying down debt and rewarding shareholders, rather than investing in major capital or expansion projects. Cenovus, for example, has reduced its net debt from $9.6 billion to $5.3 billion since the start of the year.
Cenovus is also a member of the Pathways Alliance, a consortium of oil sands companies exploring the possibility of developing a major carbon capture and storage network in northern Alberta.
Environmentalists have criticized the Pathways group for not moving faster with this project. The Pathways Alliance has said it could spend up to $16.5 billion on the project before 2030, but it has yet to pull the trigger to move forward.
On Wednesday, Pourbaix said Pathways is still working out the details with the federal government, as well as the Alberta government.
“We are ready to move forward with more advanced investment decisions on these important decarbonization projects once governments ensure the necessary mechanisms and policy supports are in place,” he said. .
Cenovus’ total upstream production for the three months ended September 30, 2022 was approximately 777,900 barrels of oil equivalent per day, compared to 804,800 boepd in the third quarter of 2021, while its downstream throughput averaged 533,500 barrels per day, compared to 554,100 bpd per year earlier.
On an adjusted basis, the company says its cash flow was $1.49 per diluted share for the quarter, compared to $1.15 per diluted share in the third quarter of 2021.
This report from The Canadian Press was first published on November 2, 2022.
Companies in this story: (TSX:CVE)
Amanda Stephenson, The Canadian Press
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