‘Unloved’: Despite the oilsands’ relentless cost cutting, investors are still wary of jumping back in

Geoffrey MorganGeoffrey Morgan

Operating costs have declined sharply in the last five years, but you wouldn’t know it looking at companies’ stock performance

Canadian Natural Resources Ltd. president Tim McKay describes his company’s ongoing push to convince fund managers that oilsands are a more investible business today than before the oil price collapse of 2014 as “a marathon.”

On the company’s earnings call last Thursday — and indeed, as all oilsands companies reported second quarter results in the last two weeks — executives faced questions about why their stocks continue to suffer institutional investor apathy despite significantly improved costs and a better market outlook for heavy oil given production declines in places like Mexico and Venezuela.

A report in April from IHS Markit shows that operating costs have seen a 40 per cent reduction in operating costs to US$20 per barrel. Steam-based oilsands projects have seen their costs fall closer to 50 per cent, to roughly US$7 to US$8 per barrel over the same time period.

Despite the belt-tightening and efficiencies, major Canadian energy companies continue to trade near multi-year lows and some oilsands focused producers are trading near their historic lows as analysts say generalist investors have largely abandoned the sector to invest in tech.

To date, McKay said, Canadian Natural and its competitors in the oilsands haven’t gotten much credit for the cost cutting initiatives the industry has undertaken.

However, with ground breaking imminent on projects such as the Trans Mountain pipeline expansion, the company is hopeful sentiment toward the industry is turning.

“I think we’re starting to get some traction,” CNRL executive vice-chair Steve Laut said, adding that part of his responsibilities for the past year have been highlighting his company’s and his industry’s improvements on cost and environmental performance. “That’s starting to make a difference,” he said.


full story at https://business.financialpost.com/commodities/energy/unloved-despite-oilsands-relentless-cost-cutting-investors-still-wary-of-jumping-back-in

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