(Bloomberg) - In a week when oil prices are rallying, financial results from one of the world’s costliest places to extract crude are a reminder of how bad things have been for energy producers.
Developers of Canada’s oil sands were burning through cash in the first quarter as they saw negative profit margins from the production of bitumen, the thick, asphalt-like substance they blend with lighter oil to flow in pipelines. Together, Suncor Energy Inc., Husky Energy Inc., Cenovus Energy Inc. and Meg Energy Corp. made less than half the cash they did in the first three months of last year.
“So far, 2016 has been a brutally challenging year for our industry,” Brian Ferguson, chief executive officer of Cenovus, said Tuesday on a conference call to discuss the results.
Cash flow from the four Calgary-based producers fell 54 percent to C$1.17 billion ($930 million) in the quarter, according to data compiled by Bloomberg from filings released this week.
The decline is on the back of a 42 percent slump in the average price for Western Canadian Select. The nation’s heavy crude blend, which includes bitumen, averaged $20.26 a barrel in the first quarter, 40 percent less than West Texas Intermediate.
The stuff was so cheap that some producers had negative profit margins on raw bitumen after covering the costs to produce, transport and pay royalties on the fuel. Currently, the Canadian benchmark is trading at about $32 a barrel, and WTI is hovering around $46.
“Could the worst be behind us?” TD Securities Inc. analysts led by Travis Wood mused in an April 27 note, referring to the first quarter.
Oil sands developers are counting on it.
“I would really like to see the market return into balance,” Husky Chief Executive Officer Asim Ghosh said on a Monday conference call.
To contact the reporter on this story: Rebecca Penty in Calgary at firstname.lastname@example.org To contact the editors responsible for this story: David Marino at email@example.com Carlos Caminada, Jeffrey Taylor
Copyright 2017 Bloomberg News.
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