Interview With The VP: Cenovus Energy Inc. (CVE) - Ian Young
February 6, 2012 - The Wall Street Transcript has just published Oil & Gas: Exploration & Production Report offering a timely review of the sector. This Special Report contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. Please find an excerpt below.
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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. But that's relatively a smaller piece.
We are primarily oil sands focused in the in situ, which is the thermal process, where you drill for the oil and inject steam. So yes, it just sort of lays out how that's going to unfold over 10 years.Now we're very comfortable that we're on track for that because when you look at what we've said over the last sort of three years, we're very predictable in our promises. In fact, we've delivered, but slightly ahead. So at Christina Lake, for instance, we came in about $100 million under budget, and we came in ahead of schedule. And the rampup, which is when you're steaming the oil, it can often take a while for the production to rampup. But at Christina Lake, we're seeing the fastest ramp up that we've seen in the industry, so that's encouraging.
Also, at Foster Creek, we've looked at our future plans, and we've increased the amount of oil we expect to be able to get out of each development phase. So these are the things that we use to measure our progress. The other thing too is that we promised that we would submit applications for commercial developments at Telephone Lake and Grand Rapids, and we got those in at the end of last year. So on the existing properties, we're ahead. We're constantly revising that and continuously improving it and getting better metrics. And then, for the future stuff, we're on track in terms of the regulatory process because it's quite a lengthy process that we have to go through to get approvals. So you really have to plan this out years in advance, and that's why everything for us is very much a long-term process to unlock that value.
TWST: Are there any other newer resource plays you believe would be of interest to potential investors?
Mr. Young: The next two that are on the horizon are Telephone Lake and Grand Rapids, and they both have size. They're very big. Telephone Lake has that really great reservoir that I already mentioned. Grand Rapids is a bit of a different horizon. There isn't a commercial project in the Grand Rapids. But what's different about the Grand Rapids is that it's consistent. It has a very flat base to it, and that makes a big difference in the steam-assisted gravity drainage, or SAGD world, because we're drilling horizontal wells. They go out 800 meters to maybe even 1,200 meters.
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