(Reuters) - Canadian crude producer Imperial Oil Ltd (IMO.TO) is urging the Alberta government to further reduce its limits on output, saying that bloated inventories have dwindled enough, Chief Executive Rich Kruger said on Friday.
Alberta, Canada’s main crude-producing province, ordered oil companies in January to curtail production due to congested pipelines that had filled storage tanks and depressed prices. Some producers supported the move, but Imperial and other companies that own refineries said the government should not intervene.
Industry data suggests that Alberta oil inventories dropped last month to about 27 million barrels from 35 million in spring, Kruger said on a quarterly conference call.
“Our view is this restores much-needed flexibility within the system,” Kruger said. “With the inventory cushion, the government of Alberta can and should further reduce curtailment levels.”
Imperial, majority owned by Exxon Mobil Corp (XOM.N), and several other large producers urged Alberta in July to allow them to produce beyond their quotas if that additional crude moves by rail. Kruger said he would not want the government to continue managing production under such a system.
Imperial shipped 64,000 barrels per day (bpd) by rail on average during the second quarter, up from 36,000 bpd in the first quarter. But the company will reduce its rail shipping pace in August and September because the premium for Canadian crude at the U.S. Gulf Coast over Alberta prices is not sufficient due to the government production curbs, he said.
Even so, Imperial is considering taking on the Alberta government’s crude by rail contracts, Kruger said, along with others such as Canadian Natural Resources (CNQ.TO).
The company missed estimates for quarterly profit, as expenses rose and it refined less crude due to maintenance work.
Production and manufacturing expenses rose 4.2%, while capital and exploration expenditure surged over 50%.
Imperial’s refinery throughput averaged 344,000 bpd, compared with 363,000 bpd in the year-earlier quarter.
Net profit rose to C$1.2 billion ($907.72 million), or C$1.57 per share, in the second quarter, from C$196 million, or 24 Canadian cents, a year earlier, helped by a C$662 million benefit from Alberta’s corporate tax reduction.
Production rose to 400,000 barrels of oil equivalent per day (boe/d) from 336,000 boe/d, a year earlier.
Excluding items, the company earned 71 Canadian cents per share. Analysts on average had expected a profit of 79 Canadian cents per share, according to IBES estimates from Refinitiv.
Imperial shares slipped 1.9% in Toronto.
Reporting by Rod Nickel in Winnipeg and Taru Jain in Bengaluru; Editing by Shailesh Kuber and Richard Chang