Cenovus Energy Inc. (TSE:CVE) (NYSE:CVE) shares were rising on Friday after the company said it received approval from the Alberta Energy Regulator for its Grand Rapids thermal oil sands project in northern Alberta.
The project, located about 300 km north of Edmonton, is expected to have production capacity of 180,000 barrels per day, to be developed in multiple phases, the company told investors in a release late Thursday. Grand Rapids is anticipated to have a life of 40 years.
Cenovus said it expects to make a decision on the timing of development later this year, with the company planning to rely on existing infrastructure at its Pelican Lake conventional heavy oil operation, which is to make the project a lower-cost venture.
"We're pleased to have received regulatory approval for our fourth oil sands project," said the company's president and CEO, Brian Ferguson, in the statement.
"Developing the Grand Rapids project contributes to our long-term business plan of creating shareholder value by increasing the company's oil production capacity over the next decade."
Indeed, Cenovus has been operating and producing heavy oil in the area for more than 15 years from the Wabiskaw formation, and has been operating a steam-assisted gravity drainage (SAGD) pilot project at the site for more than three years, with plans to continue operating the pilot project to further understand the reservoir.
The company said that approximately 180 stratigraphic test wells have been drilled at the Grand Rapids project to support its regulatory application and development plans, with results so far proving the reservoir is "very consistent."
As of year-end 2013, Cenovus's best estimate for economic contingent resources for the entire Grand Rapids holdings was 1.5 billion barrels, with about 78 million barrels estimated in probable reserves. The company is expecting to convert a significant portion of the probable reserves to proved once it decided to proceed with the project.
Its other oilsands projects include Foster Creek, which is now producing about 110,000 barrels per day, and Christina Lake, which has output of 130,000 barrels per day, with planned expansions set to grow both properties. The company's Narrows Lake project, which it jointly owns with ConocoPhillips, is expected to have first production in 2017.
Meanwhile, a regulatory application is under review for the Telephone Lake oil sands project, which is 100% owned by Cenovus and has a proposed production capacity of over 300,000 barrels per day.
Shares of Cenovus advanced 1.8% to C$30.50 in Toronto on Friday, rising to as high as $30.63 earlier in the session.