Oil sands producer Cenovus Energy Inc. has pared output amid wide price discounts to U.S. benchmark crude and a lack of access to rail shipping.

Calgary, Alberta-based Cenovus now expects oil sands production to average between 350,000 barrels per day and 360,000 bbl/d in the first quarter, according to a March 22 operational update. The company forecast full-year production of an average 364,000 bbl/d to 382,000 bbl/d in December 2017. Cenovus said it expects to meet that target over the course of the year.

Canadian producers face a pipeline crunch as production growth in the oil sands has outstripped export capacity. The bottleneck has led to a wide price spread between Western Canadian Select, a blend of oil sands bitumen and lighter oil products, and benchmark West Texas Intermediate crude. While Canada has adequate rail capacity to export its bitumen output, railways have been reluctant to add resources for crude handling without long-term contracts from producers.

The company has "significant capacity to store barrels in our oil sands reservoirs to be produced and sold at a later date when pipeline capacity improves and differentials narrow," Cenovus CEO Alex Pourbaix said in March 22 statement. "As a prudent response to the current transportation and pricing environment, we've been operating our Christina Lake and Foster Creek facilities at reduced production levels since February while continuing to inject steam at normal rates."

Cenovus uses a production method called steam-assisted gravity drainage, in which pairs of wells are drilled and steam is injected into one to make heated bitumen flow from the other. The company said it will move up some maintenance at its oil sands facilities to mitigate the impact of the lower output. Cenovus is also in talks with rail providers to increase capacity at its crude-by-rail facility in central Alberta.

First-quarter earnings will also be impacted by planned maintenance at its refining venture with Phillips 66, the company said. Cenovus owns stakes in refineries in Borger, Texas and Wood River, Ill. Phillips 66 operates the refineries.

Pourbaix, the former COO of pipeline operator TransCanada Corp., said a lack of crude export capacity is hurting Canada's economy. "These transportation challenges faced by our industry clearly demonstrate the urgent need for approved pipeline projects in Canada to proceed as soon as possible," he said.

Western Canadian Select traded at a discount of C$31.61/bbl to West Texas Intermediate on March 21, compared with a price difference of C$16.25/bbl a year earlier, according to the Petroleum Services Association of Canada.