Cenovus to cut capital spending 13%, focus on existing projects

The Globe and Mail

Cenovus Energy CEO Brian Ferguson speaks at the company’s AGM in Calgary, Alberta on Wednesday, April 24, 2013. (Chris Bolin For The Globe and Mail)

Cenovus Energy Inc. in 2014 plans to reduce investment in emerging oil sands projects and focus on the development of its existing projects and refining operations.

The Calgary-based energy giant says its total investment in projects next year will be between $2.8-billion and $3.1-billion, a 13-per-cent decrease compared with the previous year.

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Oil production is anticipated to grow 10 per cent next year.

Growth in 2014 will come mostly from added volumes at the Christina Lake phase E site and the from the planned start-up of Foster Creek phase F in the third quarter of next year, the company said Thursday.

The strategy is to use cash flow from oil, natural gas and refining operations to finance further growth of oil sands projects, it said.

Overall cash flow in 2014 is projected to be between $3-billion and $3.7-billion.

About 90 per cent of the planned $2.8-billion to $3.1-billion capital investment next year will go to upstream oil assets, said Cenovus.

Investment at Christina Lake in 2014 is expected to be between $750-million and $820-million, an increase of 15 per cent compared with the previous year, while Foster Creek will see a 12 per cent decline to between $680-million and $760-million.

Spending on emerging oil sands assets over the next year will decrease by almost 40 per cent, to between $140-million and $160-million.

“Since our launch in late 2009, Cenovus has concentrated on gaining regulatory approvals for our robust inventory of oil sands opportunities while also growing oil reserves,” said Cenovus president and chief executive officer Brian Ferguson.

“In 2014, we will focus on investment that will achieve cash flow and earnings growth from our approved projects in order to create the greatest value possible for shareholders.”

At the refining end, Cenovus plans to invest between $150-million and $160-million at its U.S refineries – which are jointly owned with Phillips 66 – a 41 per cent increase.

Cost-cutting will also be stepped up next year, the company said.

The cost-reduction strategy includes less new hires and reallocation of staff to support projects expected to add production growth over the next four years.

Overall, Cenovus anticipates that oil production will average between 190,000 and 208,000 barrels per day net in 2014, up 10 per cent and mostly from the oil sands.

Also in 2014, the company plans to start using rail transport for some of its oil sands production by mid-year, and anticipates to start taking delivery of 825 coiled and insulated leased rail cars late in the year.

The goal is to have the capacity to move by rail up to 30,000 barrels per day of blended oil volumes by the end of next year.

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