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An oil field worker walks up a flight of stairs near wellheads that inject steam into the ground and pump oil out at the Cenovus Energy Christina Lake Steam-Assisted Gravity Drainage (SAGD) project 120 km (74 miles) south of Fort McMurray, Alberta, August 15, 2013. Cenovus has already cut 15 per cent from its 2015 budget, to about $2.6-billion (Canadian).Todd Korol/Reuters

Oil sands companies are banking on falling service costs – and in some cases demanding cheaper rates from suppliers – to shore up balance sheets as weak crude prices squeeze margins in one of the world's most expensive oil plays.

Suncor Energy Inc., Canadian Natural Resources Ltd. (CNRL) and Cenovus Energy Inc. are among the biggest players that aim to capitalize on a cooling market for everything from labour to materials and construction, as the precipitous drop in oil prices eases competition for key inputs.

The prospect of falling costs is a sharp reversal for a sector that experienced massive overruns and frequent delays on multibillion-dollar construction projects when oil was more than $100 (U.S.) a barrel.

With prices trading at less than half that level, producers are attempting to bolster returns by clawing back costs on everything from operating expenses to employee overtime.

"We're looking at all that stuff with a finer tooth comb than we had looked at it before," John Brannan, chief operating officer at Cenovus, told an investor conference in Whistler, B.C. on Thursday. "There's an urgency to cut those inefficiencies out of the organization."

The company has already cut 15 per cent from its 2015 budget, to about $2.6-billion (Canadian). Mr. Brannan said Cenovus is assessing whether to cut deeper, noting the company's "committed capital" is $2.1-billion.

Oil prices tumbled again on Thursday after U.S. government data showed a larger-than-expected build in inventories, compounding a supply glut that has cut prices by more than 60 per cent since last June. U.S. benchmark West Texas intermediate fell more than 2 per cent to $46.31 (U.S.) a barrel, while Brent, the international standard, finished the day down at $48.52 a barrel.

The oil rout has erased billions from corporate budgets and cast doubt on bullish production forecasts that once saw oil sands output climbing indefinitely.

The Canadian Association of Petroleum Producers this week slashed its outlook for oil sands investment by about a quarter from last year, to $25-billion (Canadian), and said output would grow at a slower clip than previously forecast.

Over all, the industry group projects oil companies will pare capital spending in western Canada by $23-billion.

The cuts are sure to deepen pain for service companies already reeling from reduced activity and extensive layoffs.

On Thursday, the Canadian Association of Oil Well Drilling Contractors predicted the number of active drilling rigs this year would plunge 41 per cent, cutting an estimated 3,400 direct jobs. Another 19,500 indirect jobs could be impacted, the group said.

For oil sands companies wracked by high costs, however, any slowdown would come as a reprieve.

"I think you'll probably see day rates come down pretty quick with activity levels," Corey Bieber, chief financial officer at CNRL, said this week.

In a sign of shifting industry dynamics, CNRL in November sent letters to its suppliers and contractors asking them to re-examine their rates, Mr. Bieber said. He said face-to-face meetings are ongoing, as the company eyes a "headline reduction" of at least 10 per cent.

"We're looking for more than that," he said. "It's still early days."

A cooling market for labour is also benefiting megaprojects under construction, boosting productivity as more experienced pipefitters and electricians become available at cheaper rates.

That has enabled Suncor to forge ahead with its $13.5-billion Fort Hills mine, even as some analysts question the project's viability at lower crude prices.

"This is precisely when you want to build it, when nobody else is building it," chief financial officer Alister Cowan insisted at the Whistler conference, which was held by Canadian Imperial Bank of Commerce.

Still, analysts say new oil sands projects will remain pressured so long as today's oil prices last.

"Historically we haven't seen the costs of building a [steam-driven] plant or building a new mine actually decline," said Chris Cox, analyst at Raymond James Ltd. in Calgary. "It's always been a consistent rise, even during the last downturn."