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Bill McCaffrey, president and CEO of MEG Energy, at his office in Calgary in 2011.

Jeff McIntosh/The Globe and Mail

Oil's decline has forced MEG Energy Corp. to cut its 2014 budget by a third and defer some spending on new projects, as oil sands producers dig in for an extended stretch of weak crude prices.

Calgary-based MEG said it would spend $1.2-billion this year, or $600-million less than originally planned, as it shifts capital spending from new developments and focuses on growing output from existing assets.

The company set its 2015 budget at $1.2-billion, saying it would leave room to "adapt to the current market conditions" if oil prices tumble further. The outlay includes $235-million of sustaining and maintenance captial and $965-million of growth capital. The total is less than the $1.5-billion budget forecast by analysts at Raymond James Ltd.

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"As we anticipated, the company has elected to defer some spending on longer-term growth, which we view as a prudent measure in the current commodity environment," analysts led by Chris Cox told clients in a note.

U.S. crude on Friday dropped to about $65 (U.S.) here after Saudi Arabia slashed prices for deliveries in Asia and the United States, deepening a rout spurred by soaring production from U.S. shale plays and weak demand. The American benchmark price is off more than 30 per cent this year.

"Our 2015 capital program is illustrative of MEG's ability to adapt to the current market conditions while still delivering meaningful growth," MEG president and chief executive officer Bill McCaffrey said in a statement.

"With only 20 per cent of our budget required to maintain our current level of production, we have significant flexibility within our plans should we need to further respond to the market environment."

MEG, whose major shareholders include state-run CNOOC Ltd. of China, is the latest energy company forced to respond to the slump in oil prices.

Canadian Oil Sands Ltd. this week slashed its quarterly dividend by 42 per cent and said it would spend $564-million (Canadian) next year. That's down from expected capital expenses of $1.1-billion in 2014, although the drop is due in part to a reduction in spending on major projects at Syncrude Canada Ltd. Canadian Oil Sands owns 37 per cent of Syncrude.

Athabasca Oil Corp. said it would spend $266-million next year, including $58-million carried from 2014. In September, the company anticipated spending $450-million to $500-million for 2015.

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MEG said it aims to pump between 78,000 and 82,000 barrels a day next year from projects that use steam to coax bitumen from the ground. That's up from expected production of 65,000 to 70,000 b/d this year.

The company's shares have fallen by 46 per cent since Oct. 1, outpacing a 23-per-cent drop in the broader S&P/TSX capped energy index over the same period.

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