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Painted Pony cuts capital spending plans in response to lower gas prices

A oil pump jack ear Dorothy, Alberta.

© Todd Korol / Reuters/REUTERS

Painted Pony Petroleum Ltd. has cut back its capital spending budgets and production targets for 2017 and 2018, citing recent declines in the projected price of natural gas.

The Calgary-based company says it has reduced this year's capital budget by about 10 per cent to $288-million, from the previously announced $319-million.

Its 2018 budget will drop by nearly 44 per cent to $216-million from the previous estimate of $385-million under a previously announced five-year plan.

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The reduced spending will still allow Painted Pony to increase average daily production, but at a slower pace than previously anticipated.

Painted Pony says the changes are "financially prudent" and will give it the ability to withstand lower natural gas prices but continue to grow and meet its contractual commitments.

The company is working with Calgary-based AltaGas Ltd., which received approval in December to expand its natural gas processing capacity in northeastern British Columbia.

AltaGas expects to fully contract Townsend Phase 2 to process gas from Painted Pony under a 20-year agreement.

Painted Pony said in November that it expected its daily production in 2017 to be 288 million cu. ft. per day, up 110 per cent from 2016. It said on Monday that the revised 2017 production estimate is 260 million cu. ft. per day.

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