Seven Generations defies oil rout, won’t cut spending

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Seven Generations Energy Ltd., which completed a successful initial public offering last year in the face of collapsing oil prices, has veered from the pack again by so far refusing to chop its 2015 capital spending budget.

Seven Generations said it is sticking to its current plan to spend $1.6-billion on its liquids-rich natural gas assets in the Montney formation in northwestern Alberta. It expects to reap cost savings as rivals rush to chop spending, reeling from oil prices that have fallen to below $50 (U.S.) per barrel.

As much as $80-million (Canadian) of its capital is earmarked for land acquisition and "small-scale" mergers and acquisitions, Seven Generations said in an unusual news release that took the form of an interview of top executives conducted by investor relations manager Brian Newmarch.

Numerous oil and gas companies have cut budgets, some more than once, as crude prices have fallen to lows not seen in more than five years. Canadian Natural Resources Ltd. said late Sunday it reduced its capital spending plan by $2.4-billion, marking the largest cut so far among Canadian producers.

"The board of directors has authorized us to invest $1.6-billion in 2015 and we intend on executing our current business plan," Chris Law, vice-president, corporate planning, is quoted as saying. "As other energy companies pare their spending plans it should reduce competition in the region, which should lead to costs savings and the potential to execute our capital plan at lower than budgeted cost."

The company said it had $150-million budgeted outside its core operating area, which it could defer should the need arise.

Seven Generations, known for its Kakwa river project south of Grande Prairie, Alta., said production averaged 43,500 barrels of oil equivalent a day in the fourth quarter, a 21 per cent increase from the previous quarter.

The results beat expectations of analysts, including Travis Wood of TD Securities, who wrote in a research note that he had estimated the company would pump out an average of 38,700 barrels a day.

The company raised $932-million in its IPO in late October, selling shares for $18 apiece. The stock fell 4 per cent to $15.40 on the Toronto Stock Exchange on Monday, a similar drop in percentage terms to the overall energy sector.