Cenovus Energy deepens 2015 budget cuts as oil prices dive

Wed Jan 28, 2015 12:38pm EST
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By Nia Williams

(Reuters) - Cenovus Energy Inc CVE.TO Canada's No. 2 independent oil producer, cut its 2015 capital budget by C$700 million ($562.5 million) on Wednesday, blaming plunging crude oil prices.

The company also said it plans to start reducing the number of contract workers it employs, and will make further budget adjustments if necessary.

Cenovus now targets capital spending of between C$1.8 billion and C$2.0 billion for 2015, down more than a third from 2014 levels. The company had announced a 2015 budget of C$2.5 billion to C$2.7 billion in December.

The savings will come from suspending the bulk of Cenovus's conventional drilling program in southern Alberta and Saskatchewan, and delaying some long-term expansions and new projects in the oil sands of northern Alberta.

Expansions at Christina Lake and Foster Creek, both thermal oil sands operations, will go ahead.

"Our plan is to continue to pursue our long-term growth strategy, but at a pace we believe is more in line with the current pricing environment," Cenovus Chief Executive Officer Brian Ferguson said.

U.S. benchmark crude prices CLc1 have dropped sharply, to around $45 on Wednesday from over $100 per barrel in June. That has forced oil sands majors including Canadian Natural Resources Ltd (CNQ.TO: Quote) and Suncor Energy Inc (SU.TO: Quote) to slash spending for 2015 and defer new projects.

Despite the cuts, Western Canadian crude output is expected to keep growing over the next two years due to the billions of dollars producers have already sunk into existing projects, the Canadian Association of Petroleum Producers said last week. [ID:nL1N0V01D8]   Continued...

A construction worker walks past the steam generating facility at the Cenovus Foster Creek SAGD oil sands operations near Cold Lake, Alberta, July 9, 2012.  REUTERS/Todd Korol