Canadian Oil Sands sets 35 percent lower capex budget for 2016

Tue Dec 1, 2015 9:13am EST
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By Sneha Banerjee

(Reuters) - Canadian Oil Sands Ltd COS.TO set a 2016 capital expenditure budget that was 35 percent lower than what it expected to spend this year, becoming the latest North American energy company to further tighten its belt as oil prices slump.

Canadian Oil Sands said lower production costs at the Syncrude oil sands project - Canada's largest single-source producer of synthetic oil - helped it cut its capex target to C$295 million ($221 million) for 2016 from C$451 million estimated for 2015.

The company, which owns about 37 percent of the Syncrude project, is facing a hostile bid from Suncor Energy Inc (SU.TO: Quote), which holds 12 percent of the project.

Canadian Oil Sands will explore options that give its shareholders a "fair value" for its assets, which is not offered by Suncor's bid, Chief Executive Ryan Kubik said on a conference call on Tuesday.

"Syncrude's ability to reduce costs and respond to the lower oil price environment is exceeding market expectations," Kubik said in a statement.

As companies brace for a longer-than-expected slump in oil prices and adjust to the new reality of oil at near $40 per barrel, they are spending less on drilling and completing new wells and cutting vendor costs.

Canadian companies including Canadian Natural Resources Ltd (CNQ.TO: Quote) have outlined smaller budgets for 2016, while top American shale producers such as Devon Energy Corp (DVN.N: Quote) have released preliminary budgets that are sharply lower from 2015.

Canadian Oil Sands said even if West Texas Intermediate prices remained below $45 per barrel, it could "fully fund all costs, including capital expenditures and the current dividend."   Continued...

Suncor Energy head office is pictured in Calgary, Alberta June 17, 2009.REUTERS/Todd Korol