UPDATE 2-Cenovus Energy cuts oil sands spending, keeps dividend

Thu Dec 11, 2014 1:48pm EST
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Dec 11 (Reuters) - Cenovus Energy Inc, Canada's No. 2 independent oil producer, said on Thursday it plans to live within its means next year to cope with weak oil prices, cutting capital spending by 15 percent and slowing the expansion of its suite of oil sands projects in northern Alberta.

Cenovus will spend between C$2.5 billion ($2.18 billion) and C$2.7 billion next year, lower than the C$3.0 billion to C$3.1 billion it estimates it spent in 2014, but in line with its expected cash flow of C$2.75 billion.

The company said it will direct the bulk of its funds next year to planned expansions of the Christina Lake and Foster Creek oil sands projects it co-owns with ConocoPhillips while slowing development on the pairs' planned Narrows Lake project and its own undeveloped sites as it eyes boosting oil output by 4 percent next year.

"We have scaled back discretionary spending to better align with current cash flow expectations," Brian Ferguson, the company's chief executive, said on a conference call. "We have identified additional areas to scale back capital, should prices fall even further."

Oil prices have dropped from over $100 a barrel in June to just above $60 on Thursday. The rapid drop has convinced a number of producers in the high-cost oil sands region to cut back on growth projects, with Canadian Oil Sands Ltd, MEG Energy Corp and others looking to scale back budgets in order to weather weak prices.

Though the company expects to slow future growth, Ferguson said Cenovus had no plans to either scale back staff or cut back on its quarterly dividend of 26.6 Canadian cents.

Cenovus expects oil production of about 205,500 barrels per day in 2015, compared with its output of 198,000 barrels of oil per day this year.

The company said the spending cut will delay output from two 30,000 bpd expansions of the Foster Creek site by "one or two quarters", with the first expansion now expected in the first half of 2016 and the second a year later. It will also cut spending on conventional oil production by about half, to C$425 million, with output falling 5 percent to 70,000 bpd.

Cenovus shares were up 2 percent to C$21.24 on Monday afternoon on the Toronto Stock Exchange. ($1 = C$1.1470) (Reporting by Swetha Gopinath in Bengaluru; Editing by Savio D'Souza and Gunna Dickson)