CALGARY, Alberta (Reuters) - Canadian oil producer Cenovus Energy Inc (CVE.TO) (CVE.N) said on Thursday it planned to increase its 2017 capital budget by about 24 percent and will resume work on the expansion of its oil sands project in Christina Lake.
The Calgary, Alberta-based company said it intended to invest between C$1.2 billion-C$1.4 billion ($1.06 billion), with a target of C$1.3 billion. That compared with its forecast of C$1 billion-C$1.1 billion for 2016.
Cenovus’s 2017 oil production will rise 14 percent to 223,000-240,000 barrels per day (bpd), while oil sands production is estimated to increase by 20 percent to 172,000-184,000 bpd, Chief Executive Brian Ferguson said in a conference call.
Alberta’s vast oil sand deposits are the world’s third-largest crude reserves, but are more expensive to operate in than conventional oil fields. The energy industry has been hit hard by the two-year oil price crash and sought to cut costs to remain profitable.
Cenovus had reported a third-quarter loss due to asset impairment charges resulting from declining prices. Its 2016 capital spending budget was slashed to C$1.0 billion - C$1.1 billion, from the C$1.1 billion - C$1.2 billion previously forecast.
“We are confident that the cost reductions we have achieved are largely sustainable and that we can continue to find even more cost efficiencies,” Ferguson said.
Cenovus deferred Phase G of its Christina Lake thermal plant in northeast Alberta after crude prices slumped in 2014. It was one of nearly 20 oil sands projects put on hold by producers. The project is a equal partnership with ConocoPhillips (COP.N).
Crude prices have since risen after the Organization of Petroleum Exporting Countries agreed last month to cut output, signaling relief for the industry.
Ferguson said the company will resume work on Christina Lake, northeast Alberta, in the first half of 2017, adding in an interview the company will create 500 winter construction jobs.
“It’s about a 24-month period to finish the construction and get the oil flowing,” he said.
Cenovus also said it would invest about 70 percent of the capital budget towards sustaining its oil sands production as well as base production at its other operations.
The company said the rest would be spent on growth projects in its oil sands assets among other things.
Cenovus shares were down 1.1 percent in early afternoon trading on the Toronto Stock Exchange at C$20.31.
($1 = 1.3211 Canadian dollars)
Reporting by Ethan Lou in Calgary, Alberta, and Vishaka George in Bengaluru; Editing by Bernard Orr and Alan Crosby