CALGARY, Alberta (Reuters) - Penn West Petroleum Ltd PWT.TO announced a higher-than-expected 2017 capital budget on Thursday, becoming the latest Canadian oil and gas producer to boost spending as global crude prices tick higher.
Companies particularly focused on light oil such as Crescent Point Energy (CPG.TO) and ARC Resources (ARX.TO) have said they will spend more in 2017 than last year - signaling the siege mentality that permeated all parts of Canada’s energy industry is lifting after more than two and a half years of slumping prices.
Calgary-based Penn West said it will spend C$180 million ($136.34 million) this year, 20 percent higher than the company’s previous estimate made in early November.
The announcement comes a day after rival light oil and gas producer Encana said it expected better margins than previously forecast in 2017 because of lower costs and stronger production growth.
U.S. benchmark crude CLc1 more than doubled in price since hitting a 13-year low in February last year to reach $55 a barrel on Tuesday, helped by producer group OPEC agreeing in late November to co-ordinate production cuts. U.S. crude was last trading around $53 a barrel. [O/R]
“A lot of the budgets that we saw in the latter part of last year were factoring in a $50 oil environment and now we have touched $55 and have more visibility toward a longer-term price, producers are more willing to spend that extra cash flow,” said Thomas Matthews, an analyst with AltaCorp Capital.
Penn West, which last year announced C$1.1 billion in asset sales to help pay down its heavy debt burden, said it expects 2017 production of 27,000-29,000 barrels of oil equivalent per day (boepd) in its key development areas. The company said in November it expected 10 percent core production growth in 2017.
The company, which in 2013 was a 133,000 boepd producer, operates primarily in the Cardium, Viking and Peace River areas of Alberta after shrinking its portfolio dramatically to help survive the downturn.
Investors have welcomed Penn West’s steps to tackle its debt load, with the stock more than doubling in value in 2016. On Thursday the shares were up 2.5 percent at C$2.50 on the Toronto Stock Exchange.
The company also said David Hendry, vice president of finance, will take over from David Dyck as the company’s chief financial officer.
Additional reporting by John Benny in Bengaluru; Editing by Bernard Orr