December 7, 2011 / 11:19 AM / in 6 years

UPDATE 2-Cenovus sees higher oil production, boosts spending

* Expects capital budget of C$3.1-C$3.4 bln next year

* Sees 2012 cash flow of C$2.9-C$3.5 billion

* Expects production from Christina Lake project to more than double (Adds details on overall production, Christina Lake project)

Dec 7 (Reuters) - Cenovus Energy Inc, Canada’s No. 2 independent oil company, expects its oil production to grow 21 percent next year and said it will spend about 23 percent more to support that growth.

With oil prices staying above $100 a barrel, Cenovus is targeting average oil production of about 163,000 barrels per day (bbls/d) net in 2012.

The company’s production from the Christina Lake oil sands project in Alberta is expected to more than double as it expands the operation.

The company expects capital budget of C$3.1-C$3.4 billion ($3.06-$3.36 billion), with a 40 percent increase in total spending on oil.

“Our strong financial position enables us to meet current commitments while investing in long-term projects and planning to grow our dividend,” Cenovus Chief Executive Brian Ferguson said in a statement on Wednesday.

It currently pays out a quarterly dividend of 20 Canadian cents per share.

Cenovus, which aims to sell C$100-C$150 million worth of non-core assets next year, said its 2012 cash flow will be little changed from the C$2.9-C$3.5 billion it expects for this year.

The company, which has a joint venture partnership with ConocoPhillips, sees lower operating cash flow from its refining and natural gas operations, but operating cash flow from its oil projects will rise due to higher volumes and prices.

OIL SURGE

Oil production at Christina Lake is expected to average 26,000-29,000 bbls/d net in 2012, the company said.

Christina Lake’s newest expansion, Phase C, is expected to reach full capacity by mid-2012. There are plans for phase D to begin producing in the fourth quarter of 2012, at least three months ahead of schedule, Cenovus said.

The next three expansion phases at Foster Creek are now expected to produce a combined 20,000 bbls/d gross more than initially planned, the company said.

Cenovus expects its Foster Creek project in Alberta to eventually reach gross production capacity of 290,000-310,000 bbls/d.

Cenovus shares closed at C$33.07 on Tuesday on the Toronto Stock Exchange. ($1 = 1.0133 Canadian dollars) (Reporting by Bhaswati Mukhopadhyay in Bangalore; Editing by Supriya Kurane)

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