Jan 11 (Reuters) - PetroBakken Energy Ltd slashed its capital expenditure for this year as Canadian oil prices remain weak amid a shortage of pipelines - an infrastructure bottleneck that also forced Penn West Petroleum Ltd to cut its spending plans.
The price differential between Canadian crude and West Texas Intermediate (WTI) widened to the most in five years around mid-December as a surge in production far outpaced the capacity to ship oil to U.S. refineries.
Supplies are set to increase with the start-up of Imperial Oil Ltd’s 110,000-barrel-per-day Kearl oil sands project in coming weeks.
PetroBakken said it would spend C$675 million (about $686 million) this year, much lower than the C$975 million it had estimated for last year.
“The reason for it, I think, is just the commodity price outlook and the company’s high leverage and dividend commitments,” Altacorp Capital analyst Don Rawson told Reuters.
The company announced a dividend of 8 Canadian cents per share in December.
“Commodity price is important, but if they had a pristine balance sheet, I am sure they wouldn’t be cutting spending to the degree that they have,” Rawson said.
Penn West said on Wednesday that it expects to spend C$900 million this year, with the possibility of increasing that by C$300 million. It had estimated expenditure of between C$1.3 billion and C$1.4 billion in 2012.
Tight pipeline capacity to the U.S. Midwest and poor access to markets such as the U.S. Gulf Coast and Asia have delayed the opening up of new regions for Canadian supply.
The resulting weakness in oil prices has hit the shares of many producers. Penn West Petroleum’s stock has lost 20 percent over the past three months, while PetroBakken shares have fallen 25 percent during the same period.
PetroBakken shares were down 2 percent at C$10.05 in Friday afternoon trading on the Toronto Stock Exchange. Shares of Penn West Petroleum were down 3 percent at C$10.06.