CALGARY, Alberta, Nov 12 (Reuters) - Penn West Energy Trust PWT_u.TO will cut its capital spending by 20 percent next year as it looks to weather weak oil prices it believes will continue for a year or more.
Penn West said late on Tuesday its third-quarter profit rose nearly eightfold to C$1.06 billion ($860 million), or C$2.78 per unit, from a year-earlier C$138 million, or 57 Canadian cents, because of hedging gains and high oil prices.
It also said it plans to spend about C$800 million next year on capital projects, 20 percent less than its forecast of a $1 billion outlay in 2008.
Penn West, Canada’s biggest conventional energy trust, said it could further cut next year’s budget by another $200 million if conditions worsen or bump it back up to $1 billion if high prices return.
The trust is the latest among Canada’s big oil producers to rein in spending next year to weather tough markets. Nearly all the country’s big oil firms have said they’ll try to live within their means next year and avoid debt.
Canadian Natural Resources Ltd (CNQ.TO) said last week it would cut its capital spending next year by nearly half as the country’s No. 2 independent oil producer made the most austere cut yet for the sector.
Penn West said it expects the shaky fundamentals for the oil industry will firm in the next year to two years.
However, because of current oil prices, which have fallen well more than half after rising above $147 a barrel in July, and problems in the field, Penn West said it will not meet its production and cash flow targets for the year,
The company said its output in 2008 will be slightly below the average 195,000 barrels of oil equivalent a day it had promised investors, but did not say how big the miss would be.
Funds flow, or cash flow, will also be light because of falling oil and gas prices. Penn West expects to have funds flow of $2.6 billion, or C$6.86 per unit, this year down from the range of C$2.8 billion to C$3 billion it had forecast.
The trust said its third-quarter funds flow, the cash used to pay distributions to investors, rose 91 percent from the year-earlier period to C$662 million, or C$1.73 a unit, from C$346 million, or $1.44 a unit.
The company’s outstanding units rose 59 percent from the third quarter of 2007 because of acquisitions.
Production in the quarter was also boosted by acquisitions, rising more than half to 190,177 barrels of oil equivalent per day from 125,345 boed a year earlier.
Penn West units, which have dropped 36 percent over the past 12 months, fell a further 33 Canadian cents to C$19.20 late on Wednesday morning on the Toronto Stock Exchange. ($1=$1.23 Canadian) (Reporting by Scott Haggett; Editing by Peter Galloway)