CALGARY, Alberta, Jan 15 (Reuters) - Penn West Energy Trust PWT_u.TO, Canada’s biggest conventional oil and gas income trust, said it will cut spending this year by as much as 40 percent to cope with weak oil and gas prices and shaky financial markets.
Penn West, which had cautioned in December that lower 2009 expenditures were in the offing, also cut its distributions to unit holders by 32 percent, a move several trusts have made as industry conditions worsened in recent months.
The company said it would spend C$600 million to C$825 million ($476 million to $655 million) this year, down from a previously estimated outlay of about C$1 billion in 2008.
The biggest cut will be in the first half, as industry operating costs have yet to fall to the same extent as commodity prices, Penn West said.
The 50 percent reduction in first-half spending, to between C$250 million and C$325 million, should mean production will average 180,000 barrels of oil equivalent a day during the period, it said.
Penn West said it has 31 percent of its 2009 oil production hedged with a floor price of $80 a barrel and a ceiling of $110.21 a barrel. Oil was selling for less than $36 on Thursday.
About 20 percent of the company’s natural gas output is hedged between C$7.88 a gigajoule and C$11.27 a gigajoule. Canadian gas has recently sold for less than C$6 a GJ.
The company said it recently approved a cut in its monthly distribution to 23 Canadian cents a unit from 34 Canadian cents for January and February.
Penn West trust units were down 54 Canadian cents, or about 4 percent, at C$14.19 on the Toronto Stock Exchange. They are down 48 percent in the past 12 months.
$1=$1.26 Canadian Reporting by Jeffrey Jones; editing by Jeffrey Hodgson