Cenovus cuts another $700 million from budget

CALGARY, Alberta -- Cenovus Energy is further reducing its 2015 capital spending in order to preserve cash and maintain the strength of its balance sheet.

In December, Cenovus announced a 2015 capital spending budget of between $2.5 billion and $2.7 billion, an approximate 15% reduction from 2014 levels.

However, since December, crude oil prices have continued to weaken and the company is anticipating prices may remain low through 2015. As a result, Cenovus has revised its 2015 capital budget and is now targeting capital spending this year of between $1.8 billion and $2.0 billion.

“We have great assets, we’re in a strong financial position and we have the flexibility in our capital plan to make these additional spending reductions without compromising strategic growth projects,” said Brian Ferguson, Cenovus President and CEO. “Our plan is to continue to pursue our long-term growth strategy, but at a pace we believe is more in line with the current pricing environment.”

In 2015, Cenovus plans to continue funding its optimization program at Christina Lake. Construction of the Christina Lake phase F oil sands expansion and the phase G expansion at Foster Creek, which are each approximately two-thirds complete, are also planned to continue.

The expansions are expected to have strong economics, with supply costs for future capital investment at both Christina Lake and Foster Creek, including a 9% return on investment, of between $40/bbl and $45/bbl WTI.

Funding has also been allocated to maintain current production from Cenovus’s oil sands assets as well as to continue meeting all maintenance, safety, regulatory and contractual obligations across its portfolio.

The planned impacts of the 2015 capital reductions include the suspension of the bulk of the company’s 2015 conventional drilling program in southern Alberta and Saskatchewan and additional spending deferrals on all other longer-dated oil sands expansions and greenfield projects.

With its revised spending plans, the company anticipates total crude oil production in 2015 of between 195,000 bpd and 212,000 bpd, relatively unchanged from its December 2014 guidance. Cash flow for the year is now expected to be between $1.3 billion and $1.5 billion, based on a WTI strip price of $50.50/bbl for 2015.

In the coming weeks, Cenovus intends to realign its workforce based on its revised spending plans. Where work has been stopped or deferred, the company plans to reassign employees to core business areas and intends to begin reducing the size of its contract workforce.

In addition to the spending reductions outlined above, the company is continuing to pursue opportunities it has identified to target between $400 million and $500 million in sustained annual operating and capital cost reductions in the years ahead.