Cenovus reduces 2020 capital spend, defers new project sanctions

Considering low oil prices, Cenovus Energy Inc., Calgary, plans to reduce its 2020 capital spending by 32%, temporarily suspend its crude-by-rail program, and defer final investment decisions on major growth projects.

The revised budget range is $900 million (Can.) to $1 billion (Can.), down from the original budget of $1.3-1.5 billion (Can.).

Because the company is suspending its crude-by-rail program, it will no longer be making use of credits under Alberta’s Special Production Allowance program which allows crude oil producers to exceed mandated curtailment levels if those volumes are transported using incremental crude-by-rail capacity. Therefore, oil sands production in 2020 is now expected to average 350,000-400,000 b/d, about 6% lower than the Dec. 9, 2019 guidance for the year.

Total production for the year has been revised downward 5%, from 432,000-486,000 boe/d.

Capital originally budgeted to progress potential phase H expansions at both Christina Lake and Foster Creek oil sands projects to sanction-ready status this year has been put on hold. A majority of the remaining planned capital spend at the company’s Deep basin and Marten Hills operations has been suspended. Modest spending on engineering and permitting for a potential diluent recovery unit will be completed, but Cenovus does not intend to sanction any new projects in the current environment.

Cenovus currently has liquidity of $4.4 billion, including undrawn credit facility capacity and cash on hand. Under the terms of its committed credit facility, the company is required to maintain a debt to capitalization ratio not to exceed 65%. The company said it was below the limit at the end of 2019 and has no near-term debt maturities.