Cenovus Energy Inc., Calgary, is trimming its capital spending in response to declining crude oil prices and will slow development of some of its thermal oil sands projects in Alberta.
The company has budgeted capital spending for 2015 of $2.5-2.7 billion (Can.), compared with an expected $3-3.1 billion this year.
It based the 2015 budget on a price of $77/bbl (US) for West Texas Intermediate crude oil and a discount against WTI for West Canadian Select crude, the marker for Canadian bitumen, of $16.50/bbl. The budget assumes a futures price for natural gas on the New York Mercantile Exchange of $3.95/MMbtu.
About three fourths of the 2015 budget is what Cenovus calls committed, to be used to support current oil sands production, advance expansions under way at its Foster Creek and Christina Lake oil sands projects, maintain existing conventional oil projects, and sustain maintenance and expansion projects in progress at its refineries.
The company will use “discretionary capital” of $400-600 million to advance future oil sands projects, further develop conventional oil projects, and develop technology.
“If WTI prices are in the $65/bbl range through 2015, Cenovus expects it would still be able to fully fund its committed capital for the year with internal cash flow,” a company statement said.
The company will review conditions in the first quarter of 2015 and adjust the budget accordingly. It said it expects committed capital to decrease to about $1.8 billion in 2016 and to $1.7 billion in 2017 and the share of that investment aimed at sustaining production to increase.
In 2015, the company expects to invest $700-750 million at Foster Creek and $800-860 million at Christina Lake and to delay production starts of some phases of those projects. It also will slow development at Narrows Lake, which, like Foster Creek and Christina Lake, Cenovus is developing in partnership with ConocoPhillips. It has budgeted $60-75 million for Narrows Lake next year.
At Telephone Lake, for which Cenovus recently received development approval from Alberta Energy Regulator, the company will decide on timing during 2015 (OGJ Online, Nov. 18, 2014). It will decide the future pace of development at its Grand Rapids project after reviewing results of a third pilot well pair to be drilled in first-quarter 2015.
All the projects are based on steam-assisted gravity drainage.