A leaner Cenovus shifts from penny-pinching to growth in 2017
Cenovus Energy announced plans to boost capital spending by 24% next year, marking its first return to growth since oil prices fell off a cliff in 2014.
Next year's capital spending budget is expected to be between $1.2 billion and $1.4 billion, about 70% of which will be directed towards sustaining capital at its existing operations. The remaining 30% will be allocated to growth projects.
Christina Lake expansion back on track
Phase F at Christina Lake achieved first oil in November and will ramp up to its full capacity of 50,000 bbl/day over the next 12 months. That brings gross output from Christina Lake to 210,000 bbl/day by the end of next year.
Cenovus also says it plans to restart its phase G expansion at Christina Lake, which was halted in 2014 due to falling oil prices. The company says it has successfully rebid contracts on the project, reducing capital costs by $500 million. Phase G will add another 50,000 bbl/day of capacity to the SAGD facility by the middle of 2019.
Cenovus says Christina Lake will exit the year at about 184,000 to 196,000 bbl/day. Operating costs are expected to fall another 8% next year, to a range of $6.50 to $8.00 per barrel.
Foster Creek production also expanding
Foster Creek phase G achieved first oil early in the third quarter, and is also expected to ramp up over the next 12 months. This latest phase of expansion brings production capacity to about 180,000 bbl/day.
The SAGD facility is expected to output between 160,000 and 170,000 bbl/day at the end of this year. Operating costs are expected to be about 7% higher next year, to a range of $10.50 to $12.50 per barrel. The rising cost of natural gas is being blamed for the increase.
Both Christina Lake and Foster Creek are a 50/50 joint-venture with ConocoPhillips.
Cenovus plans to boost 2017 oil output by 14% to about 230,000 bbl/day, roughly 75% coming from the oil sands. Conventional output is expected to decline another 4% next year.
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CENOVUS ENERGY DECEMBER 2016 INVESTOR PRESENTATION