Cenovus responds to low oil prices with reduced 2020 capital spending
Posted March 9, 2020 11:37 pm.
CALGARY (660 NEWS) – In a statement, the Calgary-based company says it is reducing its 2020 capital spending by approximately 32% in order to maintain the strength of its balance sheet.
Cenovus is also temporarily suspending its crude-by-rail program and deferring final investment decisions on major growth projects.
The statement adds, these measures are being taken in response to the recent significant decline in world benchmark crude oil prices and the company continues to work toward funding its revised capital program and current dividend within cash flow in this challenging commodity price environment.
As a result of Cenovus’s decision to temporarily suspend its crude-by-rail program, the company will no longer be making use of credits under Alberta’s Special Production Allowance (SPA) program. Therefore, oilsands production in 2020 is now expected to average between 350,000 barrels per day (bbls/d) and 400,000 bbls/d, approximately 6% lower than the company’s December 9, 2019 guidance for the year.
Capital originally budgeted to progress potential phase H expansions at both Christina Lake and Foster Creek to sanction-ready status this year has been put on hold, and the 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 (DRU) will be completed, however, in the current environment, Cenovus does not intend to sanction any new projects.
Cenovus currently has liquidity of approximately $4.4 billion, including undrawn credit facility capacity and cash on hand. Under the terms of Cenovus’s committed credit facility, the company is required to maintain a debt to capitalization ratio, as defined in the agreement, not to exceed 65%. The company was well below this limit at the end of 2019, and has no near-term debt maturities.
Cenovus will continue to monitor the macro-economic and oil price environment and will look for additional opportunities to reduce operating and capital spending if necessary. The company expects to provide an updated corporate guidance document in due course.
