CALGARY – If Cenovus Energy decides to revive shelved oilsands projects in the coming year, it won’t necessarily be because of a recovery in oil prices.
CEO Brian Ferguson says he’s not in any way looking for a price signal to give the go-ahead for those projects. Rather, he says the deciding factors will be regulatory certainty and assurances that cost savings are sustainable.
Cenovus is basing its assumptions for 2016 on U.S. benchmark oil prices of US$49 a barrel. West Texas Intermediate crude is now hovering around US$37 a barrel.
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Cenovus has set a 2016 capital budget of between $1.4 billion and $1.6 billion — about 19 per cent below this year’s level.
There’s the flexibility to lower that range by $100- to $200-million should oil prices “weaken significantly,” said Ferguson.
Ferguson said Cenovus is in strong enough financial shape that it can invest in projects even if oil prices stay low — provided it has clarity over government policies, such as the outcome of the impending Alberta royalty review, and confidence in what costs to expect.
“These are 30-year investment decisions,” he said. “Where we have the opportunity to invest counter-cyclically in organic growth and you can get things accomplished for lower cost, that’s a good thing overall.”
About 20 per cent of next year’s capital budget for will be for growth projects, mostly at two Alberta oilsands operations, and 80 per cent will be used to sustain previous investments, including at two U.S. refineries that Cenovus jointly owns.
The two biggest budget items are between $350 million and $400 million for its Foster Creek oilsands project and between $425 million and $475 million for the Christina Lake operation. Another $230 million to $270 million is for the refining business.
Cenovus expects to complete expansion phases at the two oilsands operations by the third quarter of 2016.
It also expects total oilsands production next year will be about seven per cent higher than this year’s anticipated level, to between 144,000 and 157,000 barrels per day. Production from conventional oil is anticipated to drop to between 55,000 and 59,000 barrels per day, down 15 per cent from this year.
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