Cenovus, Athabasca unveil growth-constrained 2019 capital budget plans

CALGARY — Oilsands producers Cenovus Energy Inc. and Athabasca Oil Corp. have announced capital budgets that restrict spending to what’s required to almost maintain current production levels in 2019.

Cenovus said it will spend between $1.2 billion and $1.4 billion next year, down about four per cent from this year’s budget, with a target of a two per cent decline in overall production to between 472,000 and 500,000 barrels of oil equivalent per day in 2019.

The reduction will result mainly from a 17 per cent slide in its non-oilsands Deep Basin oil and gas production to between 95,000 and 105,000 boe/d.

Oilsands output is expected to grow by three per cent.

Smaller Athabasca, meanwhile, plans to spend between $95 million and $110 million in 2019, down from about $190 million this year, and production will slip to a midpoint of about 38,750 boe/d from 40,000 boe/d.

It also announced it will reduce the number of Calgary head office staff by 25 per cent and cut its executive and director salaries by 10 per cent to save money.

“While we are encouraged by the recent short-term steps taken by the Alberta government, significant damage has already been done to both the Canadian economy and investor confidence,” said Athabasca CEO Rob Broen in a statement.

“The sector is still a long ways away from permanent solutions. Our governments, both federally and provincially, need to prioritize long-term projects to ensure access to new end markets and to maximize value for Canada.”

Both companies said their annual guidance does not reflect the Alberta plan to impose 325,000 barrels per day of production constraints on bigger industry participants starting Jan. 1.

It’s not yet known how long the cuts designed to drain a glut of oil will be in place, although they are expected to last for at least three months.

In January, however, Cenovus estimates the move could reduce its oilsands and conventional oil production to about 347,000 boe/d (compared with its 2019 average of about 411,000 bpd) and Athabasca estimates it would have to halt 1,500 to 2,000 bpd.

Both companies had already voluntarily reduced oil production because of low oil prices blamed on a lack of pipeline capacity, with Cenovus cutting more than 40,000 bpd and Athabasca announcing 5,000 to 8,000 bpd in November and December.

Cenovus said the reduction in spending next year partly reflects efficiency improvements at its steam-driven oilsands operations in northern Alberta.

It said it will spend $100 million to $125 million next year to complete a 50,000-barrel-per-day expansion at its Christina Lake oilsands project, with first oil expected in late 2019.

Athabasca also announced the sale of its Leismer oilsands project pipelines and Cheecham storage terminal in northern Alberta for $265 million to Enbridge Inc.

It said it has agreed to pay an annual toll of about $26 million to continue using the assets and will retain priority access.

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