Cenovus Energy Inc. CVE recently announced the intention of increasing capital spending for 2020 to C$1.3-C$1.5 billion from the 2019 estimated level of C$1.1-C$1.2 billion. The rise can be attributed to a deferral of spending this year, following production curtailments introduced by regulators in Alberta. Notably, 70% of the capital spending will likely be used for sustaining production levels, primarily at the company’s Foster Creek and Christina Lake oil sands operations.
The firm intends to make its high-return projects ready for sanctions. Depending on market improvement, it plans to make final investment decisions for the projects as early as the second half of next year.
While total production for the current year is expected within 440-464 thousand barrels of oil equivalent per day (MBoe/d), the metric will likely rise 7% to 472-496 MBoe/d in 2020. The company’s crude-by-rail program and the local government’s Special Production Allowances will likely lead to the higher production.
Markedly, the rise in output will be supported by its oil sands operations that are likely to increase 13% year over year to 390-410 thousand barrels per day (MBbls/d) in 2020. The production growth is expected to be partially offset by 15% year-over-year fall in Deep Basin output.
The company is planning to invest C$705-C$820 million in the Oil Sands business in 2020, higher than the 2019 estimated level of C$595-C$640 million. The segment contributed 51.6% to Cenovus’ total revenues in third-quarter 2019. Notably, it expects low sustaining capital costs for oil sands operations and a 5% reduction in non-fuel operating costs per barrel in 2020.