Cenovus To Increase 2020 Capital Investment & Production
Zacks Investment Research | Dec 10, 2019 08:44PM ET
Cenovus Energy Inc. (TSX: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.
Production
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.
Refining and Marketing
Cenovus is planning to increase capital investment in Refining and Marketing assets in 2020 to C$285-C$330 from the 2019 estimated level of C$260-C$290. Apart from transporting and selling crude oil, natural gas and NGLs, the company’s Refining and Marketing segment includes the joint ownership of two refineries in the United States. In each of the Borger and Wood River refineries, Cenovus has a 50% ownership, with Phillips 66 (NYSE:PSX) being the operator. Moreover, Cenovus operates a crude rail terminal in Alberta, wherein it has full ownership. The segment accounted for 46% of revenues in the September quarter of 2019.
Oil Sands
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.
Price Performance
Cenovus’ shares have gained 33.7% in the year-to-date period compared with the 15.6% rally of the Zacks Investment Research
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.