Cenovus to reduce capital spending by 15% amid lower oil prices

Cenovus Energy Inc. says it will reduce next year's capital spending by 15 per cent compared with 2014 and target its efforts on completing two oilsands expansions that are well advanced.

The Calgary-based oil producer and refiner says it will implement cost-savings initiatives to achieve projected savings of $400 million to $500 million a year by 2018.

Cenovus said it's planning to live within its means during a challenging time as a result of lower oil prices and target its capital spending on completing expansions at the Christina Lake and Foster Creek oilsands operations in northern Alberta.

Its 2015 capital budget is between $2.5 billion and $2.7 billion, down from the 2014 budget of between $3.0 billion and $3.1 billion.

Its 2015 cash flow is expected to be at least $1 billion less than this year but Cenovus says it expects to fully fund its capital projects from internal cash flow.

The Cenovus budget is based on oil prices being higher than their current levels but below what they were earlier this year.

Its estimates are based on West Texas Intermediate crude at between US$74 and US$81 a barrel on average next year. The January crude contract on the New York Mercantile Exchange is currently below US$61 a barrel, down from about $105 in the summer.

Cenovus estimates its 2015 cash flow at between $2.6 billion and$2.9 billion, or between $3.40 and $3.80 per share down from the2014 estimate of between $3.8 billion and $3.9 billion, or between $5 and $5.15 per share.

The company plans to boost production in the oilsands by 9 per cent.