Cenovus Energy to spend up to $3.4 billion on oil projects in 2012

Cenovus Energy Inc. announced plans to make substantial investments in its oil assets next year to support the company’s growth strategy. The 2012 capital budget of between $3.1 billion and $3.4 billion is about 23 per cent higher than planned 2011 capital spending.

Cenovus expects oil production to grow significantly in 2012, with its Christina Lake oil sands operation more than doubling average volumes compared with this year. The production increase at Christina Lake is mainly due to its newest expansion, phase C, which is expected to reach full production mid-year. The next expansion at Christina Lake, phase D, is now anticipated to start producing by the end of 2012, several months earlier than initially scheduled. Recent investment in the company’s conventional oil properties is starting to pay off with increased production expected from those assets in 2012 as well.

Cenovus anticipates strong cash flow for 2012 of between $2.9 billion and $3.5 billion. The range is similar to expected cash flow for 2011. While the company anticipates lower operating cash flow from its refining and natural gas operations in 2012, it expects increased operating cash flow from its oil projects due to higher volumes and prices.

Oil production will average about 163,000 barrels per day (bbls/d) net in 2012, an increase of 21 per cent compared with expected 2011 production. The growth is anticipated to come largely from the Christina Lake project, where phase C is expected to reach full capacity by mid-2012 and there are now plans for phase D to begin producing in the fourth quarter of 2012, at least three months ahead of schedule. Christina Lake oil production is expected to average between 26,000 and 29,000 bbls/d net in 2012, more than double the average 2011 production.

Pelican Lake is expecting higher oil volumes in 2012 due to its increased infill drilling and the expansion of the polymer enhanced oil recovery program. Other conventional oil production is also expected to increase by about 17% compared with 2011, largely as a result of development of the company’s tight oil assets in southern Saskatchewan.

At Foster Creek oil production is expected to he higher than initially planned as a result of innovation and improved efficiency. The company has increased the combined gross production capacity of the next three Foster Creek phases, F, G and H, by 20,000 bbls/d. Cenovus now expects Foster Creek to eventually reach gross production capacity of 290,000 bbls/d to 310,000 bbls/d.