Cenovus Energy (NYSE:CVE) is planning a major increase in the company's capital budget for 2012, and expects this level of spending is to generate crude oil and natural gas liquids production growth of 21% for the company next year.
Investopedia Markets: Explore the best one-stop source for financial news, quotes and insights.

2012 Capital Spending
Cenovus Energy has set the company's 2012 capital budget to be in a range from C$3.1 billion to C$3.4 billion. This represents a 23% increase over expected 2011 capital spending of C$2.6 billion to C$2.7 billion.

Cenovus Energy estimates that its oil and natural gas liquids production will average 135,000 barrels per day in 2011. The 2012 capital budget is expected to increase this production to a range from 155,000 to 171,000 barrels per day.

Much of this capital spending will be used at Christina Lake and Foster Creek, the company's two producing oil sands projects. It will also invest in several emerging oil sands projects in its portfolio. (For related reading, see What Determines Oil Prices?)

Oil Sands
Cenovus Energy is heavily involved in various oil sands projects, and estimates that most of the growth in production in 2012 will come from the Christina Lake project. The company is looking for net oil production from here to be in a range from 26,000 to 29,000 barrels per day, up from 11,000 barrels per day in 2011.

The company recently started production from Phase C of Christina Lake and estimates that this phase will reach full productive capacity in the middle of 2012. Phase D at Christina Lake is approximately 80% complete and is scheduled to start up production in the fourth quarter of 2012. The gross productive capacity of Christina Lake is expected to be 258,000 barrels per day by 2019.

It also operates the Foster Creek oil sands project and estimates that net production from here in 2012 will be in a range from 53,000 to 57,000 barrels per day, approximately flat with 2011.

This is only a temporary production plateau at Foster Creek, and the company estimates that peak gross productive capacity from here will range from 290,000 to 310,000 barrel of oil per day. This peak capacity is expected to be achieved beyond 2017.

Cenovus Energy has a 50% interest in both the Christina Lake and Foster Creek oil sands projects. Conoco Phillips (NYSE:COP) is also involved here and owns the other 50% of both oil sands projects. (For related reading, see A Guide To Investing In Oil Markets.)

Other Oil Sands Operators
Nexen (NYSE:NXY) is also involved with various oil sands projects in Canada, and estimates that the company will spend between C$775 million and C$1.05 billion in capital on these projects in 2012.

Nexen owns a 7.23% interest in the Syncrude project in Canada, and will spend up to C$250 million in capital here in 2012. Other public companies involved in this project include Murphy Oil (NYSE:MUR), Suncor (NYSE:SU), Imperial Oil (AMEX:IMO) and China Petroleum & Chemical Corp. (NYSE:SNP)

The Bottom Line
Cenovus Energy is looking to accelerate the growth of crude oil production in 2012, and will rely heavily on its oil sands projects in Canada to achieve this growth. These projects will also power production growth in the long term for the company.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Stock Analysis

    The Biggest Oil Producers in Asia

    Learn which Asian countries deliver the most crude oil to market, and discover what companies are the biggest producers in each country.
  2. Stock Analysis

    The 5 Biggest Russian Oil Companies

    Discover the top Russian oil companies by production volume and find out more about their domestic and international business operations.
  3. Mutual Funds & ETFs

    What Exactly Are Arbitrage Mutual Funds?

    Learn about arbitrage funds and how this type of investment generates profits by taking advantage of price differentials between the cash and futures markets.
  4. Investing News

    Ferrari’s IPO: Ready to Roll or Poor Timing?

    Will Ferrari's shares move fast off the line only to sputter later?
  5. Stock Analysis

    3 Solar Stocks to Add to Your Portfolio

    Understand the growth and challenges of the renewable energy market and its success in 2015. Learn about the top three energy stocks to add to a portfolio.
  6. Investing News

    Glencore Shares Surge in Hong Kong

    Shares of Glencore International, a leading multinational commodities and mining company, jumped by around 15% on London Stock Exchange, after the shares had gained about 71% earlier on the Hong ...
  7. Stock Analysis

    The 5 Best Buy-and-Hold Energy Stocks

    Understand why energy companies' stock are volatile when oil prices are volatile. Learn about the top five energy companies to buy and hold.
  8. Investing

    Have Commodities Bottomed?

    Commodity prices have been heading lower for more than four years, being the worst performing asset class of 2015 with more losses in cyclical commodities.
  9. Stock Analysis

    5 Cheap Dividend Stocks for a Bear Market

    Here are five stocks that pay safe dividends and should be at least somewhat resilient to a bear market.
  10. Investing

    How to Win More by Losing Less in Today’s Markets

    The further you fall, the harder it is to climb back up. It’s a universal truth that is painfully apparent in the investing world.
  1. Can working capital be too high?

    A company's working capital ratio can be too high in the sense that an excessively high ratio is generally considered an ... Read Full Answer >>
  2. How do I use discounted cash flow (DCF) to value stock?

    Discounted cash flow (DCF) analysis can be a very helpful tool for analysts and investors in equity valuation. It provides ... Read Full Answer >>
  3. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  4. What is the formula for calculating compound annual growth rate (CAGR) in Excel?

    The compound annual growth rate, or CAGR for short, measures the return on an investment over a certain period of time. Below ... Read Full Answer >>
  5. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  6. When does the fixed charge coverage ratio suggest that a company should stop borrowing ...

    Since the fixed charge coverage ratio indicates the number of times a company is capable of making its fixed charge payments ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!