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