Cenovus Energy Inc. plans to accelerate oil project development over the next decade, investing an average of up to $3.5 billion a year as it seeks to increase production to about 500,000 barrels per day by the end of 2021.
CALGARY: Cenovus Energy Inc. plans to accelerate oil project development over the next decade, investing an average of up to $3.5 billion a year as it seeks to increase production to about 500,000 barrels per day by the end of 2021.
“Based on the strong performance delivered by our teams over the past year, we believe we can bring on substantially more oil production earlier than initially planned,” president and CEO Brian Ferguson said. “We plan to expand current conventional oil and oil sands opportunities and bring on new projects.”
The plan now targets total oil production of about 500,000 barrels per day by the end of 2021, including oil sands production of more than 400,000 barrels per day. That would be almost six times greater than current oil sands production of 70,000 bbls/d, with a new oil sands project phase expected to come on stream every 12 to 18 months
The plan also foresees conventional oil production of 120,000 to 130,000 bbls/d by the end of 2016, nearly double current production of about 70,000.
“Capital investment will be focused on growing the company’s oil assets with a total average annual investment of about $3 billion to $3.5 billion planned over the next decade,” the company said.
However, there is “considerable flexibility” built into its capital plan since most of the investment is discretionary, with only $1.1 billion of the 2012 plan considered to be committed capital needed to maintain current operations and construct approved oil sands expansions.
Cenovus anticipates an average of $800 million to $1 billion in committed capital for each of the remaining years of the next decade. And it plans to take a balanced approach to cash flow in excess of committed capital, with “a priority is to be placed on using excess cash flow to grow the dividend after 2011.”
Organic growth opportunities will be funded with the balance of free cash flow and if necessary, additional debt financing will be used to support capital investment for the first half of the 10-year plan.
Foster Creek and Christina Lake are expected to contribute about two-thirds of oil sands production. The company now expects to reach approximately 350,000 bbls/d of oil sands production by the end of 2019, compared with the 300,000 bbls/d milestone it had set in its 2010 strategic plan.
To achieve its production growth, Cenovus is working to have 400,000 bbls/d to 500,000 bbls/d net of oil sands projects approved by regulators by 2015, it said.
The strong resource base at Foster Creek has prompted the company to increase expected total gross production capacity to between 270,000 bbls/d and 290,000 bbls/d, from the previous expectation of 235,000 bbls/d gross.
Foster Creek phases F, G and H are now each planned to have production capacity of 35,000 bbls/d, which is 5,000 bbls/d more than initially anticipated at each phase.
Cenovus is also moving up the anticipated timelines for first production from phases G and H as well as future phases.
Steaming at Christina Lake phase C is underway, about six weeks ahead of schedule. Construction of phase D is more than half complete and is three to six months ahead of schedule, it said.
Cenovus is assessing whether it will be able to increase the production capacity of future phases at Christina Lake and accelerate the timing of those projects. The Narrows Lake project is still expected to begin producing in 2016 and Grand Rapids in 2017. Foster Creek, Christina Lake and Narrows Lake are jointly owned with ConocoPhillips and project timing is subject to partner approval.
While the bulk of Cenovus’s future growth will be in the oil sands, the company also expects significant near-term growth in conventional oil production, it said.
It anticipates oil production from operations such as Pelican Lake, Weyburn, southern Alberta, Saskatchewan Bakken and Lower Shaunavon will increase to between 120,000 bbls/d and 130,000 bbls/d by the end of 2016 from about 70,000 bbls/d currently.
© 2011 The Canadian Press