CALGARY—Cenovus Energy Inc. has lowered its 2015 capital budget to between $1.8- and $2 billion, which is about $700 million less than the previous estimate and more than 15 per cent below last year’s spending levels.
The latest capital spend reduction comes about six weeks after the company announced a planned budget drop to between $2.5- and $2.7 billion, down from the the $3- to $3.1 billion it spent last year.
It’s also looking for ways to reduce annual operating and cost reductions by between $400- and $500 million in the years ahead and expects to redeploy and reduce its workforce in the coming weeks.
The Calgary-based oil producer and refiner said it’s making the move to preserve cash in response to further erosion in global oil prices, which have fallen below US$50 a barrel from more than US$100 a barrel last summer.
The company said it plans to reassign employees to core areas in coming weeks and begin reducing the size of its contract workforce, but didn’t provide details on how many people will be affected.
Cenovus said it’s suspending most of its conventional drilling program in southern Alberta and Saskatchewan but will continue projects at the Christina Lake and Foster Creek oilsands operations in northern Alberta.
Cenovus chief executive Brian Ferguson said he believes crude oil prices will rebound, but the timing is uncertain.
“As a result of the dramatic slowdown across the energy sector, we expect to see continued reductions in demand for labour, service and materials. This should create potential opportunities for us to drive improvements in our cost structure,” Ferguson said in a statement.