CALGARY, Alberta - EnCana Corp and Petro-Canada moved to cut 2009 capital spending on Thursday to cope with falling commodity prices and market turmoil, but they left themselves enough room to change plans quickly in case the economy swings to the better, or worse.
After years of boosting budgets to increase production from far-flung reserves and the expensive oil sands, Canada's big oil companies are retrenching to cope with crude prices that have fallen by close to $100 a barrel from July peaks.
"They've been fairly cautious," said Chris Feltin, an analyst at Tristone Capital. "Companies are managing their activities in 2009 to live within their cash flow ... They are coming out with conservative spending outlooks in light of relatively weak oil and natural gas prices."
Instead of looking to expand output at any cost, the producers are taking a more cautious approach, waiting to see which way the economic winds will blow.
"The business environment is too volatile to count on with any degree of certainty," Petro-Canada Chief Executive Ron Brenneman said on a conference call. Brenneman said his company "will stay as flexible as possible until the situation becomes a little clearer for both the commodity and financial markets."
Petro-Canada, the country's No. 4 oil exploration and refining firm, said it will cut its 2009 capital budget by 36 percent to C$3.96 billion from the C$6.16 billion it plans to spend this year.
The company last month delayed an investment decision for its Fort Hills oil sands mine by a year to late 2009 and deferred an upgrader to cut the project's C$21 billion price tag.
It now says it will monitor the markets and adjust spending plans accordingly.
Though directing more than half its cash to growth programs and exploration, Petro-Canada forecasts a drop in output in 2009 due to major maintenance shutdowns at offshore projects in Atlantic Canada and in the North Sea.
Petro-Canada estimates 2009 production will range between 360,000 and 395,000 barrels of oil equivalent per day, down from its 2008 target of 400,000 to 420,000 boe/d, as the shutdowns are expected to cut average production by 15,000 boe/d next year.
ENCANA OUTPUT FLAT
EnCana, Canada's biggest independent oil and gas producer, will cut its spending next year by 18 percent to about $6.1 billion, down from $7.4 billion this year, as it looks to keep its production flat with 2008 levels.
The company, which earlier this year was forced to postpone plans to spin off its oil sands operations because of credit worries, said 2009 capital spending may shift up or down by $500 million depending on whether the North American recession tightens or eases over the course of the year.
Calgary-based EnCana said it sees 2009 production levels remaining similar to 2008's, in the range of about 4.5 billion to 4.7 billion cubic feet of natural gas equivalent a day.
It also lowered its 2008 target for cash flow by about 5 percent. It now expects cash flow for the year to range between $9.4 billion and $9.6 billion because of lower commodity prices and refining margins.
Also on Thursday, UTS Energy Corp, whose biggest a asset is a 20 percent stake in Petro-Canada's Fort Hills oil sands project, said it will spend C$24.5 million on the project this year, as the partners, which include mining firm Teck Cominco expect to spend C$540 million in 2009 as they look to finalize plans for the project.
Petro-Canada is mulling sending some of the bitumen from the Fort Hills mine in northeastern Alberta to its Montreal refinery if a pipeline is reversed, allowing the heavy western crude to reach the eastern city.
The decision would also hinge on whether Petro-Canada follows through on plans to add a coker unit to the refinery so it can process the tar-like bitumen from the oil sands.
Petro-Canada shares fell 24 Canadian cents to C$28.76 on Thursday on the Toronto Stock Exchange, while EnCana dropped C$3.74 to C$55.40.
UTS, whose shares have fallen 84 percent in the past year, rose 5 Canadian cents to 88 Canadian cents.
After years of boosting budgets to increase production from far-flung reserves and the expensive oil sands, Canada's big oil companies are retrenching to cope with crude prices that have fallen by close to $100 a barrel from July peaks.
"They've been fairly cautious," said Chris Feltin, an analyst at Tristone Capital. "Companies are managing their activities in 2009 to live within their cash flow ... They are coming out with conservative spending outlooks in light of relatively weak oil and natural gas prices."
Instead of looking to expand output at any cost, the producers are taking a more cautious approach, waiting to see which way the economic winds will blow.
"The business environment is too volatile to count on with any degree of certainty," Petro-Canada Chief Executive Ron Brenneman said on a conference call. Brenneman said his company "will stay as flexible as possible until the situation becomes a little clearer for both the commodity and financial markets."
Petro-Canada, the country's No. 4 oil exploration and refining firm, said it will cut its 2009 capital budget by 36 percent to C$3.96 billion from the C$6.16 billion it plans to spend this year.
The company last month delayed an investment decision for its Fort Hills oil sands mine by a year to late 2009 and deferred an upgrader to cut the project's C$21 billion price tag.
It now says it will monitor the markets and adjust spending plans accordingly.
Though directing more than half its cash to growth programs and exploration, Petro-Canada forecasts a drop in output in 2009 due to major maintenance shutdowns at offshore projects in Atlantic Canada and in the North Sea.
Petro-Canada estimates 2009 production will range between 360,000 and 395,000 barrels of oil equivalent per day, down from its 2008 target of 400,000 to 420,000 boe/d, as the shutdowns are expected to cut average production by 15,000 boe/d next year.
ENCANA OUTPUT FLAT
EnCana, Canada's biggest independent oil and gas producer, will cut its spending next year by 18 percent to about $6.1 billion, down from $7.4 billion this year, as it looks to keep its production flat with 2008 levels.
The company, which earlier this year was forced to postpone plans to spin off its oil sands operations because of credit worries, said 2009 capital spending may shift up or down by $500 million depending on whether the North American recession tightens or eases over the course of the year.
Calgary-based EnCana said it sees 2009 production levels remaining similar to 2008's, in the range of about 4.5 billion to 4.7 billion cubic feet of natural gas equivalent a day.
It also lowered its 2008 target for cash flow by about 5 percent. It now expects cash flow for the year to range between $9.4 billion and $9.6 billion because of lower commodity prices and refining margins.
Also on Thursday, UTS Energy Corp, whose biggest a asset is a 20 percent stake in Petro-Canada's Fort Hills oil sands project, said it will spend C$24.5 million on the project this year, as the partners, which include mining firm Teck Cominco expect to spend C$540 million in 2009 as they look to finalize plans for the project.
Petro-Canada is mulling sending some of the bitumen from the Fort Hills mine in northeastern Alberta to its Montreal refinery if a pipeline is reversed, allowing the heavy western crude to reach the eastern city.
The decision would also hinge on whether Petro-Canada follows through on plans to add a coker unit to the refinery so it can process the tar-like bitumen from the oil sands.
Petro-Canada shares fell 24 Canadian cents to C$28.76 on Thursday on the Toronto Stock Exchange, while EnCana dropped C$3.74 to C$55.40.
UTS, whose shares have fallen 84 percent in the past year, rose 5 Canadian cents to 88 Canadian cents.
