Canada's Cenovus Forecasts 21% increase in 2023 Capital Spending

An FPSO used for Cenvous' offshore oil field production - ©Cenovus
An FPSO used for Cenvous' offshore oil field production - ©Cenovus

Canada's Cenovus Energy CVE.TO on Tuesday forecast higher capital expenditure and production in 2023, and said its natural gas business could grow by as much as 25% in coming years due to higher prices. 

The Calgary-based oil and gas producer said total upstream production will rise around 3% year-on-year to 800,000-840,000 barrels of oil equivalent per day (boepd), and total spending will increase around 21% to between C$4 billion ($2.94 billion) and C$4.5 billion. 

The company will direct up to C$1.7 billion towards growth projects including building the offshore West White Rose project in Atlantic Canada, optimizing oil sands assets and improving reliability in its downstream refinery business. 

Last week, rivals Suncor Energy and Canadian Natural Resources also said they expect higher capital expenditure in 2023. However, Canadian producers remain cautious given volatile crude prices, which soared nearly 80% earlier this year following Russia's invasion of Ukraine but have since given up those gains, and stubborn inflation.

"One of the great achievements in this budget is we've largely been able to keep operating costs flat year-on-year in most business areas," Cenovus CEO Alex Pourbaix told Reuters in an interview.

Cenovus expects to hit its target of reducing net debt to C$4 billion next year, at which point the company plans to return 100% of excess free funds flow to shareholders. 

Natural gas prices have also rallied and Pourbaix said the company has a significant amount of opportunities in western Canada that it will develop over time. Cenovus' conventional business, which includes natural gas production, makes up around a sixth of its total output. 

The company produces 580 million cubic feet a day of natural gas that it uses to feed its oil sands operations. 

Pourbaix called that business "incredibly attractive at these kind of prices" and said Cenovus plans to grow it beyond its own needs. 

"It will depend on opportunities and economics but we are spending about 20-25% more in capital and over time it should not surprise anyone to see production grow around that level," he said. Cenovus expects its acquisition of a 50% interest in the Toledo, Ohio, refinery will close in the first quarter of 2022 and the refinery will restart operations after being damaged by a fire in September. 

Cenovus shares were last down 2.7% on the Toronto Stock Exchange at C$25.37, tracking a decline in energy stocks. ($1 = 1.3627 Canadian dollars) 

(Reporting by Ankit Kumar; Editing by Krishna Chandra Eluri and David Gregorio)

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