Cenovus Energy plans $2.6 billion to $3 billion capital spending budget for 2022

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CALGARY - Cenovus Energy Inc. has increased its capital spending budget for next year, against the backdrop of a global commodity boom that has pushed Canadian oil production to all-time record levels.

As part of its annual investor day December 8, the Calgary-based energy company announced a capital spending budget between $2.6 billion and $3 billion for next year. It said it will also reduce emissions by 35% by the end of 2035, with the long-term goal of getting to net-zero greenhouse gas emissions by 2050.

Cenovus' capital spending plan is up from its guidance for between $2.3 billion and $2.7 billion this year.

The company also said it plans to allocate about 50% of its excess cash flow in 2022 to shareholder returns. Remaining excess cash flow will be put toward the goal of reducing the company's net debt to below $8 billion.

"Building on our upstream production strength in 2021 and the continued optimization of our business, I am confident in our ability to grow free funds flow and deliver sustainable, increased returns to our shareholders,'' said Cenovus chief executive Alex Pourbaix in a news release.

Capital spending in Canada's oil and gas sector has so far remained subdued this year, in spite of oil prices that are at seven-year highs.

According to Statistics Canada, oil and gas capital spending over the first three quarters of 2021 was $8.5 billion, 32% below the same period during 2019 pre-pandemic.

The industry also spent less than a third of what it did during the same period of 2014. That year, capital investment in the Canadian oilpatch hit an all-time record high of $81 billion.

However, companies are using existing assets to ramp up production to meet global demand. Alberta oil production in October was 119 million barrels, an all-time monthly record, according to Statistics Canada.

Cenovus said capital spending on its upstream assets next year is expected to be between $1.7 billion and $2 billion, including $1.35 billion to $1.55 billion for its oilsands operations.

Downstream capital investments in 2022 are expected to total between $850 million and $950 million, including $200 million to $250 million for its Superior Refinery rebuild project, which Cenovus expects will be largely offset by insurance.

In its guidance for 2022, the company says it expects total production of between 780,000 and 820,000 barrels of oil equivalent per day and downstream throughput between 530,000 and 580,000 barrels per day.

Cenovus said its capital programs and current base dividend are sustainable at a West Texas Intermediate crude price of US$45 per barrel. WTI closed at US$72.05 December 7.

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