<article><p>Cenovus Energy will continue to invest in its oil sands projects despite long-term challenging crude prices, but do so on the back of deeper staff cuts, slashed dividend payouts and a total of $280mn in cost reductions this year.</p><p>The Calgary-based producer said it expects oil prices to remain soft for the next three years, planning for $65/bl WTI through 2017, but that operations "stress-tested" at $50/bl were sustainable.</p><p>Cenovus also announced a 40pc increase in cost reductions to a total C$280mn ($215mn), two-thirds from operating cost improvements. The company said it will cut another 400 jobs, for a total 1,200 this year, but the resulting C$100mn ($77mn) in savings were not included in this year's cost reduction target.</p><p>Capital spending remains within previously announced guidance of C$1.8bn-C$2bn ($1.4bn-$1.5bn).</p><p>Cenovus also cut its third quarter dividend 40pc to C16¢/share (12¢) compared to C26.62¢ for the second quarter.</p><p>Cenovus, Canada's second largest oil producer, said its priorities this year are the completion of the Christina Lake optimization and 50,000 b/d phase F expansion, and Foster Creek's 30,000 b/d phase G expansion.</p><p>"Foster Creek and Christina Lake remain our top capital priorities," chief executive Brian Ferguson said during an investor call. </p><p>Combined production from the joint venture projects with ConocoPhillips is expected to boost Cenovus' oil sands production by 25pc, or about 50,000 b/d net to the company, by the end of 2016.</p><p>Second quarter 2015 oil sands production grew by 5pc to 130,734 b/d (net), from 124,827 b/d a year ago, supported by flush production from Foster Creek following a forced shut down in the spring because of forest fires. </p><p>The Foster Creek outage represents about 2,600 b/d in 2015, net to Cenovus, but will not change a forecast production of 62,000-68,000 b/d, the company said. </p><p>Christina Lake was producing above nameplate capacity, at 72,000 b/d net, up 6pc from the same period in 2014. Despite production falling about 4,000 b/d net from the first quarter 2015 primarily because of a power outage, Cenovus expects full-year production to be above the midpoint of its guidance of 67,000-74,000 b/d.</p><p>Conventional oil production fell 10pc to 69,220 b/d from 76,861 b/d during the second quarter a year ago. Natural gas production fell 11pc during the quarter to 450mn cf/d per day, from 507mn cf/d a year prior.</p><p>Ferguson said Cenovus plans on resuming limited tight oil activity in Southern Alberta and its Weyburn enhanced oil recovery project in Saskatchewan, adding $70 million to conventional crude drilling and three rigs this year. </p><p>The company does not expect to allocate any funds toward its Pelican Lake heavy oil project, currently producing 24,000 b/d in northern Alberta. </p><p>The company's profits fell 80pc to C$126M ($97mn) during the second quarter.</p><p>dom/tdf</p><p><br> Send comments to <a href="mailto:feedback@argusmedia.com" target="_parent"> feedback@argusmedia.com </a></p><p><u><a href="http://www.argusmedia.com/Info/General/News" target="_TOP"> Request more information </a></u> about Argus' energy and commodity news, data and analysis services. </p><p><i> Copyright © 2015 Argus Media Ltd - <a href="http://www.argusmedia.com/" target="_TOP"> www.argusmedia.com </a> - All rights reserved. </i></p></article>
