Responding to low oil prices

Cenovus

Cenovus Energy Inc. is further reducing its 2015 capital spending in order to preserve cash and maintain the strength of its balance sheet. The compay has identified approximately US$700 million in additional capital expenditures originally planned for 2015 that can be deferred until crude oil prices recover. Brian Ferguson, Cenovus President and CEO said, “we have great assets, we’re in a strong financial position and we have the flexibility in our capital plan to make these additional spending reduction without compromising strategic growth projects. Our plan is to continue to pursue our long term growth strategy, but at a pace we believe is more in line with the current pricing environment.”

In December last year, Cenovus announced a 2015 capital spending budget of between US$2.5 billion and US$2.7 billion, an approximately 15% reduction from 2014 levels. Since December, crude oil prices have continued to weaken and the company is anticipating prices may remain low through 2015. As a result, Cenovus has revised its 2015 capital budget and is now targeting capital spending this year of between US$1.8 billion and US$2 billion. As part of its prudent approach to financial management, the company will continue to assess its spending plans on a regular basis and has the ability to make further budget adjustments, if required. In addition to capital flexibility, Cenovus continues to evaluate other corporate and financial opportunities, including generating cash from its existing portfolios.

Ferguson continued, “I believe crude oil prices will rebound, but the timing is uncertain. We’re taking the actions we deem prudent to help protect the financial resilience of Cenovus without compromising the future. 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.”

Sasol

Sasol has announced that it is formulating a comprehensive plan to conserve cash in response to lower international oil prices. While the detailed actions underpinning the company’s response plan are being refined, certain decisive measures have already been agreed to and are being implemented. These include identifying opportunities for additional cash savings targeted over the next 30 months. The focus areas are capital portfolio phasing and reductions, capital restructuring, working capital improvements, margin enhancement and further fixed cost reductions. Cash flow improvements actioned in terms of the response plan will be over and above the current target of at least R4 billion in sustainable cost savings by 2016, which was confirmed last year as part of Sasols business performance enhancement programme.

As a result of the ongoing capital investment reprioritisation exercise, Sasol has decided to delay the final investment decision on its large scale, GTL plant in Louisiana. The timing of the decision will take into consideration progress made with the execution of the company’s world scale ethane cracker and derivatives complex, prevailing market conditions and other strategic investment opportunities.

Edited from press releases by Claira Lloyd

Published on 30/01/2015


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