Suncor Energy is chopping its capital program from this year by 26 per cent or $1.5 billion, the energy giant has announced.
The revised capital program is expected to be between $3.9 and $4.5 billion.
The company said the updated capital spend is concentrated on sustaining capital and continuing with a limited number of low capital intensity, value creating projects, as follows:
- $2.3 – 2.7 billion related to asset sustainment and maintenance activities;
- $600 – 750 million on E&P step out developments; and
- Approximately $1 billion on high return / cost reduction projects largely independent of commodity price volatility.
In a news release, Suncor said its original capital guidance was $5.4 to $6.0 billion, with approximately 50 per cent allocated to economic investment and 50 per cent to sustaining capital.
“By the end of Q1 2020, Suncor is expected to have spent approximately $1.3 billion in capital. In order to sustain the financial strength of the business within the current economic environment, it is crucial to reduce the capital budget. Suncor is able to make these reductions because of the flexibility previously built into the budget. The targeted reductions include a combination of reducing economic investment and sustaining capital by deferring and cancelling projects, while maintaining a focus on safety and asset reliability over the long term,” it said.
The revised capital spending guidance reflects the significant decline in the crude oil price and uncertainty surrounding the economic impact of COVID-19, it added.
“The simultaneous supply and demand shocks are having a significant impact on the global oil industry. We are adjusting our spending and operational plans to be prepared in the event the current business environment persists for an extended period of time,” said Mark Little, president and chief executive officer. “Our business model and financial strategy are designed to withstand volatile environments.”