Calgary-based Seven Generations is reducing its previously announced 2020 capital investment budget by 18 per cent, or $200 million, to $900 million in response to the significant decline in global energy prices.
Effective immediately, the company will “meaningfully reduce” its activity levels to align investments to expected cash flow, it said in a news release.
“During this time of unprecedented volatility, we have several options available to us to maintain our profitability and financial strength,” said Marty Proctor, 7G’s President and Chief Executive Officer, in a statement.
“Strong local condensate pricing, infrastructure ownership, flexible service contracts and our low cost structure gives us the ability to prioritize financial strength over production volumes. Today’s reduced capital and production guidance does not reflect additional cost savings and other optimizations that we are actively pursuing. The company will demonstrate its resilience and emerge from this downturn stronger and better-positioned than ever before.”
On Tuesday, Cenovus Energy announced it is reducing its 2020 capital spending by approximately 32 per cent in order to maintain the strength of its balance sheet. It is also temporarily suspending its crude-by-rail program and deferring final investment decisions on major growth projects.
Capital investment has been revised to between $900 million and $1 billion from the original budget of $1.3 to $1.5 billion.
Seven Generations is a low supply cost energy producer with its liquids-rich Kakwa River Project in northwest Alberta. 7G’s corporate office is in Calgary, but its operations headquarters is in Grande Prairie.
The company said the capital investment remains fully funded at current futures pricing.
“This reduction reflects a temporary deferral of planned activity in the present commodity price environment that will afford the company the opportunity to high-grade drilling locations and improve efficiencies,” it said.
“As a result of this deferred capital investment, 7G expects annual 2020 production to average between 185,000 and 190,000 boe/d. This updated guidance anticipates a similar condensate and total liquids mix to the prior budget.
“The company will continue to refine its production, capital allocation and cost structure throughout the year in the context of prevailing market conditions. These efforts, alongside reduced production levels and moderating decline rates are anticipated to improve sustaining capital requirements.”
