Cenovus provides update on Foster Creek

abarrelfullabarrelfull wrote on 19 Sep 2014 06:22

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Cenovus Energy Inc. (TSX: CVE) (NYSE: CVE) achieved first oil production at its recently-completed Foster Creek phase F expansion earlier this month. Phase F is expected to add 30,000 barrels per day (bbls/d) of capacity, with production ramping up over the next 12 to 18 months. By year-end, production from phase F is expected to be approximately 5,000 bbls/d. Phases G and H are under construction and are expected to add another 30,000 bbls/d each with first production anticipated in late 2015 and 2016, respectively. This will bring total expected gross production capacity at Foster Creek to 210,000 bbls/d. Following the completion of phases F, G and H, optimization work is expected to increase total capacity by another 15,000 to 35,000 bbls/d.

Cenovus expects the F, G and H expansion and optimization projects can be completed with capital costs of between $35,000 and $38,000 per incremental barrel, better than industry average.

“In July, we indicated that capital costs for the F, G and H expansion were trending higher and we committed to providing additional information,” said Brian Ferguson, Cenovus President & Chief Executive Officer. “One of the key drivers of the cost increases is the impact of changes we made to the phases that we believe will result in better long-term plant reliability and production efficiency.”

Changes to the F, G and H expansion include improvements to the oil and water plant, safety systems, completion designs and the incorporation of recent regulatory changes. The revised cost estimate is based on actual costs for phase F, which Cenovus has used to update cost estimates for phases G and H and optimization.

The Foster Creek project has demonstrated consistent performance since a planned turnaround in late 2013, with production averaging between 90% and 95% of plant capacity. In July, production averaged 102,000 bbls/d as volumes were impacted by scheduled maintenance on Cenovus’s cogeneration facility. August volumes averaged 119,000 bbls/d and September production continues to be strong. The company estimates a planned partial turnaround later in the month will have minimal impact on production volumes.

“Foster Creek is a cornerstone asset that continues to generate free cash flow and strong returns,” said Ferguson. “We believe the changes we’ve made to our latest expansion project will allow us to have more consistent performance as we work towards adding significant new production capacity over the next few years.”

Cenovus anticipates Foster Creek’s steam to oil ratio (SOR), which measures how much steam is required to produce one barrel of oil, will range between 2.6 and 3.0 until all phases of F, G and H are complete. At that point the SOR is expected to drop below 2.5. Foster Creek is operated by Cenovus and jointly owned with ConocoPhillips.

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