Petro-Canada's Board of Directors approved a capital and exploration expenditure program of up to $4.0 billion for 2009, down significantly compared with the program in 2008. Within this program, there is considerable flexibility to reduce and defer spending if commodity prices remain weak for an extended period of time. The Company intends to monitor commodity and financial markets closely and adjust the program accordingly.
"Petro-Canada is in an excellent position because we are financially conservative, we have diverse operations to generate cash and we can pace our growth projects," said Ron Brenneman, president and chief executive officer.
The 2009 capital program includes $2.1 billion directed to growth projects, exploration and new venture developments and $1.3 billion to replace reserves in core areas. In addition, Petro-Canada expects to invest $360 million to enhance existing assets and to improve profitability in the base business, and $130 million to comply with new regulations. The 2009 capital expenditure program will be adjusted on an ongoing basis so that it can be funded from cash flow and, if necessary, from available credit facilities.
"We believe we've set a prudent level of capital spending for next year, given current market conditions," said Brenneman. "But we'll evaluate the business environment and financial markets as the year progresses and adjust our plans accordingly."
Production for the full year of 2008 is expected to be at the high end of the range of 400,000 boe/d to 420,000 boe/d, in line with previous guidance. In 2009, Petro-Canada's upstream production is expected to be in the range of 360,000 boe/d to 395,000 boe/d. The expected decrease in production is due to natural declines in Western Canada, East Coast Canada and International, as well as large facility turnarounds in East Coast Canada and International. These turnarounds are being undertaken to enhance production growth in the future and maintain reliable operations. Partially offsetting these decreases are additional volumes from Oil Sands and base business investments, which moderate the natural declines.
"Deferred production from the turnarounds will be back on-stream at year end, giving us an exit rate closer to the high end of our range," said Brenneman. "The bottom line effect of lower production in 2009 will be offset by cash flow from the Edmonton refinery conversion project, which is just now starting up."
The Company's financial capacity and flexibility remain strong despite the recent turmoil in the financial markets. This is due to the Company being able to generate strong cash flow, having access to existing cash balances and significant credit facility capacity, and requiring no near-term refinancing.
"We have always managed our financing conservatively, and it's paying off in these markets," said Harry Roberts, executive vice-president and chief financial officer. "We have a very strong cash and liquidity position. Together with our capital flexibility, we're in very good shape to weather the downturn and come out strong on the other side."
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