Suncor Energy (TSX, NYSE:SU), Canada’s dominant oil sands player, warned Tuesday that production would drop next year as a result of major planned maintenance work at its facilities.
The company, however, intends to increase capital spending in 2016 by around 15% from this year. That means it has added $900 million to its budget, despite its pessimistic outlook for commodity prices.
Suncor expects U.S. benchmark crude to remain unchanged at $50 a barrel, while predicts that Canadian heavy oil will trade $2 lower in 2016 than this year’s forecast.
Total production is expected to average 525,000 to 565,000 barrels of oil equivalent per day, with the midpoint down 5% from the 2015 average of 550,000 to 595,000 boe/d.
The company noted the announced production cut has nothing to do with low global oil prices, which have pushed the price of Canadian heavy crude to around $27 a barrel in November.
Earlier this month, oil sands producer Canadian Natural Resources (TSX:CNQ) — the country’s largest independent oil producer — said it planned to spend between Cdn$4.5bn and Cdn$5bn in 2016, but also warned it could reduce that amount by as much as $1.5 billion depending on commodity markets.
Suncor has so far cut $1.4 billion from its budget this year and let go about 1,200 employees. It said Tuesday it could adjust next year’s spending plan in line with “any further deterioration in market conditions,” citing potential reductions in capital and operating expenditures.
Last moth the oil giant launched a $3.3 billion (Cdn$4.3bn) hostile takeover bid for Canadian Oil Sands (TSX:COS), its partner and the largest shareholder in Syncrude — Canada’s largest synthetic oil project.
Its attempt to buy COS expires on December 4, marking 60 days since the offer was made.
Suncor has been looking to expand in the Canada’s oil sands amid a prolonged slump in oil prices. In September, it bought an additional 10% interest in the Fort Hills oil sands project in northern Alberta from French oil company Total.