2008 Capital Expenditure
• $5.3 billion capital program planned: focus on long-life projects that provide sustainable cash flow
• Upstream production guidance range for 2008 of 390,000 barrels of oil equivalent per day (boe/d) to 420,000 boe/d
Petro-Canada has set a capital and exploration expenditure program budget totalling $5.3 billion for 2008, an increase of 28% compared with the program in 2007.
The 2008 capital program includes $3.6 billion directed to growth projects, exploration and new venture developments, a 50% increase in this category compared with 2007. In addition, Petro-Canada expects to invest $1.2 billion to replace reserves in core areas, $430 million to enhance existing assets and to improve profitability in the base business, and $105 million to comply with new regulations. The 2008 capital expenditure program is expected to be funded primarily from cash flow and additional debt as required.
Petro-Canada's upstream production is expected to decrease slightly in 2008 and be in the range of 390,000 boe/d to 420,000 boe/d. In 2008, natural declines in East Coast Canada and Western Canada are expected to be partially offset by additional volumes from the full-year impact of Buzzard and Saxon in the North Sea, as well as higher planned Oil Sands production. Production for the full year of 2007 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.
The increased level of capital spending contemplated is consistent with the Company's priority of investing in attractive projects to create shareholder value. As the Company looks beyond 2008, spending on the next large projects will likely result in annual capital expenditures exceeding operating cash flow. Additional funding requirements are expected to be met by external financing. As financial leverage is expected to increase over time, it will be managed in the context of Petro-Canada's target ranges.
Outlook
Operational Updates
• Syncrude to commence planned 45-day Coker 8-1 turnaround in March
• White Rose advanced its planned 2008 maintenance turnaround to January 2008
Major Project Milestones
• Edmonton refinery conversion project construction 61% complete at the end of the fourth quarter and on track for startup in the fourth quarter of 2008
• Syria gas development front-end engineering and design (FEED) expected to be completed early in 2008, followed closely by the awarding of the engineering, procurement and construction (EPC) contract
• Libyan heads of agreement signed for extension of concession development, with final ratification anticipated in the first half of 2008
• White Rose Extension development agreement signed, FEED on the North Amethyst portion of the project completed and progressing with detailed design in pursuit of regulatory approval in the first half of 2008
• Montreal coker investment decision expected in the second quarter of 2008
• Fort Hills project FEED on track for completion mid-2008, with a final investment decision planned for the third quarter of 2008
• MacKay River expansion continues with FEED, with a final investment decision expected in the first quarter of 2009