Highlights
• $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's Board of Directors have approved a capital and exploration expenditure program 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.
"The step up in our capital program for 2008 begins to fund the next large projects in our portfolio of opportunities," said Ron Brenneman, president and chief executive officer. "These are high quality, long-life projects consistent with our business strategy to deliver profitable growth."
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.
"In 2007, we took our base rate of production to a new level, and we will see that again when our next big upstream projects come on," said Brenneman. "In the meantime, our two refining conversion projects will boost earnings and cash flow significantly in the near term."
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.
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