(Adds context on other producers, analyst comment)
By Nia Williams
CALGARY, Alberta Jan 5 Penn West Petroleum Ltd
announced a higher-than-expected 2017 capital budget on
Thursday, becoming the latest Canadian oil and gas producer to
boost spending as global crude prices tick higher.
Companies particularly focused on light oil such as Crescent
Point Energy and ARC Resources have said they
will spend more in 2017 than last year - signaling the siege
mentality that permeated all parts of Canada's energy industry
is lifting after more than two and a half years of slumping
Calgary-based Penn West said it will spend C$180 million
($136.34 million) this year, 20 percent higher than the
company's previous estimate made in early November.
The announcement comes a day after rival light oil and gas
producer Encana said it expected better margins than previously
forecast in 2017 because of lower costs and stronger production
U.S. benchmark crude more than doubled in price since
hitting a 13-year low in February last year to reach $55 a
barrel on Tuesday, helped by producer group OPEC agreeing in
late November to co-ordinate production cuts. U.S. crude was
last trading around $53 a barrel.
"A lot of the budgets that we saw in the latter part of last
year were factoring in a $50 oil environment and now we have
touched $55 and have more visibility towards a longer-term
price, producers are more willing to spend that extra cash
flow," said Thomas Matthews, an analyst with AltaCorp Capital.
Penn West, which last year announced C$1.1 billion in asset
sales to help pay down its heavy debt burden, said it expects
2017 production of 27,000-29,000 barrels of oil equivalent per
day (boepd) in its key development areas. The company said in
November it expected 10 percent core production growth in 2017.
The company, which in 2013 was a 133,000 boepd producer,
operates primarily in the Cardium, Viking and Peace River areas
of Alberta after shrinking its portfolio dramatically to help
survive the downturn.
Investors have welcomed Penn West's steps to tackle its debt
load, with the stock more than doubling in value in 2016. On
Thursday the shares were up 2.5 percent at C$2.50 on the Toronto
The company also said David Hendry, vice president of
finance, will take over from David Dyck as the company's chief
($1 = 1.3202 Canadian dollars)
(Additional reporting by John Benny in Bengaluru; Editing by