By Rod Nickel and Arundhati Sarkar
CALGARY, Alberta (Reuters) - Shares of Canadian energy companies recovered some of their losses on Tuesday, but hovered around their weakest levels in a decade, and Cenovus Energy Inc <CVE.TO>, one of the country's largest producers, slashed spending.
Cenovus cut capital spending by 32% for the year and suspended rail-shipping as an oil price war battered rival producers, including Canada.
Saudi Arabia and Russia raised the stakes further on Tuesday, a day after crude prices suffered their biggest rout since the 1991 Gulf War.
Cenovus closed up 11.3% at C$4.25 and was among the Canadian oil patch's biggest recoveries, after shedding more than 50% the day before, while the Toronto Stock Exchange energy index <.SPTTEN> closed 1.7% higher.
Cenovus said it expected oil sands production to average between 350,000 barrels per day (bpd) and 400,000 bpd for the year, down 6% from its prior forecast.
MEG Energy, whose key operations are in the Athabasca oil sands region in Alberta province, said it would cut its 2020 capital spending by 20% to C$200 million and forecast full-year output in the range of 93,000–95,000 bpd, lower than the prior forecast of 94,000–97,000 bpd.
Calgary-based Husky Energy <HSE.TO> is "evaluating actions that can be taken in light of challenging global market conditions," spokeswoman Kim Guttormson said.
Occidental Petroleum Corp <OXY.N> and several other U.S. producers chopped spending and Chevron Corp <CVX.N> said it was considering reductions.
Canada, the fourth largest producer, has struggled for years as congested pipelines weakened prices and forced the Alberta provincial government to curtail production.
In light of those conditions, Canadian oil sands companies reined in spending and repaid debt in recent years, leaving them better able to weather low oil prices than U.S. shale producers, said Greg Stringham, president of energy consultancy GS3 Strategies.
Oil sands facilities are expensive to build, but relatively cheap to operate, another advantage during low prices.
Even so, most Canadian producers cannot generate enough cash to cover maintenance spending and dividends at current prices, said a BMO Capital Markets note. It expects up to nine to suspend or cut their dividends.
Cutting staffing costs will be a particular challenge, said Craig Alexander, chief economist at financial services firm Deloitte Canada.
Conventional producers such as Crescent Point Energy <CPG.TO> and Seven Generations Energy <VII.TO> could reduce drilling, Stringham said. That activity normally pauses in spring anyway as the ground thaws, giving them some time to assess.
Neither company could be reached.
With shares weak, some companies could attract takeover interest. "It's a great buying opportunity for people if they're brave enough to get into it," Stringham said. "But this is not a normal price war."
(Reporting by Rod Nickel in Calgary, Alberta and Arundhati Sarkar in Bengaluru; additional reporting by Shariq Khan in Bengaluru; Editing by Marguerita Choy and Arun Koyyur)