CALGARY - Capital spending cuts may be in the cards when oilpatch earnings season kicks off this week, according to an analyst's report.

"With the rapid drop in commodity prices we would not be surprised to see some producers start to reconsider capital plans," wrote CIBC's Andrew Potter.

Nexen Inc. (TSX:NXY), which is on the hunt for a new CEO after Marvin Romanow's exit earlier this year, is the first to report on Thursday.

Potter said Nexen will be one of the few to post stronger production, as its offshore Usan project in West Africa ramps up and volumes at its Long Lake oilsands project and North Sea platforms improve.

The most likely to reduce capital spending is Canadian Natural Resources Ltd. (TSX:CNQ), which reports on Aug. 9. Its latest budget of $7.4 billion was based on West Texas Intermediate oil prices of US$104. With prices looking like they're heading closer to US$90, it could mean a spending reduction of $500 million to $1 billion.

"We believe CNQ would most likely cut capex out if its oilsands budget, implying there should be little impact to short-term production forecasts," Potter wrote.

Canadian Oil Sands Ltd. (TSX:COS) raised its dividend from 30 cents to 35 cents last quarter — a level Potter called "unsustainable" in the current oil price environment.

"We believe the company will most likely wait another quarter before making any decisions on dividend cuts," he said.

Generally, Potter doesn't see much to get excited about this earnings season.

"Overall, second-quarter results will likely be quite weak as producers grapple with low natural gas prices, declining benchmark oil prices and widening North American oil differentials vs. benchmarks."

Canadian producers will continue to be whacked by the double-discount they get for their crude.

Pipeline bottlenecks have eroded the value of landlocked U.S. West Texas Intermediate crude compared to international varieties that can be transported by tanker to several markets.

And oilsands crude, because it's heavy and more difficult to refine, already trades lower than WTI.

"We believe that Q2/12 will continue to illustrate the magnitude of the opportunity cost to Canadian producers as pricing worsened from the levels seen in Q1," wrote Potter.

Oil companies that have refinery interests, such as Suncor Energy Inc. (TSX:SU) and Cenovus Energy Inc. (TSX:CVE) are expected to do better than peers that don't. Having a downstream business cushions them against the lower crude prices because it means the cost of the oil they buy to run through their refineries goes down.

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  • 10. Oil And Gas Accounts For 4.8 Per Cent Of GDP

    The oil and gas industries accounted for around $65 billion of economic activity in Canada annually in recent years, or slightly less than 5 per cent of GDP. Source: <a href="http://www.ceri.ca/docs/2010-10-05CERIOilandGasReport.pdf" target="_hplink">Canada Energy Research Institute</a>

  • 9. Oil Exports Have Grown Tenfold Since 1980

    Canada exported some 12,000 cubic metres of oil per day in 1980. By 2010, that number had grown to 112,000 cubic metres daily. Source: <a href="http://membernet.capp.ca/SHB/Sheet.asp?SectionID=9&SheetID=224" target="_hplink">Canadian Association of Petroleum Producers</a>

  • 8. Refining Didn't Grow At All As Exports Boomed

    Canada refined 300,000 cubic metres daily in 1980; in 2010, that number was slightly down, to 291,000, even though exports of oil had grown tenfold in that time. Source: <a href="http://membernet.capp.ca/SHB/Sheet.asp?SectionID=7&SheetID=104" target="_hplink">Canadian Association of Petroleum Producers</a>

  • 7. 97 Per Cent Of Oil Exports Go To The U.S.

    Despite talk by the federal government that it wants to open Asian markets to Canadian oil, the vast majority of exports still go to the United States -- 97 per cent as of 2009. Source: <a href="http://www.nrcan.gc.ca/statistics-facts/energy/895" target="_hplink">Natural Resources Canada</a>

  • 6. Canada Has World's 2nd-Largest Proven Oil Reserves

    Canada's proven reserves of 175 billion barrels of oil -- the vast majority of it trapped in the oil sands -- is the second-largest oil stash in the world, after Saudi Arabia's 267 billion. Source: <a href="http://www.ogj.com/index.html" target="_hplink">Oil & Gas Journal</a>

  • 5. Two-Thirds Of Oil Sands Bitumen Goes To U.S.

    One-third of Canada's oil sands bitumen stays in the country, and is refined into gasoline, heating oil and diesel. Source: <a href="http://www.nrcan.gc.ca/statistics-facts/energy/895" target="_hplink">Natural Resources Canada</a>

  • 4. Alberta Is Two-Thirds Of The Industry

    Despite its reputation as the undisputed centre of Canada's oil industry, Alberta accounts for only two-thirds of energy production. British Columbia and Saskatchewan are the second and third-largest producers. Source: <a href="http://www.nrcan.gc.ca/statistics-facts/energy/895" target="_hplink">Natural Resources Canada</a>

  • 3. Alberta Will Reap $1.2 Trillion From Oil Sands

    Alberta' government <a href="http://www.huffingtonpost.ca/2012/03/27/alberta-oil-sands-royalties-ceri_n_1382640.html" target="_hplink">will reap $1.2 trillion in royalties from the oil sands over the next 35 years</a>, according to the Canadian Energy Research Institute.

  • 2. Canadian Oil Consumption Has Stayed Flat

    Thanks to improvements in energy efficiency, and a weakening of the country's manufacturing base, oil consumption in Canada has had virtually no net change in 30 years. Consumption went from 287,000 cubic metres daily in 1980 to 260,000 cubic metres daily in 2010. Source: Source: <a href="http://membernet.capp.ca/SHB/Sheet.asp?SectionID=6&SheetID=99" target="_hplink">Canadian Association of Petroleum Producers</a>

  • 1. 250,000 Jobs.. Plus Many More?

    The National Energy Board says oil and gas employs 257,000 people in Canada, not including gas station employees. And the Canadian Association of Petroleum Producers says the oil sands alone <a href="http://www.capp.ca/aboutUs/mediaCentre/NewsReleases/Pages/OilsandsaCanadianjobcreator.aspx" target="_hplink">will grow from 75,000 jobs to 905,000 jobs by 2035</a> -- assuming, of course, the price of oil holds up.