With commodities prices, including crude oil, falling en masse due to global economic growth concerns, the impact is being felt especially harshly by smaller resources plays such as Longview Oil Corp.

The Calgary-based oil and gas producer and explorer has cut its capital spending program and lowered its production guidance for 2012 in response to declining oil prices.

On Thursday, West Texas Intermediate crude oil on the New York Mercantile Exchange dipped below US$80 a barrel for the first time since last October on weak manufacturing data in China and the U.S.

“In light of the recent pullback in oil prices, we think that Longview’s capital reduction in favour of balance sheet strength is a wise move, and should lend some security with respect to the 5¢/share monthly dividend (unchanged),” William S. Lee, analyst with Scotia Capital, said in a note. “We are not surprised by the move and continue to believe that Longview’s business model offers a low-risk investment with an attractive yield.”

Mr. Lee maintains a sector outperform rating with a target price of $12 for Longview, describing the company’s decision a “prudent” move.

Longview, which has oil and gas operations across four sites in Alberta and Saskatchewan, has reduced its capital spending program to $46-million from $73-million, deferring higher-cost horizontal drilling wells in Alberta in favour of wells in Saskatchewan with stronger economics, Mr. Lee said.

Production guidance for the year has also been cut to 6.4 mboe/d (thousands of barrels of oil equivalents per day) from 6.6 to 6.8 mboe/d.
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As well, second-quarter volumes have been impacted by poor weather related to the spring thaw, along with a scheduled three-week third-party outage at its Nevis site in Alberta.

“We forecast second quarter production of 6,140 boe/d, down 8% relative to first-quarter levels,” he said.

Meanwhile Bellatrix Exploration Ltd., another mid-tier producer based in Calgary, announced similar plans to reduce capital spending on Thursday.

In a release, the company said it will reduce its spending in 2012 to between $140- and $150-million from $180-million previously budgeted.

However, production estimates of 16,500 to 17,000 boe/d and exit rates of 19,000 to 19,500 boe/d for the year remain the same, thanks to well results to date that have been ahead of expectations.

“Spending less to achieve the same result is especially positive in volatile times when capital preservation is key,” Brian Kristjansen, analyst with Canaccord Genuity, said in a note Thursday. “The relative valuation, consistent growth and profitable-at-current-prices drilling inventory make it our top intermediate pick.”

Mr. Kristjansen notes the company will focus its capital spending on drilling new wells at its Cardium and Notikewin locations instead of the previously planned Duvernay well.

“Our focus and positive view of the company remain on the consistent and more economic Cardium and Notikewin inventory,” he said. “A better return is likely to be had from a Cardium or Notikewin well.”

Mr. Kristjansen maintains a buy rating while raising his target price to $9 from $8.75.