UPDATE 1-Canadian oil shares bounce modestly, Cenovus cuts spending

Rod Nickel and Arundhati Sarkar

(Recasts with share recovery, comments from Husky Energy, consultants, analysts)

CALGARY, Alberta, March 10 (Reuters) - Canadian energy companies recovered some of their stock losses on Tuesday, but hovered around their weakest levels in a decade, and Cenovus Energy Inc, 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.

Crude prices suffered their biggest rout since the 1991 Gulf War on Monday.

On Tuesday, Cenovus gained 11.5%, among the Canadian oil patch's biggest recoveries, after shedding more than 50% the day before. The Toronto Stock Exchange energy index rose 0.7%, after plunging 27%.

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 earlier forecast.

Its spending cut made it an outlier among Canada's biggest producers, who held off on major moves.

Calgary-based Husky Energy is "evaluating actions that can be taken in light of challenging global market conditions," spokeswoman Kim Guttormson said.

Occidental Petroleum Corp and several other U.S. producers chopped spending and Chevron Corp 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.

"It isnt like there is any padding and fat" left, he said.

Conventional producers such as Crescent Point Energy and Seven Generations Energy 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.

"Its a great buying opportunity for people if theyre 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 Shailesh Kuber and Marguerita Choy)