Cenovus oil sands production climbs 44% in third quarter

  Cenovus oil sands production climbs 44% in third quarter

   Cash flow rises 41% on strong refining results, increased oil production

Business Wire

CALGARY, Alberta -- October 25, 2012

Cenovus Energy Inc. (TSX, NYSE: CVE):

An aerial of Cenovus's Foster Creek operation in northern Alberta (Photo:
Business Wire)

An aerial of Cenovus's Foster Creek operation in northern Alberta (Photo:
Business Wire)

  *Average oil sands production exceeded 95,000 barrels per day (bbls/d) net
    to Cenovus, a 44% increase compared with the same period a year earlier.
  *Cash flow surpassed $1.1 billion or $1.47 per share diluted in the third
    quarter, 41% higher than the same period last year.
  *Operating cash flow from refining more than doubled to $530 million
    compared with the third quarter of 2011, primarily due to increased
    throughput, higher yields and strong refining margins.
  *Christina Lake production grew more than threefold in the third quarter
    compared with 2011. Production averaged more than 32,000 bbls/d net,
    reaching a single-day high of 43,500 bbls/d net. The increase was due to
    strong phase C well performance and the start-up of phase D in late July.
  *Foster Creek production increased 12% compared with the third quarter of
    2011, averaging above current design capacity through the quarter.
  *Third quarter production at Pelican Lake increased 16% compared with the
    same quarter of 2011, averaging more than 23,500 bbls/d.
  *In September, Cenovus was named to the Dow Jones Sustainability World
    Index for the first time and was recently named to the Carbon Disclosure
    Leadership Index for the third year in a row.

“Cenovus continues to deliver predictable, reliable performance and is on
track for another great year, both operationally and financially,” said Brian
Ferguson, Cenovus President & Chief Executive Officer. “Our integrated
strategy is clearly paying off. Increased oil sands production combined with
strong margins at our refining business contributed to record cash flow and
solid operating earnings in the third quarter.”

Financial & Production Summary
(for the period ended
September 30)                   2012              2011
                                                               % change
($ millions, except per         Q3                Q3
share amounts)
Cash flow^1                     1,117             793             41
Per share diluted               1.47              1.05            
Operating earnings^1            432               303             43
Per share diluted               0.57              0.40            
Net earnings                    289               510             -43
Per share diluted               0.38              0.67            
Capital investment^2            830               631             32
Production (before                                              
royalties)
Foster Creek (bbls/d)           63,245            56,322          12
Christina Lake (bbls/d)         32,380            10,067          222
Total Foster Creek &            95,625            66,389          44
Christina Lake (bbls/d)
Pelican Lake (bbls/d)           23,539            20,363          16
Other conventional oil^3        52,186            46,744          12
(bbls/d)
Total oil production            171,350           133,496         28
(bbls/d)
Natural gas (MMcf/d)            577               656             -12
^1 Cash flow and operating earnings are non-GAAP measures as defined in the
Advisory. See also the Earnings Reconciliation Summary.
^2 Includes expenditures on property, plant and equipment and exploration and
evaluation assets, excluding acquisitions and divestitures.
^3 Includes natural gas liquids (NGLs) production.



Cenovus Energy Inc. (TSX, NYSE: CVE) delivered strong third quarter
performance led by significant growth in oil sands production and excellent
results from its refining operations. As planned, the company increased
capital spending compared with the same period a year ago as it continued to
expand operations at its oil sands assets and conventional oil properties in
Alberta and Saskatchewan.

Combined output from Foster Creek and Christina Lake reached more than 95,000
bbls/d net to Cenovus in the third quarter, a 44% increase from the same
period last year. Production at Christina Lake averaged more than 32,000
bbls/d net, a more than threefold increase from the third quarter of 2011,
driven by strong performance from phase C and the ramp-up of production at
phase D. Full capacity was reached at phase C in the first quarter, while
phase D saw first oil production in late July, approximately three months
ahead of schedule. During the quarter, Christina Lake also achieved a
single-day production high of more than 87,000 bbls/d gross. Once phase D is
fully ramped up, production capacity at Christina Lake is expected to reach
98,000 bbls/d gross. With the addition of another four planned phases, Cenovus
believes Christina Lake has the potential to produce 288,000 bbls/d gross,
increasing to as much as 300,000 bbls/d with optimization.

Production at Foster Creek grew 12%, compared with the third quarter of 2011,
to more than 63,000 bbls/d net, mainly due to improved well performance and
plant optimization. Throughout the quarter, production at Foster Creek
consistently exceeded the project’s original design capacity by approximately
5%, averaging more than 126,000 bbls/d gross. There are five phases currently
producing at Foster Creek, with three more under construction. A public
consultation process is under way for an additional expansion phase.
Ultimately, Cenovus expects Foster Creek will have the capacity to produce
295,000 bbls/d gross and as much as 310,000 bbls/d with optimization.

“We have a great resource base that includes some of the best in-situ oil
sands reservoirs in the industry,” said John Brannan, Cenovus Executive
Vice-President & Chief Operating Officer. “Our teams have done a great job
starting up new production in these reservoirs safely, on schedule and within
budget. Thanks to the strong performance of both our oil sands and
conventional businesses, our oil growth is ahead of plan.”

Including expansion phases already under construction and those with
regulatory approval, Cenovus is on track to add approximately 400,000 bbls/d
of additional gross oil sands production (approximately 200,000 bbls/d net)
over the next five years. The company expects to bring on new phases at Foster
Creek and Christina Lake at a cost of $22,000 to $25,000 per flowing barrel.
Cenovus is also focused on maintaining industry-leading supply costs. At
Foster Creek and Christina Lake, supply costs are approximately $35 to $45 per
barrel. Supply costs are calculated as the long-term average West Texas
Intermediate (WTI) oil price required to achieve a 9% after-tax return after
all capital, operating and maintenance costs are considered.

Solid financial performance
Total third quarter cash flow surpassed $1.1 billion, a 41% increase from the
same period a year earlier. The increase was due to higher oil production and
improved operating cash flow from Cenovus’s refining business. Third quarter
operating cash flow from refining more than doubled to $530 million, compared
with the same period in 2011, driven by strong refining margins and increased
refinery throughput. Cenovus’s third quarter operating earnings were $432
million, a 43% increase over 2011.

During the third quarter, Cenovus took advantage of attractive long-term
interest rates to complete a public offering in the United States of US$1.25
billion of senior unsecured notes, consisting of US$500 million of 10-year
notes with a coupon rate of 3% due August 15, 2022 and US$750 million of
30-year notes with a coupon rate of 4.45% due September 15, 2042. Combined
with its existing credit facilities, the debt offering provides Cenovus with
considerable additional financial flexibility as it continues to execute its
growth plan.

Investing in oil growth
In the third quarter Cenovus invested $830 million in capital projects, a 32%
increase from the same period a year earlier and in line with full-year
guidance. Third quarter capital investment at its producing oil sands
properties increased by 52% to $346 million. This included spending for
construction, pre-construction and design engineering work for the next three
phases at Foster Creek and facility construction, site preparation work and
design engineering for the next three phases at Christina Lake.

Capital investment at Pelican Lake was $128 million in the third quarter, an
83% increase from the same period in 2011. The company plans to drill about
1,000 additional production and injection wells over the next five to seven
years to expand the polymer flood. Production at Pelican Lake is expected to
reach 55,000 bbls/d.

At its other conventional oil properties, Cenovus increased capital investment
by 33% to $224 million during the quarter, when compared with 2011. That
included investment in tight oil drilling programs in Alberta and drilling,
completion and facilities work in Saskatchewan. The company’s goal is to
increase production from its conventional oil properties, excluding Pelican
Lake, from just over 52,000 bbls/d today to between 65,000 and 75,000 bbls/d
by the end of 2016.

As part of its integrated strategy, Cenovus’s non-oil producing assets
continue to provide significant ongoing financial support for the company’s
oil growth plans. In the first nine months of the year, Cenovus’s natural gas
and refining operations combined, generated more than $1.4 billion of
operating cash flow in excess of capital invested.

Strong potential at Telephone Lake
Cenovus’s 100%-owned Telephone Lake asset has shown tremendous potential since
the company first began drilling test wells at the property. More recent
drilling has only served to increase Cenovus’s confidence that the proposed
oil sands project in northern Alberta may become another cornerstone asset,
similar to Foster Creek or Christina Lake.

“Last year, we made a joint regulatory application for a 90,000 barrels per
day project at Telephone Lake, but we believe that is just the beginning,”
Ferguson said. “With future expansions, we anticipate Telephone Lake has the
potential to support a project with production capacity of more than 300,000
barrels per day.”

Cenovus has recently completed a number of minor acquisitions to add
complementary oil sands acreage to its Telephone Lake property. Late last
year, the company purchased several small parcels of land located within the
company’s broader Telephone Lake acreage to consolidate the property. Earlier
this month, Cenovus also acquired the assets of Oilsands Quest, a bankrupt oil
sands exploration company, for $10 million. The assets include three oil sands
leases, covering approximately 59,000 hectares in Alberta and Saskatchewan,
that are adjacent to Telephone Lake. Cenovus is assessing the potential
incremental benefit of these acquisitions.

Recognition for corporate responsibility
In September, Cenovus was named to the Dow Jones Sustainability World Index
for the first time. Cenovus is the only Canadian integrated oil and gas
company to make the World Index in 2012 and one of just 11 Canadian
corporations overall. The Dow Jones Sustainability Indexes (DJSI) recognize
companies around the world for leadership in corporate responsibility. Cenovus
was also named to the DJSI North America Index for the third year in a row. As
well, the company was recently named to the Carbon Disclosure Leadership Index
for the third consecutive year for exceptional disclosure of greenhouse gas
emissions.

Guidance updated
Cenovus has updated its 2012 full-year guidance to reflect actual numbers for
the first nine months of the year and the company’s estimates for the fourth
quarter. Of note, Cenovus has increased its midpoint guidance for expected
full-year cash flow by 11%. Total 2012 cash flow is now expected to be 22%
higher than last year. Updated guidance can be found at www.cenovus.com under
“Invest in us”.


IMPORTANT NOTE: Cenovus reports financial results in Canadian dollars and
presents production volumes on a net to Cenovus before royalties basis, unless
otherwise stated. Cenovus prepares its financial statements in accordance with
International Financial Reporting Standards (IFRS). See the Advisory for
definitions of non-GAAP measures used in this news release.


                                 Oil Projects

             Daily Production^1

(Before        2012                    2011                           2010
royalties)
               YTD  Q3   Q2   Q1      Full  Q4   Q3   Q2   Q1      Full
(Mbbls/d)                                Year                             Year
Oil sands                                                        
Foster Creek   57    63    52    57      55     55    56    50    58      51
Christina      29    32    29    25      12     20    10    8     9       8
Lake
Oil sands      86    96    80    82      67     75    66    58    67      59
total
Conventional                                                     
oil
Pelican Lake   22    24    22    21      20     21    20    19    21      23
Weyburn        16    16    16    17      16     17    16    15    17      17
Other oil^2    37    36    36    38      31     32    31    29    32      31
Conventional   75    76    75    75      68     70    67    64    71      70
total
Total oil      161   171   156   157     134    144   133   122   137     129
^1 Totals may not add due to rounding.
^2 Includes NGLs production.

Oil sands

Foster Creek and Christina Lake
Cenovus’s oil sands properties in northern Alberta offer opportunities for
substantial production growth. The Foster Creek and Christina Lake assets,
which are operated by Cenovus and jointly owned with ConocoPhillips, use
steam-assisted gravity drainage (SAGD) to drill and pump the oil to the
surface.

Production

  *Production at Foster Creek and Christina Lake increased 44% in the third
    quarter from the same period a year earlier.

  *Christina Lake production averaged 32,380 bbls/d in the quarter, a more
    than three-fold increase from the same period a year earlier. The
    substantial increase is due to the industry-leading start-up and continued
    strong performance of phase C since late last year and the commissioning
    of phase D in July. Phase C reached full capacity during the first quarter
    while phase D continues to ramp up.
  *Cenovus continues to sell most of its oil from Christina Lake as Christina
    Dilbit Blend (CDB). This blend is gaining acceptance from a wider base of
    refining customers, including the company’s jointly owned Wood River
    Refinery. As a result, the pricing discount for CDB has narrowed, in line
    with expectations.
  *Foster Creek production averaged 63,245 bbls/d in the quarter, a 12%
    increase compared with 2011, mainly due to improved well performance and
    plant optimization.
  *About 12% of current production at Foster Creek comes from 48 wells using
    Cenovus’s Wedge Well™ technology. These single horizontal wells, drilled
    between existing SAGD well pairs, have the potential to increase overall
    recovery from the reservoir by as much as 10% to 15%, while reducing the
    steam to oil ratio (SOR). Ten additional wells using this technology are
    expected to have steam stimulation completed and be online before the end
    of 2012. Christina Lake is also beginning to see positive results from
    four wells using this technology, currently producing about 1,100 bbls/d.

Expansions

  *Phase D at Christina Lake achieved first production in late July and is
    expected to reach its full design capacity of 40,000 bbls/d in the second
    quarter of 2013.
  *Overall construction of Christina Lake phase E is approximately 60%
    complete, while the central plant is approximately 81% complete. First
    production is anticipated in the fourth quarter of 2013. Initial site
    preparation and the purchase of equipment continue at phase F and
    engineering and design work are underway for phase G.
  *At Foster Creek, overall construction of the combined F, G and H expansion
    is approximately 33% complete, while the phase F plant is more than 60%
    complete. Initial production from phase F is expected in 2014. Facility
    construction, offsite fabrication and equipment purchasing are underway at
    phase G and engineering is underway for phase H.

Operating costs and royalties

  *Operating costs at Christina Lake were $13.59/bbl in the third quarter, a
    41% decrease from $23.01/bbl in the same period a year earlier due to the
    significant increase in production. Operating costs at Christina Lake are
    expected to be lower than initially anticipated and the company has
    adjusted its full-year guidance to $12.70/bbl. Non-fuel operating costs at
    Christina Lake were $11.03/bbl in the quarter, a 43% decrease from
    $19.44/bbl in the third quarter of 2011.
  *Operating costs at Foster Creek averaged $11.50/bbl in the third quarter,
    a 4% increase from $11.11/bbl in the same period last year.The increase
    is primarily due to higher staffing levels in preparation for the phase F
    expansion and increased well workovers. The company expects operating
    costs at Foster Creek to average $12.05/bbl for the full year, which is
    within the company's original guidance range. Non-fuel operating costs at
    Foster Creek were $9.76/bbl in the third quarter compared with $8.86/bbl
    in the same period a year earlier, a 10% increase.
  *Christina Lake’s average royalty rate in the quarter was 5.3%, compared
    with an average royalty rate of 5.7% for the same period a year earlier.
    The rate drop was primarily due to a decrease in the average WTI price
    used by the Alberta government to calculate royalties.
  *Foster Creek’s average royalty rate was 19.1% in the third quarter of
    2012, a decline from 20.6% in the same period in 2011. Royalties were
    lower due to higher capital investment.
  *Royalty calculations for Cenovus’s oil sands projects differ between
    properties. Pre-payout royalties at Christina Lake are a function of the
    monthly Canadian dollar WTI benchmark price and volumes. Foster Creek is a
    post-payout project for royalty purposes so its royalties are impacted by
    volumes, an estimated annualized price, adjusted quarterly, and allowable
    operating and capital costs.

Steam to oil ratios

  *Cenovus continues to achieve some of the best SORs in the industry with a
    third quarter average ratio of about 1.9 at Christina Lake and about 2.1
    at Foster Creek for a combined SOR of about 2.
  *An SOR of 2 means approximately two barrels of steam are needed for every
    barrel of oil produced. A lower SOR requires less steam, which means less
    natural gas is used. This results in reduced capital and operating costs,
    fewer emissions and lower water usage.

Future projects
Cenovus has an enormous opportunity to deliver increased shareholder value
through production growth from its oil sands assets in the Athabasca region of
northern Alberta, most of which are undeveloped. The company has identified 10
emerging projects and continues to assess its resources to prioritize
development plans and support regulatory applications.

  *On September 25, Cenovus broke ground on its Narrows Lake project, which
    is jointly owned with ConocoPhillips. Narrows Lake is expected to have
    gross production capacity of 130,000 bbls/d and be developed in three
    phases. Project sanctioning for the first phase is expected from Cenovus
    and ConocoPhillips by the end of this year.
  *The Narrows Lake regulatory approval included the option to use a
    combination of SAGD and solvent aided process (SAP) for oil production.
    Based on test results at other locations, Cenovus expects SAP to improve
    the SOR and oil production rate by as much as 30% compared to SAGD alone.
    Cenovus also expects SAP to increase total oil recovery by as much as 15%.
  *The joint regulatory application and environmental impact assessment for a
    commercial SAGD project at Cenovus’s wholly owned Grand Rapids asset in
    the Greater Pelican Region is being reviewed by the regulators. The
    company believes Grand Rapids has the potential to reach production
    capacity of 180,000 bbls/d.
  *Cenovus is continuing to develop a pilot project in the Grand Rapids area.
    Construction for the installation of a third mobile steam generator is
    progressing and steam injection has started on the second well pair.
  *The revised joint regulatory application and environmental impact
    assessment for the 100%-owned Telephone Lake project in the Borealis
    Region is also being reviewed by the regulators. The application updates
    the expected production capacity for the initial phase at Telephone Lake
    to 90,000 bbls/d from the original 35,000 bbls/d application that was
    filed in 2007. With future expansion phases, Cenovus believes Telephone
    Lake has the potential to support production capacity of more than 300,000
    bbls/d.

Conventional oil

Pelican Lake
Cenovus produces heavy oil from the Wabiskaw formation at its wholly-owned
Pelican Lake operation in the Greater Pelican Region, about 300 kilometres
north of Edmonton. While this property produces conventional heavy oil, it’s
managed as part of Cenovus’s oil sands segment. Since 2006, polymer has been
injected along with a waterflood to enhance production from the reservoir.
Based on reservoir performance of the polymer flood, the company has initiated
a multi-year growth plan for Pelican Lake with production expected to reach
55,000 bbls/d.

  *Production averaged more than 23,500 bbls/d in the third quarter, a 16%
    increase from the same period in 2011. Cenovus continues to be encouraged
    by results from its infill drilling program to expand the polymer flood.
    Production increases continue to be partially offset by reduced operating
    pressures related to temporary well shut-ins required to complete infill
    drilling between existing wells. The company expects Pelican Lake
    production for the full year to be at the lower end of its original
    guidance range.
  *Cenovus plans to continue expanding Pelican Lake by drilling approximately
    1,000 additional production and injection wells over the next five to
    seven years to increase the polymer flood. The company is also planning to
    build a new battery to support the expansion, with construction slated to
    begin in 2013.
  *Operating costs at Pelican Lake averaged $17.47/bbl in the quarter, a 22%
    increase from $14.31/bbl in the third quarter of 2011 due to higher
    workovers, repairs and maintenance, additional staffing and increased
    polymer costs associated with the expansion of the polymer flood. Cenovus
    has adjusted its full-year guidance for operating costs at Pelican Lake to
    $16.65/bbl, slightly above the top end of its original guidance range.
  *Pelican Lake’s average royalty rate was 6.6% in the third quarter of 2012
    compared with 12.7% in the same period of 2011. The reduction was
    primarily due to increased capital investment to expand the polymer flood.

Other conventional oil
In addition to Pelican Lake, Cenovus has extensive oil operations in Alberta
and Saskatchewan. These include the established Weyburn operation that uses
carbon dioxide (CO[2]) to enhance oil recovery, the Bakken and Lower Shaunavon
tight oil assets in southern Saskatchewan, and established properties in
southern Alberta. By the end of 2016, Cenovus is targeting oil production from
these properties between 65,000 bbls/d and 75,000 bbls/d.

  *Third quarter production from the company’s conventional oil assets in
    Alberta increased 10% over the same period in 2011 to nearly 30,000
    bbls/d, primarily due to successful drilling programs and effective
    management of natural declines.
  *The Weyburn operation produced about 16,000 bbls/d net in the third
    quarter. This is a 3% increase compared with the same period a year
    earlier, when wet weather affected production.
  *Lower Shaunavon production averaged approximately 4,550 bbls/d in the
    third quarter, a 77% increase compared with the same period a year
    earlier, due to additional development drilling. Cenovus has 118
    horizontal wells producing in the Lower Shaunavon.
  *In the third quarter of 2012, Cenovus completed construction of the Lower
    Shaunavon battery.
  *The company’s Bakken operation hadaverage oil production of more than
    1,700 bbls/d in the quarter, including royalty interest volumes, an 18%
    increase compared with the same period a year earlier, due to additional
    drilling. Cenovus had 27 producing wells in the Bakken area at the end of
    the third quarter.
  *Operating costs for Cenovus’s conventional oil operations, excluding
    Pelican Lake, increased 19% to $16.33/bbl in the third quarter compared
    with the same period a year earlier. This was due to higher costs for
    repairs and maintenance, electricity, trucking and waste handling and
    labour.

                                 Natural Gas

(Before      Daily Production
royalties)    2012                    2011                           2010
              YTD  Q3   Q2   Q1      Full  Q4   Q3   Q2   Q1      Full
(MMcf/d)                                Year                             Year
Natural       602   577   596   636     656    660   656   654   652     737
Gas^1
^1 Reflects production from the sale of non-core assets in the third quarter
of 2010 and the first quarter of 2012.

Cenovus has a solid base of established, reliable natural gas properties in
Alberta. These assets are an important component of the company’s financial
foundation, generating operating cash flow well in excess of ongoing capital
investment requirements. The natural gas business also acts as an economic
hedge against price fluctuations because natural gas fuels the company’s oil
sands and refining operations.

  *Natural gas production in the third quarter was approximately 577 million
    cubic feet per day (MMcf/d), a 12% decline from the same period in the
    previous year. The decrease is mainly due to expected natural declines and
    to the divestiture of a non-core property early in the first quarter of
    2012.
  *Cenovus’s average realized sales price for natural gas, including hedges,
    was $3.54 per thousand cubic feet (Mcf) in the quarter compared with $4.48
    per Mcf in the same period a year earlier.
  *As a result of the efficient, low-cost nature of its natural gas assets,
    Cenovus generated third quarter natural gas operating cash flow of $118
    million in excess of capital invested in those properties.
  *Cenovus anticipates managing an annual decline rate of 10% to 15% for its
    natural gas production, targeting a long-term production level of between
    400 MMcf/d and 500 MMcf/d to match Cenovus’s future anticipated internal
    consumption at its oil sands and refining facilities.

                                   Refining

Cenovus’srefining operations include the Wood River Refinery in Illinois and
the Borger Refinery in Texas, which are jointly owned with the operator,
Phillips 66.

  *The two refineries produced approximately 463,000 bbls/d gross of refined
    products in the third quarter, an increase of approximately 37,000 bbls/d
    compared with the same period a year ago primarily due to higher
    throughput and increased yields as a result of the Wood River Refinery’s
    Coker and Refinery Expansion (CORE) project.
  *Combined crude oil consumption at the Wood River Refinery and Borger
    Refinery averaged 442,000 bbls/d gross for the quarter, an increase of 7%
    compared with the same period a year earlier.
  *Canadian heavy crude processed at the Wood River Refinery in the quarter
    continued to average approximately 200,000 bbls/d gross, including almost
    28,000 bbls/d of CDB.Total processing capability of heavy Canadian crudes
    will be dependent upon the quality of available crudes and will be managed
    to maximize economic benefit.
  *Third quarter operating cash flow from refining operations was $530
    million, an increase of $297 million compared with the same period last
    year. This was primarily due to increased throughput of heavy crude oil,
    favourable discounts on inland crudes and higher market crack spreads.
  *Cenovus's operating cash flow is calculated on a first-in, first-out
    (FIFO) inventory accounting basis.Using the last-in, first-out (LIFO)
    accountingmethod employed by most U.S. refiners, Cenovus's refining
    operating cash flow in the third quarter wouldhave been$6 million lower
    than under FIFO, compared with $69 million higher in 2011.
  *Cenovus invested $37 million in its refining operations in the quarter,
    resulting in $493 million of operating cash flow in excess of the capital
    spent on the refineries.
  *Scheduled maintenance turnarounds at the Wood River and Borger refineries
    are currently underway and are proceeding as planned, with return to full
    operationsexpected in November. Theresulting reductions in crudeoil
    processingare reflected in the company’s revisedrefining operating cash
    flowguidance.
  *Cenovus has increased its 2012 full-year guidance for operating cash flow
    from its refining operations by 38%. Updated guidance can be found at
    www.cenovus.com under “Invest in us”.

                                  Financial

Dividend
The Cenovus Board of Directors declared a fourth quarter dividend of $0.22 per
share, payable on December 31, 2012 to common shareholders of record as of
December 14, 2012. Based on the October 24, 2012 closing share price on the
Toronto Stock Exchange of $34.00, this represents an annualized yield of about
2.6%. Declaration of dividends is at the sole discretion of the Board.
Cenovus’s continued commitment to a meaningful dividend is an important aspect
of the company’s strategy to focus on increasing total shareholder return.

Hedging Strategy
The natural gas and crude oil hedging strategy helps Cenovus achieve more
predictability around cash flow and safeguard its capital program. The
strategy allows the company to financially hedge up to 75% of expected natural
gas production in 2012 and 2013, net of internal fuel use, and up to 50% and
25%, respectively, in the two following years. The company has Board approval
for fixed price hedges on as much as 50% of net liquids production for 2012
and 2013 and 25% of net liquids production for each of the following two
years.

In addition to financial hedges, Cenovus benefits from a natural hedge with
its natural gas production. About 125 MMcf/d of natural gas is currently
consumed at the company’s SAGD and refinery operations, which is offset by the
natural gas Cenovus produces. The company's financial hedging positions are
determined after considering this natural hedge.

Cenovus’s hedge positions as at September 30, 2012 include:

  *approximately 30% of expected 2012 oil production hedged; 24,800 bbls/d at
    a WTI price of US$98.72/bbl and an additional 24,500 bbls/d at an average
    WTI price of C$99.47/bbl
  *approximately 65% of expected 2012 natural gas production hedged: 130
    MMcf/d at an average NYMEX price of US$5.96/Mcf and 127 MMcf/d at an
    average AECO price of C$4.50/Mcf, plus about 125 MMcf/d of internal usage
  *18,500 bbls/d of expected oil production hedged for 2013 at an average
    Brent price of US$110.36/bbl and an additional 18,500 bbls/d at an average
    Brent price of C$111.72/bbl
  *166 MMcf/d of expected natural gas production hedged for 2013 at an
    average NYMEX price of US$4.64/Mcf, plus internal usage
  *no fixed price commodity hedges in place beyond 2013.

During the third quarter, Cenovus converted all of its existing 2013 crude oil
hedges from WTI to Brentand addedadditional hedging contracts at Brent
pricing. While WTI has historically been the dominant benchmark for North
American crude oil, inland refined products have now become morestrongly
correlated to Brentpricing. Because of its exposure to refined products
through its joint ownership in two U.S. refineries, Cenovus has decided to
move its crude oil hedges to Brent pricing to better reflect its integrated
structure and exposure to market risk.

Financial Highlights

  *During the third quarter, Cenovus completed a US$1.25 billion debt
    offering in the U.S. of 10 and 30-year senior unsecured notes and
    renegotiated its existing $3 billion credit facility, extending the
    maturity date to November 30, 2016 and slightly reducing the cost of
    future borrowings under the facility.
  *Cash flow in the third quarter of 2012 was more than $1.1 billion, or
    $1.47 per share diluted, compared with $793 million, or $1.05 per share
    diluted, for the same period a year earlier.
  *Operating earnings in the quarter were $432 million, or $0.57 per share
    diluted, compared with $303 million, or $0.40 per share diluted, for the
    same period last year.
  *Cenovus’s realized after-tax hedging gains were $73 million in the
    quarter. Cenovus received an average realized price, including hedging, of
    $67.40/bbl for its oil in the quarter, compared with $68.13/bbl in the
    third quarter of 2011. The average realized price, including hedging, for
    natural gas was $3.54/Mcf, compared with $4.48/Mcf in the same period a
    year earlier.
  *Cenovus recorded an income tax expense of $186 million in the third
    quarter, a $108 million decrease over the previous year. The decrease was
    primarily due to a deferred tax recovery associated with unrealized
    hedging losses offset by deferred tax on increased refining income.
  *Cenovus’s net earnings for the quarter were $289 million, compared with
    $510 million in the same period a year earlier. The decrease was primarily
    due to an unrealized after-tax risk management loss of $218 million in the
    third quarter compared to an unrealized after-tax risk management gain of
    $283 million in the same period a year earlier. Cenovus also recorded a
    $60 million unrealized foreign exchange gain in the third quarter of 2012,
    compared to an unrealized foreign exchange loss of $63 million in the
    third quarter of 2011.
  *Capital investment during the quarter was $830 million, as planned, a 32%
    increase compared with the same period a year earlier as the company
    continues to advance the development of its oil opportunities.
  *Over the long term, Cenovus targets a debt to capitalization ratio of
    between 30% and 40% and a debt to adjusted EBITDA ratio of between 1.0 and
    2.0 times. At September 30, 2012, the company’s debt to capitalization
    ratio was 31% and debt to adjusted EBITDA, on a trailing 12-month basis,
    was 1.1 times.

Earnings Reconciliation Summary
(for the period ended September 30)         2012   2011   9 months   9 months
                                                                
($ millions, except per share amounts)      Q3     Q3     2012       2011
Net earnings
Add back (losses) & deduct gains:           289    510    1,111      1,212
Per share diluted                           0.38   0.67   1.46       1.60
Unrealized mark-to-market hedging gain      -218   283    -44        314
(loss), after tax
Non-operating foreign exchange gain         76     -76    100        -11
(loss), after tax
Divestiture gain (loss), after tax          -1     -      -          2
Operating earnings                          432    303    1,055      907
Per share diluted                           0.57   0.40   1.39       1.20


Conference Call Today
9:00 a.m. Mountain Time (11:00 a.m. Eastern Time)
Cenovus will host a conference call today, October 25, 2012, starting at 9:00
a.m. MT (11:00 a.m. ET). To participate, please dial 888-231-8191 (toll-free
in North America) or 647-427-7450 approximately 10 minutes prior to the
conference call. An archived recording of the call will be available from
approximately 12:00 p.m. MT on October 25, 2012, until midnight November 1,
2012, by dialing 855-859-2056 or 416-849-0833 and entering conference passcode
44575180. A live audio webcast of the conference call will also be available
via www.cenovus.com. The webcast will be archived for approximately 90 days.


Notice of Change of Transfer Agent and Registrar
Effective November 1, 2012, Computershare Investor Services Inc. will replace
CIBC Mellon Trust Company as Transfer Agent and Registrar, Dividend Disbursing
Agent, Dividend Reinvestment Plan Agent and Shareholder Rights Plan Agent for
Cenovus Energy Inc. No action is required as a result of this transition.
Additional information is available at www.cenovus.com under Invest in us,
Shareholder information.

ADVISORY

NON-GAAP MEASURES
This news release contains references to non-GAAP measures as follows:

  *Operating cash flow is defined as revenues, less purchased product,
    transportation and blending, operating expenses, production and mineral
    taxes plus realized gains, less realized losses on risk management
    activities and is used to provide a consistent measure of the cash
    generating performance of the company’s assets and improves the
    comparability of Cenovus’s underlying financial performance between
    periods.
  *Cash flow is defined as cash from operating activities excluding net
    change in other assets and liabilities and net change in non-cash working
    capital, both of which are defined on the Consolidated Statement of Cash
    Flows in Cenovus’s interim consolidated financial statements.
  *Operating earnings is defined as net earnings excluding non-operating
    items such as the after-tax impacts of a gain/loss on discontinuance, the
    gain on asset acquisition, the after-tax gain/loss of unrealized
    mark-to-market accounting for derivative instruments, the after-tax
    unrealized gain/loss on translation of U.S. dollar denominated notes
    issued from Canada and the partnership contribution receivable, the
    after-tax foreign exchange gain/loss on settlement of intercompany
    transactions, after-tax gains or losses on divestiture of assets, deferred
    income tax on foreign exchange related to U.S. dollar intercompany debt
    recognized for tax purposes only and the effect of changes in statutory
    income tax rates. Management views operating earnings as a better measure
    of performance than net earnings because the excluded items reduce the
    comparability of the company’s underlying financial performance between
    periods. The majority of the U.S. dollar debt issued from Canada has
    maturity dates in excess of five years.
  *Free cash flow is defined as cash flow in excess of capital investment,
    excluding net acquisitions and divestitures, and is used to determine the
    funds available for other investing and/or financing activities.
  *Debt to capitalization and debt to adjusted EBITDA are two ratios that
    management uses to steward the company’s overall debt position as measures
    of the company’s overall financial strength. Debt is defined as short-term
    borrowings and long-term debt, including the current portion, excluding
    any amounts with respect to the partnership contribution payable and
    receivable. Capitalization is a non-GAAP measure defined as debt plus
    shareholders’ equity. Adjusted EBITDA is defined as adjusted earnings
    before interest income, finance costs, income taxes, depreciation,
    depletion and amortization, exploration expense, unrealized gain or loss
    on risk management, foreign exchange gains or losses, gains or losses on
    divestiture of assets and other income and loss.

These measures have been described and presented in this news release in order
to provide shareholders and potential investors with additional information
regarding Cenovus’s liquidity and its ability to generate funds to finance its
operations. For further information, refer to Cenovus’s most recent
Management’s Discussion & Analysis (MD&A) available at www.cenovus.com.

FORWARD-LOOKING INFORMATION
This news release contains certain forward-looking statements and other
information (collectively “forward-looking information”) about our current
expectations, estimates and projections, made in light of our experience and
perception of historical trends. Forward-looking information in this news
release is identified by words such as “anticipate”, “believe”, “expect”,
“plan”, “forecast”, “target”, “project”, “could”, “focus”, “vision”, “goal”,
“proposed”, “scheduled”, “outlook”, “potential”, “may”, “positioned” or
similar expressions and includes suggestions of future outcomes, including
statements about our growth strategy and related schedules, projected future
value or net asset value, forecast operating and financial results, planned
capital expenditures, expected future production, including the timing,
stability or growth thereof, potential dividends and dividend growth strategy,
anticipated timelines for future regulatory, partner or internal approvals,
forecasted commodity prices, future use and development of technology and
projected increasing shareholder value. Readers are cautioned not to place
undue reliance on forward-looking information as our actual results may differ
materially from those expressed or implied.

Developing forward-looking information involves reliance on a number of
assumptions and consideration of certain risks and uncertainties, some of
which are specific to Cenovus and others that apply to the industry generally.

The factors or assumptions on which the forward-looking information is based
include: assumptions inherent in our current guidance, available at
www.cenovus.com; our projected capital investment levels, the flexibility of
capital spending plans and the associated source of funding; estimates of
quantities of oil, bitumen, natural gas and liquids from properties and other
sources not currently classified as proved; our ability to obtain necessary
regulatory and partner approvals; the successful and timely implementation of
capital projects; our ability to generate sufficient cash flow from operations
to meet our current and future obligations; and other risks and uncertainties
described from time to time in the filings we make with securities regulatory
authorities.

The risk factors and uncertainties that could cause our actual results to
differ materially, include: the volatility of and assumptions regarding oil
and gas prices; the effectiveness of our risk management program, including
the impact of derivative financial instruments and the success of our hedging
strategies; the accuracy of cost estimates; fluctuations in commodity prices,
currency and interest rates; fluctuations in product supply and demand; market
competition, including from alternative energy sources; risks inherent in our
marketing operations, including credit risks; maintaining desirable ratios of
debt to adjusted EBITDA as well as debt to capitalization; our ability to
access various sources of debt and equity capital; success of hedging
strategies; accuracy of our reserves, resources and future production
estimates; our ability to replace and expand oil and gas reserves; our ability
to maintain our relationship with our partners and to successfully manage and
operate our integrated heavy oil business; reliability of our assets;
potential disruption or unexpected technical difficulties in developing new
products and manufacturing processes; refining and marketing margins;
potential failure of new products to achieve acceptance in the market;
unexpected cost increases or technical difficulties in constructing or
modifying manufacturing or refining facilities; unexpected difficulties in
producing, transporting or refining of crude oil into petroleum and chemical
products; risks associated with technology, its implementation and its
application to our business; the timing and the costs of well and pipeline
construction; our ability to secure adequate product transportation; changes
in the regulatory framework in any of the locations in which we operate,
including changes to the regulatory approval process and land-use
designations, royalty, tax, environmental, greenhouse gas, carbon and other
laws or regulations, or changes to the interpretation of such laws and
regulations, as adopted or proposed, the impact thereof and the costs
associated with compliance; the expected impact and timing of various
accounting pronouncements, rule changes and standards on our business, our
financial results and our consolidated financial statements; changes in the
general economic, market and business conditions; the political and economic
conditions in the countries in which we operate; the occurrence of unexpected
events such as war, terrorist threats and the instability resulting therefrom;
and risks associated with existing and potential future lawsuits and
regulatory actions against us.

Readers are cautioned that the foregoing lists are not exhaustive and are made
as at the date hereof. For a full discussion of our material risk factors, see
“Risk Factors” in our most recent annual information form, Form 40-F,
available at www.cenovus.com. Readers should also refer to “Risk Management”
in our annual MD&A for the year ended December 31, 2011, our current MD&A and
to the risk factors described in other documents we file from time to time
with securities regulatory authorities, available at www.sedar.com,
www.sec.gov and www.cenovus.com.

Wedge Well™ is a registered trademark of Cenovus Energy Inc.

Cenovus Energy Inc.
Cenovus Energy Inc. is a Canadian, integrated oil company. It is committed to
applying fresh, progressive thinking to safely and responsibly unlock energy
resources the world needs. Operations include oil sands projects in northern
Alberta, which use specialized methods to drill and pump the oil to the
surface, and established natural gas and oil production in Alberta and
Saskatchewan. The company also has 50% ownership in two U.S. refineries.
Cenovus shares trade under the symbol CVE, and are listed on the Toronto and
New York stock exchanges. Its enterprise value is approximately $30 billion.
For more information, visit www.cenovus.com.

Find Cenovus on Facebook, Twitter, Linkedin and YouTube.

Photos/MultimediaGallery Available:
http://www.businesswire.com/cgi-bin/mmg.cgi?eid=50452991&lang=en

Multimedia
Available:http://www.businesswire.com/cgi-bin/mmg.cgi?eid=50452991&lang=en

Contact:

Cenovus Contacts
Investors:
Susan Grey
Director, Investor Relations
403-766-4751
Bill Stait
Senior Analyst, Investor Relations
403-766-6348
Graham Ingram
Senior Analyst, Investor Relations
403-766-2849
Media:
Rhona DelFrari
Director, Media Relations
403-766-4740
Brett Harris
Advisor, Media Relations
403-766-3420
 
Press spacebar to pause and continue. Press esc to stop.