Cenovus oil production climbs 15% in first quarter
CALGARY, April 24, 2013
Refining operating cash flow increases 97% to $524 million
*Cash flow was $971 million, or $1.28 per share in the first quarter, an
increase of 7% from the same period in 2012, mainly due to strong
performance from the company's refining business.
*Operating cash flow from refining almost doubled to $524 million compared
with the same quarter a year earlier.
*Combined oil sands production at Foster Creek and Christina Lake averaged
more than 100,000 barrels per day (bbls/d) net in the first quarter, up
22% from a year earlier. Production at Christina Lake increased 79% to an
average of more than 44,000 bbls/d net.
*Conventional oil production, including Pelican Lake, averaged almost
80,000 bbls/d in the quarter, a 7% increase from the same period a year
*Regulatory applications and environmental impact assessments (EIAs) were
submitted for new phases at Christina Lake and Foster Creek.
*Cenovus drilled 315 gross stratigraphic test wells in the first quarter,
primarily to support the expansion and development of the company's oil
"Our refining business continues to deliver excellent results, clearly
demonstrating the benefit of our integrated strategy. When our cash flow from
heavy oil production is affected by low commodity prices, our refineries give
us a financial advantage by turning that discounted crude into higher-value
refined products," said Brian Ferguson, President & Chief Executive Officer of
Cenovus. "We also delivered another quarter of strong oil production growth,
mainly due to our oil sands assets."
Financial & production summary
(for the period ended March 31) 2013 2012 % change
($ millions, except per share amounts) Q1 Q1
^ Cash flow^1 971 904 7
Per share diluted 1.28 1.19
Operating earnings^1 391 340 15
Per share diluted 0.52 0.45
Net earnings 171 426 -60
Per share diluted 0.23 0.56
Capital investment 915 900 2
Production (before royalties)
Oil sands total (bbls/d) 100,347 81,947 22
Conventional oil^2 (bbls/d) 79,878 74,903 7
Total oil^2 (bbls/d) 180,225 156,850 15
Natural gas (MMcf/d) 545 636 -14
^1 Cash flow and operating earnings are non-GAAP measures as defined in the
Advisory. See also the earnings reconciliation summary in the operating
^2 Includes natural gas liquids (NGLs) production and production from Pelican
CALGARY, April 24, 2013 /PRNewswire/ - Cenovus Energy Inc. (TSX, NYSE: CVE)
reported strong first quarter performance, benefiting from its integrated
business plan. The company delivered excellent results from its U.S. refining
operations and continued growth in its oil production. Cenovus achieved cash
flow of $971 million, 7% higher than the first quarter of 2012. Increased
crude oil production was offset by a 27% decline in the average crude oil
sales price the company received compared with the same period a year ago.
While lower oil prices had a negative impact on cash flow from the company's
oil producing assets, they benefited Cenovus's refining operations. This is
due to the company's ability to process discounted heavy oil and at the same
time receive elevated prices for its refined products. Operating cash flow
from refining increased to $524 million in the first quarter, 97% higher than
the year before.
During the first quarter, the price of Western Canadian Select (WCS), the
benchmark Canadian heavy oil blend, fell against the price of West Texas
Intermediate (WTI), the North American benchmark. The differential averaged
US$31.96/bbl in the first quarter, widening 49% from the same period in 2012.
The company's refineries, one in Illinois and the second in Texas, have access
to WCS and other discounted oil feedstock.
Steady oil production growth
Average daily oil production in the quarter was 15% higher compared with the
same period in 2012, primarily led by growth at the company's Christina Lake
oil sands project. Combined output from Foster Creek and Christina Lake
averaged 100,347 bbls/d net in the first quarter, up 22% from the same period
in 2012. Production at Christina Lake averaged 44,351 bbls/d net, an increase
of 79% from a year earlier, resulting mainly from the successful ramp-up of
the phase D expansion. Foster Creek output averaged about 56,000 bbls/d net,
down 2% from the same period a year earlier due to higher than expected
downtime on some production wells.
There are now five phases operating at Foster Creek and four at Christina
Lake. Expansions continue at each of these projects, with a combined 85,000
bbls/d of gross production capacity expected to be added before the end of
2014, helping to advance Cenovus's long-term oil growth strategy.
Cenovus has started moving wells at Foster Creek into the final phase of
production, called blowdown. This is a first at a major commercial
steam-assisted gravity drainage (SAGD) project. As SAGD wells are prepared for
blowdown, steam injection is reduced and pressure is maintained with the
co-injection of methane. In full blowdown, the well continues to produce
without steam, which lowers operating costs. The steam is then redirected to a
newer well pad. One well pad at Foster Creek entered full blowdown mode in the
first quarter and two more are being converted.
Addressing market access challenges
The predictability of Cenovus's oil production growth, combined with its
financial strength, gives the company the confidence to consider support for
all proposed major pipeline projects that would open up additional access to
existing markets and potentially add new ones.
"It's vital to the economy that Canadian oil companies continue to expand
market access for their production," Ferguson said. "Without pipelines to new
markets, Canada's oil industry will continue to leave billions of dollars in
lost revenues on the table every year to the detriment of all Canadians. With
the third largest oil reserves in the world, Canada has a tremendous
opportunity to meet the growing global demand for energy."
Cenovus continues to examine ways to mitigate the negative impact of market
access constraints on pricing for Canadian oil producers. The company takes a
portfolio approach to market access and continues to proactively assess
various options to transport its oil. Cenovus is receiving higher
international prices on about 40,000 bbls/d of oil production through a
combination of pipeline, barge and rail options that provide access to ocean
transport. For example, in early 2012, Cenovus started shipping 11,500 bbls/d
of oil under a firm service agreement on the Trans Mountain pipeline that runs
from Edmonton to the West Coast. This enables Cenovus to receive a premium for
its Foster Creek production relative to the WCS heavy oil benchmark. In
addition to pipelines, Cenovus is now shipping about 6,000 bbls/d of
conventional oil to market by rail and is looking to increase that to about
10,000 bbls/d by the end of this year.
(Before royalties) 2013 2012 2011
Q1 Full Year Q4 Q3 Q2 Q1 Full Year
Foster Creek 56 58 59 63 52 57 55
Christina Lake 44 32 42 32 29 25 12
Oil sands total 100 90 101 96 80 82 67
Pelican Lake 24 23 24 24 22 21 20
Weyburn 17 16 16 16 16 17 16
Other conventional^2 39 37 37 36 36 38 31
Conventional total 80 76 77 76 75 75 68
Total oil^2 180 165 178 171 156 157 134
^1 Totals may not add due to rounding.
^2 Includes NGLs production.
Cenovus has a substantial portfolio of oil sands assets in northern Alberta
with the potential to provide decades of growth. The two currently producing
operations, Foster Creek and Christina Lake, use SAGD, which involves drilling
into the reservoir and pumping the oil to the surface. Cenovus has begun work
on its third project, Narrows Lake, which is part of the Christina Lake
Region. These projects are operated by Cenovus and are jointly owned with
ConocoPhillips. Cenovus also has an enormous opportunity to deliver increased
shareholder value through production growth from future developments. The
company has identified several emerging projects and continues to assess its
resources to prioritize development plans and support regulatory applications
for new projects.
Foster Creek and Christina Lake
*Combined production at Foster Creek and Christina Lake increased 22% to
more than 100,000 bbls/d net in the first quarter of 2013 compared with
the same period a year earlier.
*Christina Lake production increased 79% to an average of 44,351 bbls/d net
in the first quarter, compared with the same period a year earlier.
*The substantial increase in production at Christina Lake was due to the
ramp-up of two new expansion phases. Phase C reached full capacity in the
first quarter of 2012, while phase D began producing in July 2012, about
three months ahead of schedule. Phase D demonstrated full production
capacity in January 2013, approximately six months after first production.
*Foster Creek produced an average of about 56,000 bbls/d net in the first
quarter, a 2% decline from the average production rate in the same period
a year earlier. The slight decline was mainly due to increased downtime on
some production wells. Work is being done on the wells and the company
anticipates production to once again be at the higher end of its current
expected range of 110,000 bbls/d to 120,000 bbls/d in the third quarter.
*About 14% of production at Foster Creek comes from 52 wells using
Cenovus's Wedge Well^TM technology. These single horizontal wells, drilled
between existing SAGD well pairs, reach oil that would otherwise be
unrecoverable. The company's Wedge [ ]Well^TM technology has the potential
to increase overall recovery from the reservoir between 10% and 15%, while
reducing the steam to oil ratio (SOR). Cenovus anticipates having an
additional 11 wells at Foster Creek using Wedge Well^TM technology on
production by the end of 2013.
*Christina Lake is also benefiting from the use of Wedge Well^TM technology
with seven of these wells now producing and another three drilled wells
expected to be on line in the second quarter of this year.
*The Christina Lake phase E project is about 90% complete. First production
is expected in the third quarter of 2013. Procurement, plant construction
and major equipment fabrication continue for phase F. Engineering work
continues for phase G.
*At Foster Creek, overall progress of the combined F, G and H expansion is
approximately 46% complete, while the phase F central plant is about 73%
complete. First production at phase F is expected in the third quarter of
2014. Module assembly and piling work continues at phase G, while site
preparation, piling work and major equipment procurement are underway for
*Combined capital investment at Foster Creek and Christina Lake was $385
million in the first quarter, up 30% from the same period in 2012. This
includes spending on the expansion phases, stratigraphic test wells and
*During the first quarter, Cenovus submitted regulatory applications and
environmental impact assessments for Christina Lake phase H and Foster
Creek phase J, with regulatory approvals anticipated in the fourth quarter
of 2014 and the first quarter of 2015, respectively.
*Operating costs at Foster Creek averaged $14.03/bbl in the first quarter,
about 9% higher than $12.85/bbl a year earlier. The increase came mostly
from higher fuel prices and workforce costs, partially offset by lower
repair and maintenance expenses. Non-fuel operating costs were $11.12/bbl
in the quarter compared with $10.72/bbl in the same period of 2012, a 4%
*Operating costs at Christina Lake were $12.93/bbl in the first quarter, a
16% decrease from $15.33/bbl in the same period a year ago. Non-fuel
operating costs at Christina Lake were $9.24/bbl in the quarter compared
with $12.86/bbl in 2012, a 28% decrease. The cost declines were primarily
due to significantly higher production and lower repair and maintenance
expenses compared with the first quarter in 2012. These were partially
offset by an increase in fuel prices and volume, waste fluid handling and
Steam to oil ratio
*SOR measures the number of barrels of steam needed for every barrel of oil
produced. A lower SOR means less natural gas is used to generate the
steam, which results in reduced capital and operating costs, fewer
emissions and lower water usage.
*Cenovus continues to achieve among the lowest SORs in the industry. The
first quarter SOR at Christina Lake was 1.9, down from 2.1 in the same
period a year ago, due to increased production. Foster Creek's SOR was
2.4, compared with 2.1 in the first quarter of 2012, due to slightly lower
production. The SOR at Foster Creek is expected to decrease once
production returns to anticipated rates and the company sees the benefits
that are anticipated from moving to blowdown. The combined SOR for
Cenovus's oil sands operations was 2.2 in the first quarter of 2013.
Christina Dilbit Blend (CDB)
*CDB is a heavy oil blend stream launched in the fourth quarter of 2011.
While CDB is priced at a discount to WCS, it continues to gain acceptance
with a wide base of refiners, which has resulted in a narrowing of the
discount for the first quarter of 2013 compared with the same period a
*The Wood River Refinery ran approximately 103,000 bbls/d gross of CDB or
equivalent high-TAN crudes during the first quarter of 2013. These crudes
represented approximately 60% of the total heavy crude volumes processed
at Wood River in the quarter, up from about 30% in the first quarter of
*Cenovus's next major oil sands development, a three-phase project at
Narrows Lake in northern Alberta, received regulatory approval in 2012 as
well as partner approval for the first phase. Narrows Lake is expected to
be the industry's first project to demonstrate solvent aided process
(SAP), using butane, on a commercial scale.
*Site preparation, which began in the third quarter of 2012, engineering
and procurement, are progressing as expected. Construction of the phase A
plant is scheduled to start in the third quarter of 2013. The first phase
of the project is anticipated to have production capacity of 45,000
bbls/d, with first oil expected in 2017.
*Cenovus invested $25 million to advance the Narrows Lake project in the
first quarter of this year compared with $9 million in the same period in
*At the company's 100%-owned Grand Rapids project, located within the
Greater Pelican Region, a SAGD pilot project is underway. The pilot
project is progressing and first production from a second well pair was
achieved in February.
*A regulatory application and EIA for a 180,000 bbl/d commercial project
has been submitted and is proceeding on schedule. Cenovus anticipates
regulatory approval for Grand Rapids by the end of 2013.
*Capital investment at Grand Rapids was $18 million in the first quarter of
2013, down from $34 million a year ago. This was primarily due to
stratigraphic test well drilling initially scheduled for the first quarter
of this year being advanced into the fourth quarter of 2012.
*Cenovus's 100%-owned Telephone Lake property is located within the
Borealis Region of northern Alberta. A revised application and EIA
submitted in December 2011 is advancing through the regulatory process and
approval is anticipated in 2014.
*Cenovus is continuing its dewatering pilot project designed to remove a
layer of non-potable water that is sitting on top of the oil sands deposit
at Telephone Lake. The dewatering operations have been running well. While
dewatering is not essential to the development of Telephone Lake, Cenovus
believes it could improve the project's SORs by up to 30%, enhancing its
economics and reducing its impact on the environment.
*Consistent with the development plan, capital spending in the first
quarter was $53 million, down from $91 million a year earlier.
Cenovus produces heavy oil from the Wabiskaw formation at its 100%-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, Cenovus has been
injecting polymer to enhance production from the reservoir, which is also
under waterflood. Based on reservoir performance of the polymer program, the
company has a multi-year growth plan for Pelican Lake with production expected
to reach 55,000 bbls/d.
*Pelican Lake produced 23,687 bbls/d in the first quarter of 2013, a 14%
increase in production compared with the same period in 2012 due to the
expansion of infill drilling and polymer injection. In the first quarter,
production response from the company's infill drilling and polymer flood
program was slower than expected for some of the well pads as it's taking
longer to build reservoir pressure. Stronger production growth is expected
later this year and in 2014 in response to the polymer injection.
*Cenovus invested $143 million at Pelican Lake in the first quarter to
increase infill drilling for the polymer flood program and on facility
expansion, up from $139 million in the same period of 2012. This
investment not only helps to grow production, but also to offset natural
*The company has decided to delay some capital investment originally
planned for 2013 to align spending with the current response it's
receiving from the polymer flood program. A second oil battery scheduled
for construction this year has been delayed until 2014. The move should
allow Cenovus to optimize the battery design and installation, which is
expected to reduce overall costs. Work will continue as planned on project
engineering and long-lead items. In addition, the company is reducing the
number of drilling rigs to two from the four that have been at site.
*Cenovus still plans to drill about 1,000 additional production and
injection wells in the next five to seven years to expand the polymer
flood at Pelican Lake.
*Operating costs at Pelican Lake averaged $19.23/bbl in the first quarter,
a 20% increase from $16.05/bbl in the same quarter a year earlier. Per
barrel operating costs have been impacted by the expanded polymer
injection program and workover activities. Production growth expected
later this year will help to reduce per barrel operating costs.
Other conventional oil
In addition to Pelican Lake, Cenovus has conventional and tight oil assets in
Alberta as well as the established Weyburn operation in Saskatchewan that uses
carbon dioxide injection to enhance oil recovery.
*Alberta oil production averaged 32,960 bbls/d in the first quarter, up 8%
from the same period in the previous year, primarily due to increased
light and medium crude production as a result of successful horizontal
*The company invested $190 million in its conventional oil assets, the
majority of which was dedicated to the continued development of its
emerging tight oil plays in southern Alberta.
*Production at the Weyburn operation was about 16,700 bbls/d net compared
with approximately 16,600 bbls/d net in the first quarter of 2012.
*Cenovus signed an agreement late last year for a new supply of carbon
dioxide (CO) [ ]from SaskPower to supplement the supply it already
receives from a coal gasification plant in Beulah, North Dakota. This new
supply agreement improves the stability of the company's CO[2 ]supply
source for its enhanced oil recovery operation.
*Combined crude oil production from the Bakken and Lower Shaunavon
operations averaged about 6,500 bbls/d, a 6% decrease from the same
quarter a year earlier. As previously announced, Cenovus has a process
underway to dispose of its interests in the Lower Shaunavon property and
the operated part of its Bakken property.
*Operating costs for Cenovus's conventional oil operations, excluding
Pelican Lake, increased 5% to $16.52/bbl in the first quarter of 2013
compared with the same period in 2012. This was mainly due to higher costs
for electricity, workforce, waste fluid handling and trucking.
(Before royalties) Daily production
(MMcf/d) 2013 2012 2011
Q1 Full Year Q4 Q3 Q2 Q1 Full Year
Natural Gas 545 594 566 577 596 636 656
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 their 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 first quarter of 2013 was approximately 545
million cubic feet per day (MMcf/d), down 14% from the same period last
year, as anticipated. The production drop was driven primarily by expected
natural declines and the decision to direct capital investment toward the
company's oil opportunities.
*Cenovus's average realized sales price for natural gas, including hedges,
was $3.64 per thousand cubic feet (Mcf) in the period compared with $3.53
per Mcf in the first quarter of 2012.
*The company invested $9 million in its natural gas properties in the first
quarter of 2013. Operating cash flow from natural gas in excess of capital
investment was $106 million.
*Cenovus anticipates managing an annual decline rate of 10% to 15% for its
natural gas production, targeting a long-term 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.
Cenovus's refining operations allow the company to capture value from crude
oil production through to refined products such as diesel, gasoline and jet
fuel. This integrated strategy provides a natural economic hedge against
discounted crude oil prices by providing lower feedstock costs to theWood
River Refinery in Illinois and Borger Refinery in Texas, which Cenovus jointly
owns with the operator, Phillips 66.
*Operating cash flow from refining increased to $524 million, 97% more than
in the first quarter of 2012. This was due toimproved refining margins,
mainly attributable to higher benchmark crack spreads as well as wider
heavy oil price differentials, resulting in lower feedstock costs.
*The positive impact of lower feedstock costs was partially offset by
reduced product output due to planned maintenance at both refineries
during the quarter.
*Cenovus's refineries processed an average of 416,000 bbls/d of crude oil
in the first quarter, resulting in 439,000 bbls/d of refined product
output. This was about 6% lower than in the same quarter a year ago
primarily due to planned maintenance work at Wood River.
*For the second quarter of 2013, Cenovus is expecting operating cash flow
from the company's refining business to range between $250 million and
$350 million, based on a crack spread of $25/bbl and the recent narrowing
of light-heavy differentials.
*The amount of Canadian heavy oil processed in the first quarter of 2013
was 197,000 bbls/d, compared with 199,000 bbls/d in the same period of
*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 first quarter
2013 refining operating cash flow wouldhave been$20 million lower than
reported under FIFO, compared with $4 million lower in the same quarter of
*The company had refining capital investment of $25 million in the first
quarter of this year.
The Cenovus Board of Directors declared a second quarter dividend of $0.242
per share, payable on June 28, 2013 to common shareholders of record as of
June 14, 2013. Based on the April 23, 2013 closing share price on the Toronto
Stock Exchange of $28.75, this represents an annualized yield of about 3.4%.
Declaration of dividends is at the sole discretion of the Board. Cenovus's
continued commitment to the dividend is an important aspect of the company's
strategy to focus on increasing total shareholder return.
Cenovus's natural gas and crude oil hedging strategy helps it to achieve more
predictability around cash flow and safeguard its capital program. The
Board-approved risk management policy allows the company to financially hedge
up to 75% of this year's and next year's expected natural gas production, net
of internal fuel usage, and up to 50% and 25%, respectively, in the two
following years. The policy also allows the company to enter fixed price
hedges on as much as 50% of net liquids production this year and next, as well
as 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
gas production. About 135 MMcf/d of natural gas is expected to be consumed at
the company's SAGD and refinery operations, which is more than offset by the
gas Cenovus produces. The company's financial hedging positions are determined
after considering this natural hedge.
Cenovus's financial hedge positions at March 31, 2013 include:
*approximately 10% or 18,500 bbls/d of expected oil production hedged for
2013 at an average Brent price of US$110.36/bbl and an additional 10% or
18,500 bbls/d at an average Brent price of C$111.72/bbl
*166 MMcf/d or approximately 32% of expected natural gas production hedged
for 2013 at an average NYMEX price of US$4.64/Mcf, plus internal usage of
about 135 MMcf/d of natural gas and long-term sales of 29 MMcf/d of
*approximately 49,200 bbls/d of heavy crude exposure hedged for 2013 at an
average WCS differential to WTI of US$20.74/bbl
*approximately 10,800 bbls/d of heavy crude exposure hedged for 2014 at an
average WCS differential to WTI of US$20.27/bbl.
*Cash flow in the first quarter was $971 million, or $1.28 per share
diluted, compared with $904 million, or $1.19 per share diluted, in the
same period a year earlier.
*Operating earnings in the quarter were $391 million, or $0.52 per share
diluted, up 15% from the same quarter in 2012.
*Cenovus had a realized after-tax hedging gain of $44 million in the first
quarter. The company received an average realized price, including
hedging, of $56.72/bbl for its oil in the first quarter, compared with
$72.61/bbl during the same period in 2012. The average realized price,
including hedging, for natural gas in the first quarter was $3.64/Mcf,
compared with $3.53/Mcf a year earlier.
*Cenovus recorded income tax expense of $123 million in the first quarter
of 2013, giving the company an effective tax rate of 42%, compared with an
effective rate of 28% in the year-earlier period. The increased tax rate
reflects higher income from U.S. refining operations and a loss from
Canadian sources of income due to unrealized risk management losses. A tax
expense arises from the U.S. income, while there is a tax recovery
associated with the Canadian loss, which is calculated at the lower
*Cenovus's net earnings for the first three months of 2013 were $171
million compared with $426 million in the first quarter of 2012. Net
earnings were negatively impacted by unrealized risk management and
foreign exchange losses in the quarter compared with gains in the same
period of 2012.
*Capital investment during the quarter was $915 million. That was a 2%
increase from $900 million in the first quarter of 2012 as the company
continued to advance development of its oil opportunities.
*General and administrative (G&A) expenses were $83 million in the first
quarter of this year. G&A expenses were 11% lower than in the first
quarter of 2012, primarily due to a decline in long-term incentive
*Over the long term, Cenovus continues to target a debt to capitalization
ratio of between 30% and 40% and a debt to adjusted EBITDA ratio of
between 1.0 and 2.0 times. At March 31, 2013, the company's debt to
capitalization ratio was 33% and debt to adjusted EBITDA, on a trailing
12-month basis, was 1.1 times.
(for the period ended March 31) 2013 2012
($ millions, except per share amounts) Q1 Q1
Net earnings 171 426
Add back (deduct):
Unrealized risk management (gains) losses, after-tax 173 (48)
Non-operating unrealized foreign exchange (gains) losses, 47 (38)
Operating earnings 391 340
Per share diluted 0.52 0.45
Oil sands project schedule
First production Expected production
Project phase Regulatory status target capacity (bbls/d)
Foster Creek^1 A - E 120,000
F Approved Q3-2014F 45,000^2
G Approved 2015F 40,000
H Approved 2016F 40,000
J Submitted Q1-2013 2019F 50,000
Future optimization 15,000
Total capacity 310,000
Christina Lake^1 A - D 98,000
E Approved Q3-2013F 40,000
F Approved 2016F 50,000
G Approved 2017F 50,000
H Submitted Q1-2013 2019F 50,000
Future optimization 12,000
Total capacity 300,000
A Approved 2017F 45,000
B-C Approved TBD 85,000
Total Capacity 130,000
Grand Rapids Submitted Q4-2011 2017F 180,000
Telephone Lake^3 Submitted Q4-2011 TBD 90,000
^1 Properties 50% owned by ConocoPhillips. Certain phases may be subject to
^2 Includes 5,000 bbls/d gross submitted to the regulator in Q1 2013.
^3 Projected total capacity of more than 300,000 bbls/d.
Conference call today
9 a.m. Mountain Time (11 a.m. Eastern Time)
Cenovus will host a conference call today, April 24, 2013, starting at 9 a.m.
MT (11a.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 1
p.m. MT on April 24, 2013, until midnight May 1, 2013, by dialing 855-859-2056
or 416-849-0833 and entering passcode 23074842. A live audio webcast of the
conference call will also be available via cenovus.com or via the following
The webcast will be archived for approximately 90 days.
Basis of Presentation 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).
Non-GAAP Measures This news release contains references to non-GAAP measures
*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
*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 and annual consolidated financial statements.
*Operating earnings is defined as net earnings excluding after-tax gain
(loss) on discontinuance, after-tax gain on bargain purchase, after-tax
effect of unrealized risk management gains (losses) on derivative
instruments, after-tax unrealized foreign exchange gains (losses) on
translation of U.S. dollar denominated notes issued from Canada and the
Partnership Contribution Receivable, after-tax foreign exchange gains
(losses) on settlement of intercompany transactions, after-tax gains
(losses) on divestiture of assets, deferred income tax on foreign exchange
recognized for tax purposes only related to U.S. dollar intercompany debt
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, calculated on a trailing
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 cenovus.com.
This document 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 document
is identified by words such as "anticipate", "believe", "expect", "plan",
"forecast" or "F", "target", "project", "could", "focus", "vision", "goal",
"proposed", "scheduled", "outlook", "potential", "may", "strategy" 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, expected future refining capacity, anticipated finding and
development costs, expected reserves and contingent and prospective resources
estimates, potential dividends and dividend growth strategy, anticipated
timelines for future regulatory, partner or internal approvals, future impact
of regulatory measures, 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
cenovus.com; our projected capital investment levels, the flexibility of our
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 or stages thereof; 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: 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; accuracy of our reserves,
resources and future production estimates; our ability to replace and expand
oil and gas reserves; our ability to maintain our relationships 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 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, "Risk
Management" in our current and annual MD&A and risk factors described in other
documents we file from time to time with securities regulatory authorities,
all of which are available on SEDAR at www.sedar.com, EDGAR at www.sec.gov and
our website at cenovus.com.
TM denotes a 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 $27 billion.
For more information, visit cenovus.com.
Find Cenovus on Facebook, Twitter, Linkedin and YouTube.
SOURCE Cenovus Energy Inc.
Video with caption: "Video: Cenovus President & CEO Brian Ferguson discusses
Q1 results". Video available at:
Image with caption: "Expansion work at Cenovus's Christina Lake operations in
northern Alberta (CNW Group/Cenovus Energy Inc.)". Image available at:
Image with caption: "Cenovus's Christina Lake operations in northern Alberta
(CNW Group/Cenovus Energy Inc.)". Image available at:
Image with caption: "Cenovus has 50% ownership in the Wood River Refinery in
Illinois (CNW Group/Cenovus Energy Inc.)". Image available at:
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