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Cenovus Forecasts Decline in 2013 Cash Flow on Prices

Dec. 12 (Bloomberg) -- Cenovus Energy Inc., the Canadian oil producer planning to more than triple output in the next decade, said cash flow will probably fall in 2013 because of lower crude prices.

Cash flow will be C$3.1 billion ($3.15 billion) to C$4 billion next year, the Calgary-based company said today in a statement. The producer’s 2012 guidance is for cash of C$3.7 billion.

“As we moved through the fourth quarter we have seen shifting market fundamentals,” Chief Executive Officer Brian Ferguson said today on a conference call from Calgary. “We expect ongoing uncertainty in commodity prices and global financial markets.”

Higher prices for natural gas and electricity have increased production costs while lower prices for Canadian heavy oil, Cenovus’s main product, resulted in cash flow below the original target for this year, Ferguson said. Western Canada Select, the benchmark Canadian crude, trades at a discount of $34 to the U.S. price.

Cenovus said in an October investor presentation that it’s planning to reach production of about 500,000 barrels a day by 2021. Cenovus expects oil output to average 180,000 to 196,000 barrels a day next year, an increase of 14 percent from forecast 2012 volumes.

Lower Prices

Along with the 2013 outlook, the company adjusted its 2012 guidance to reflect lower-than-anticipated cash flow in the fourth quarter, citing wider “light-heavy differentials,” lower crude prices and longer-than-expected maintenance at U.S. refineries. It kept a forecast for oil output volumes this year.

“Cenovus expects continued robust growth in oil production in 2013, mainly due to expanded capacity at its Christina Lake oil-sands operation,” according to the statement.

The company expects to invest C$3.2 billion to C$3.6 billion next year as it ramps up production to meet the 2021 target.

Cenovus also is considering ways to “de-bottleneck” its Wood River refinery, Chief Operating Officer John Brannan said during the call. Planned maintenance in 2013 at the company’s two refineries won’t be as “major” as this year, he said.

Cenovus fell 1.1 percent to C$33.34 at the close in Toronto. The shares have declined 1.4 percent this year.

To contact the reporter on this story: Jeremy Van Loon in Calgary at jvanloon@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net

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