Cenovus Records Deep Loss, Despite Operational Improvements
July 28 2016 - 8:30AM
Dow Jones News
Cenovus Energy Inc. on Thursday posted a hefty second-quarter
loss and an 8% decline in cash flow as lower oil-sands operating
costs and stronger production failed to offset a slump in oil and
gas prices.
The Calgary, Alberta-based company said oil-sands operating
costs declined 24% per barrel in the quarter ended June 30, while
oil-sands production climbed 9%. Still, a steep decline in oil and
gas prices compared with a year earlier—including a 21% drop in
West Texas Intermediate oil prices—weighed on results.
"We've achieved significant sustainable improvements in our cost
structure over the last year and a half, and we'll remain vigilant
on costs to maximize our competitive position in this challenging
and volatile commodity price environment," said Chief Executive
Brian Ferguson in a release.
Cenovus swung to a loss of 267 million Canadian dollars ($202
million), or 32 Canadian cents a share, in its latest quarter from
a profit of C$126 million, or 15 Canadian cents a share, a year
earlier.
Adjusted to exclude items, it lost 5 Canadian cents a share,
compared with a profit of 18 Canadian cents a year earlier.
Analysts polled by Thomson Reuters were expecting a loss of 19
Canadian cents.
Cash flow declined to C$440 million from C$477 million a year
earlier.
Cenovus said it's on track to lower capital, operating and
general and administrative costs by up to C$500 million this year
compared with its original budget. It noted that it completed its
planned workforce cuts in the latest quarter, resulting in total
staff reductions since the end of 2014 of 31%. It booked about C$19
million of severance costs related to workforce reductions this
year in the latest quarter, it said.
Like its peers in the oil patch, Cenovus has been battling
slumping oil and gas prices and has been focused on cost-cutting
efforts. However, it said stronger oil and gas prices recently
compared with multiyear lows in the first three months of the year
helped boost cash flow from first-quarter levels.
"Given the strength of our balance sheet and financial position
as well as our high level of confidence that the cost reductions
we've achieved will be largely sustainable, I'm optimistic about
the potential to resume construction on some of our deferred
projects," Mr. Ferguson said.
Cenovus deferred some oil-sands expansion projects amid the
extended slump in commodity prices, but said Thursday it is
completing engineering work at its Christina Lake operations for
the possible restart of an expansion project that was put on hold
in late 2014.
Write to Judy McKinnon at judy.mckinnon@wsj.com
(END) Dow Jones Newswires
July 28, 2016 08:15 ET (12:15 GMT)
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