Cenovus Energy Inc. (TSX: CVE) (NYSE: CVE) today released its 2022
budget, updated corporate strategy, five-year business plan and
environmental, social and governance (ESG) targets, built on the
company’s demonstrated operating strength, capital discipline and
ESG leadership. The 2022 guidance includes capital spending of $2.6
billion to $3.0 billion and total production of approximately
800,000 barrels of oil equivalent per day (BOE/d), factoring in
major planned turnarounds and production impacts from assets sold
in 2021. The company anticipates 2022 downstream throughput of
about 555,000 barrels per day (bbls/d). Cenovus has reaffirmed its
commitment to growing shareholder returns, with planned allocation
of about 50% of excess free funds flow in 2022 to shareholder
returns, including the planned repurchase of up to 146.5 million
common shares pursuant to the company’s previously announced normal
course issuer bid. As of December 7, there have been 9,719,100
shares repurchased by the company, at an average price of $15.82
per share. Remaining excess free funds flow will continue to be
allocated to the reduction of net debt to below $8 billion.
Cenovus also released its latest ESG report today, which
outlines ambitious new targets for the company’s ESG focus areas,
including plans for a 35% reduction in absolute greenhouse gas
(GHG) emissions by the end of 2035 and the continuation of its
ambition to achieve net zero emissions from operations by 2050.
“Our operational proficiency, disciplined spending and ESG
leadership sets us apart,” said Alex Pourbaix, Cenovus President
& Chief Executive Officer. “Building on our upstream production
strength in 2021 and the continued optimization of our business, I
am confident in our ability to grow free funds flow and deliver
sustainable, increased returns to our shareholders.”
Capital Investment by asset ($ millions) |
|
2022 guidance |
2021 guidance |
Upstream |
|
|
Oil Sands (includes thermal
& cold/EOR) |
1,350 - 1,550 |
950 - 1,050 |
Conventional |
150 - 200 |
170 - 210 |
Offshore |
200 - 250 |
200 - 250 |
Total upstream |
1,700 - 2,000 |
1,320 - 1,510 |
Downstream |
|
|
Superior Refinery rebuild |
200 - 250 |
520 - 570 |
Total downstream |
850 - 950 |
900 - 1,100 |
Corporate |
50 - 70 |
75 - 100 |
Total |
2,600 - 3,000 |
2,300 - 2,700 |
Note: Totals may not add due to
rounding.
Average production and throughput forecast |
|
2022 guidance |
2021 guidance |
% change |
Upstream |
MBOE |
MBOE |
|
Oil Sands (includes thermal
& cold/EOR) |
570 - 630 |
540 - 596 |
6 |
Conventional |
118 - 134 |
131 - 140 |
(7) |
Offshore |
64 - 76 |
66 - 74 |
0 |
Total upstream |
780 - 820 |
750 - 790 |
4 |
|
|
|
|
Downstream |
Mbbl |
Mbbl |
|
Total
downstream |
530 - 580 |
500 - 550 |
6 |
Note: Production ranges for assets are not
intended to equal total upstream. Cenovus’s full
2022 guidance can be found on cenovus.com.
Five-year planCenovus’s plan is guided by five
key strategic objectives: top-tier safety and ESG performance, cost
leadership, financial discipline, returns-focused capital
allocation and free funds flow growth. Applying the strategic
objectives to Cenovus’s business is expected to drive enhanced
shareholder returns, driven by growth in earnings and free funds
flow. This funds flow will position the company well to continue to
return significant cash to shareholders through a growing dividend
and opportunistic share buybacks.
The company remains focused on top-tier safety performance and
asset integrity. Leveraging the strength of its assets and its
considerable operational expertise, Cenovus expects to deliver
sustained production and growth in throughput over the next five
years while reducing absolute scope 1 and 2 GHG emissions.
Demonstrating both cost leadership and financial discipline, the
company anticipates a reduction of 7% in overall unit operating
costs in both the upstream and downstream segments, while general
and administrative expenses and average annual sustaining capital
requirements will remain flat.
The company’s capital programs and current base dividend are
sustainable at US$45 West Texas Intermediate (WTI) per barrel, with
the opportunity to grow shareholder returns over the life of the
plan as net debt is further reduced. Over the longer term, Cenovus
will aim for 1.0-1.5 times net debt to adjusted earnings before
interest, taxes, depreciation and amortization (EBITDA) and is
committed to achieving a mid-BBB investment grade credit rating. In
the fourth quarter of 2021, Cenovus doubled its common share
dividend and once the company achieves net debt below $8 billion it
expects to have further expanded capacity for increasing
shareholder returns.
SustainabilityCenovus’s ambitious targets for
its five ESG focus areas are embedded in the company’s five-year
business plan.
Focus area |
Targets |
Climate change & GHG
emissions |
• Reduce absolute GHG emissions
by 35% by year-end 2035• Reach long-term ambition for net zero
emissions by 2050 |
Water
stewardship |
• Reduce fresh water intensity by
20% in oil sands and in thermal operations by year-end 2030 |
Biodiversity |
• Reclaim 3,000 decommissioned
well sites by year-end 2025• Restore more habitat than Cenovus uses
in the Cold Lake caribou range by year-end 2030 |
Indigenous
reconciliation |
• Achieve a minimum of $1.2
billion of spending with Indigenous businesses between 2019 and
year-end 2025• Attain Progressive Aboriginal Relations gold
certification from the Canadian Council for Aboriginal Business by
year-end 2025 |
Inclusion &
diversity |
• Increase women in leadership
roles to 30% by year-end 2030• Conduct a self-identification survey
by year-end 2022; add diversity target beyond gender in 2023•
Aspire to have at least 40% representation from designated groups
among non-management directors, including at least 30% women, by
year-end 2025 |
Note: Targets include start year 2019 for emissions, water
intensity, well reclamation and Indigenous business spend, and 2016
for caribou habitat restoration.Emissions reductions are in
reference to scope 1 and 2, on a net equity basis.
2022 guidance highlightsIn 2022, Cenovus
anticipates total upstream production of between 780,000 BOE/d and
820,000 BOE/d, which includes the impact of major planned
turnarounds and approximately 15,300 BOE/d of production divested
in 2021. Canadian and U.S. Manufacturing throughput is expected to
be between 530,000 bbls/d and 580,000 bbls/d, an increase of about
6% over 2021, as demand for refined products rebounds.
Guidance for total capital expenditures is between $2.6 billion
and $3.0 billion. This includes growth capital of $200 million to
$250 million for the completion of the Superior Refinery rebuild,
which the company expects will be largely offset by insurance
proceeds, as well as capital in the range of $100 million to $150
million to complete the Terra Nova project and Spruce Lake North
thermal project, both of which are expected to start up in the
fourth quarter of 2022.
Cenovus anticipates integration costs related to its combination
with Husky Energy of $100 million to $150 million in 2022, which is
the remainder of the expected $500 million to $550 million in total
integration costs for the transaction. The targeted annual run-rate
of $1.2 billion in synergies has been achieved.
Oil SandsIn the Oil Sands segment, production
is expected to be in the range of 570,000 BOE/d to 630,000 BOE/d in
2022, which includes major planned turnarounds at Foster Creek and
Christina Lake. The production range also reflects continued strong
performance at Foster Creek and Christina Lake, and at the
Lloydminster thermal projects where the application of Cenovus’s
operating model is generating cost savings and increased
production. For example, the operating model in 2021 drove a
production increase of about 10% at the Lloydminster thermal
projects without adding steam. At the Spruce Lake North project,
which is expected to start up in the fourth quarter of 2022,
Cenovus has reduced the number of wells and surface pads needed by
approximately 50%, while doubling the average well length,
resulting in substantial cost savings.
Cenovus plans to spend between $1.4 billion and $1.6 billion in
the segment, with the increase from 2021 mainly related to
additional sustaining capital investment directed towards assets
where investment was lower in recent years. Operating costs for
2022 are expected to range between $10.50 per BOE and $12.00 per
BOE, which are largely flat year-over-year.
ConventionalPlanned spending in 2022 of between
$150 million and $200 million includes sustaining drilling programs
in the segment and represents a 7% reduction compared to 2021
guidance given dispositions this year. Total production in the
Conventional segment is expected to be between 118,000 BOE/d and
134,000 BOE/d, and takes into account a reduction of about 15,300
BOE/d from divestitures in 2021. Conventional operating costs are
expected to be between $10.00 per BOE and $11.50 per BOE, which are
largely flat year-over-year.
OffshoreOffshore production in 2022 is expected
to be in the range of 64,000 BOE/d to 76,000 BOE/d. This includes
the expected startup of the MDA and MBH fields offshore Indonesia
and expected gas sales from the Liwan field offshore China. It also
includes the anticipated startup of the Terra Nova floating
production, storage and offloading vessel before the end of 2022
following asset life extension (ALE) work and reflects Cenovus’s
increased working interest of 34%.
Capital spending of between $200 million and $250 million will
be primarily directed towards the Terra Nova ALE project and
preservation capital for the West White Rose Project. Cenovus and
its partners continue to evaluate their options on the West White
Rose Project, with a decision on any further investment to be made
by mid-2022.
Offshore operating costs in 2022 are expected to be between $14
per BOE and $16 per BOE.
DownstreamWith recovering demand for refined
products, Cenovus expects to see crude oil throughput at its
Canadian and U.S. Manufacturing assets increase to between 530,000
bbls/d and 580,000 bbls/d, including planned turnarounds. Capital
expenditures ranging from $850 million to $950 million reflect a
debottlenecking project at the Lloydminster Refinery to increase
throughput capacity by about 8%, as well as additional spending to
support downstream operations and reliability. The range also
includes capital for the Superior Refinery rebuild project, which
the company expects will largely be offset by insurance proceeds.
The rebuild remains on schedule and is expected to be completed and
ready for startup in the first quarter of 2023.
The turnarounds at the Lloydminster Upgrader, Lloydminster
Refinery and non-operated refineries, as well as facility renewal
projects to maintain safe and reliable operations, will contribute
to operating expenses in 2022 of between $10 per barrel and $12 per
barrel, which are expected to trend lower across the five-year
plan.
Leadership updateSarah Walters, Cenovus’s
Executive Vice-President, Corporate Services, has decided to return
to the United Kingdom to be closer to family and will be leaving
the company at the end of February. As a result, effective March 1,
2022, Susan Anderson, currently Vice-President, Supply Chain
Management, will take on the role of Senior Vice-President, People
Services, reporting directly to Alex Pourbaix.
“Sarah has been an invaluable member of my team, helping build
our culture at Cenovus over her eight years with the company,” said
Pourbaix. “She will be greatly missed.”
For further details on Cenovus’s 2022 budget, updated strategy
and five-year business plan, see the company’s Investor Day
presentation and 2022 guidance available under Investors at
cenovus.com. For more details on Cenovus’s ESG targets, including
plans to achieve them, read the full report.
Investor Day webcast today8 a.m. Mountain Time (10 a.m.
Eastern Time)Cenovus will host a webcast today, Dec. 8,
2021, starting at 8 a.m. MT (10 a.m. ET). Access the webcast here.
The webcast will be archived for approximately 12 months. |
Advisory
Barrels of Oil Equivalent Natural gas volumes
have been converted to barrels of oil equivalent (BOE) on the basis
of six Mcf to one barrel (bbl). BOE may be misleading, particularly
if used in isolation. A conversion ratio of one bbl to six Mcf is
based on an energy equivalency conversion method primarily
applicable at the burner tip and does not represent value
equivalency at the wellhead. Given that the value ratio based on
the current price of crude oil compared with natural gas is
significantly different from the energy equivalency conversion
ratio of 6:1, utilizing a conversion on a 6:1 basis is not an
accurate reflection of value.
Presentation Basis Cenovus presents production
volumes on a net to Cenovus before royalties basis, unless
otherwise stated.
Non-GAAP Measures and Additional SubtotalThe
following measures do not have a standardized meaning as prescribed
by IFRS and therefore are considered non-GAAP measures. You should
not consider these measures in isolation or as a substitute for
analysis of our results as reported under IFRS. These measures are
defined differently by different companies in our industry. These
measures may not be comparable to similar measures presented by
other issuers.
“Adjusted Funds Flow” is used in the oil and gas industry to
assist in measuring a company’s ability to finance its capital
programs and meet its financial obligations. Adjusted Funds Flow is
defined as Cash From Operating Activities excluding net change in
other assets and liabilities and net change in non-cash working
capital. Net change in other assets and liabilities is composed of
site restoration costs and pension funding. Non-cash working
capital is composed of current assets and current liabilities,
excluding cash and cash equivalents, risk management, the
contingent payment, assets held for sale and liabilities related to
assets held for sale.
“Excess Free Funds Flow” is defined as Adjusted Funds Flow minus
dividends paid on common shares, dividends paid on preferred
shares, capital investment, settlement of decommissioning
liabilities and principal repayment of leases.
“Free Funds Flow” is defined as Adjusted Funds Flow less capital
investment.
“Operating Margin” is an additional subtotal found in Note 1 of
the September 30, 2021 unaudited interim Consolidated Financial
Statements and is used to provide a consistent measure of the cash
generating performance of our assets for comparability of our
underlying financial performance between periods. Operating Margin
is defined as revenues less purchased product, transportation and
blending, operating expenses, plus realized gains less realized
losses on risk management activities. Items within the Corporate
and Eliminations segment are excluded from the calculation of
Operating Margin.
Forward-looking Information This news release
contains certain forward-looking statements and forward-looking
information (collectively referred to as “forward-looking
information”) within the meaning of applicable securities
legislation, including the United States Private Securities
Litigation Reform Act of 1995, about our current expectations,
estimates and projections about the future, based on certain
assumptions made by us in light of our experience and perception of
historical trends. Although Cenovus believes that the expectations
represented by such forward-looking information are reasonable,
there can be no assurance that such expectations will prove to be
correct. Readers are cautioned not to place undue reliance on
forward-looking information as actual results may differ materially
from those expressed or implied.
Forward-looking information in this report is identified by
words such as “achieve”, “advance”, “aim”, “ambition”, “build”,
“can”, “commitment”, “committed”, “continue”, “delivering”,
“develop”, “ensure”, “establishing”, “estimate”, “expect”, “focus”,
“goals”, “grow”, “implementing”, “improve”, “intend”, “maintain”,
“opportunity”, “plan”, “position”, “potential”, “priority”,
“pursue”, “reduce”, “remain”, “strategy”, “target”, “will” or
similar words or expressions and includes suggestions of future
outcomes, including, but not limited to, statements about: capital
spending; production; upstream and downstream operating costs;
operating margin; planned turnarounds at any of our facilities; the
effects of asset sales; downstream throughput; growing and
enhancing shareholder returns; earnings and free funds flow growth;
cost leadership; safety performance and asset integrity; excess
free funds flow and the allocation thereof to shareholder returns
and debt reduction; share repurchases; dividend increases;
incremental investment in the business; opportunistic acquisitions;
ESG targets, including reducing absolute GHG emissions by 35% by
2035 on a net equity basis; ambition to achieve net zero emissions
from operations by 2050; sustained growth in production and
throughput over the next five years while reducing both absolute
scope 1 and 2 GHG emissions and GHG emissions intensity on a net
equity basis; maintaining general and administrative expenses and
average annual sustaining capital requirements; sustainability of
base dividend at US$45 WTI; growing shareholder returns as net debt
is reduced; achieving 1.0-1.5 times net debt to EBITDA; achieving a
mid-BBB investment grade credit rating; expanding capacity for
increasing shareholder returns as net debt falls below $8 billion;
capital expenditures for Superior Refinery rebuild and offsetting
insurance proceeds; anticipated integration costs related to the
Husky transaction for 2022; the application of Cenovus’s operating
model to generate cost savings and increased production; startup of
the Terra Nova floating production, storage and offloading vessel;
startup of the MDA and MBH fields offshore Indonesia and expected
gas sales from the Liwan field offshore China; making a decision on
the West White Rose Project; and debottlenecking project at the
Lloydminster Refinery increasing throughput capacity.
Developing forward-looking information involves reliance on a
number of assumptions and other factors 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 our forward-looking information is
based include the following: forecast oil and natural gas, NGLs,
condensate and refined products prices and light-heavy crude oil
price differentials; our ability to realize the benefits and
anticipated cost synergies associated with the Husky transaction;
projected capital investment levels and the flexibility of capital
spending plans and associated sources of funding; our ability to
access or implement some or all of the technology necessary to
efficiently and effectively operate our assets and achieve expected
future results, including in respect of ESG and GHG emissions
targets and ambitions and the commercial viability and scalability
of emission reduction strategies; our ability to fund growth,
sustaining capital expenditures and shareholder distributions; and
other assumptions, risks and uncertainties described from time to
time in the filings we make with securities regulatory authorities
including the assumptions inherent in Cenovus’s 2021 guidance
available on cenovus.com.
The risk factors and uncertainties that could cause our actual
results to differ materially, include, but are not limited to: the
effect of the COVID-19 pandemic on our business, including any
related measures taken by governments in the jurisdictions in which
we operate; our ability to access or implement some or all of the
technology necessary to efficiently and effectively operate our
assets and achieve expected future results including in respect of
ESG and GHG emissions targets and ambitions and the commercial
viability and scalability of emission reduction strategies; and
changes in commodity prices and differentials. In addition, there
are risks that the effect of actions taken by us in implementing
targets, commitments and ambitions for ESG focus areas may have a
negative impact on our existing business, growth plans and future
results from operations.
Readers are cautioned that the foregoing lists are not
exhaustive and are made as at the date hereof. Events or
circumstances could cause our actual results to differ materially
from those estimated or projected and expressed in, or implied by,
the forward-looking information. For a full discussion of Cenovus's
material risk factors, assumptions and uncertainties, see "Risk
Management and Risk Factors" and “Advisory” in our Management's
Discussion and Analysis (MD&A) for the period ended September
30, 2021 and the risk factors described in other documents Cenovus
files from time to time with securities regulatory authorities in
Canada, available on SEDAR at sedar.com, and with the U.S.
Securities and Exchange Commission on EDGAR at sec.gov, and on the
Corporation’s website. Additional information concerning Husky’s
business and assets as of December 31, 2020 may be found in the
Husky Annual Information Form and Husky MD&A, each of which is
filed and available on SEDAR under Husky's profile at sedar.com.
Cenovus undertakes no obligation to update or revise any
forward-looking information except as required by law.
Cenovus Energy Inc.
Cenovus Energy Inc. is an integrated energy company with oil and
natural gas production operations in Canada and the Asia Pacific
region, and upgrading, refining and marketing operations in Canada
and the United States. The company is focused on managing its
assets in a safe, innovative and cost-efficient manner, integrating
environmental, social and governance considerations into its
business plans. Cenovus common shares and warrants are listed on
the Toronto and New York stock exchanges, and the company’s
preferred shares are listed on the Toronto Stock Exchange. For more
information, visit cenovus.com.
Find Cenovus on Facebook, Twitter, LinkedIn, YouTube and
Instagram.
Cenovus contacts:
Investors |
Media |
Investor Relations general line403-766-7711 |
Media Relations general line403-766-7751 |
Cenovus Energy (NYSE:CVE)
Historical Stock Chart
From Jun 2024 to Jul 2024
Cenovus Energy (NYSE:CVE)
Historical Stock Chart
From Jul 2023 to Jul 2024