Cenovus Energy Inc. (TSX: CVE) (NYSE: CVE) is reducing its 2020
capital spending by approximately 32% in order to maintain the
strength of its balance sheet. Cenovus is also temporarily
suspending its crude-by-rail program and deferring final investment
decisions on major growth projects. These measures are being taken
in response to the recent significant decline in world benchmark
crude oil prices. The company continues to work toward funding its
revised capital program and current dividend within cash flow in
this challenging commodity price environment.
“We have top-tier assets, one of the lowest cost structures in
our industry and we’ve made significant progress in deleveraging
over the past few years,” said Alex Pourbaix, Cenovus
President & Chief Executive Officer. “Consistent with our
commitment to balance sheet strength, we’re exercising our
flexibility to reduce discretionary capital while maintaining our
base business and delivering safe and reliable operations.”
2020 budget forecast |
|
Revised budget |
Original budget1 |
% change2 |
Total capital investment ($ billions) |
0.9 – 1.0 |
1.3 – 1.5 |
-32 |
Total oil sands production (Mbbls/d) |
350 – 400 |
390 – 410 |
-6 |
Total production (MBOE/d) |
432 – 486 |
472 – 496 |
-5 |
1 Original 2020 budget announced December 10, 2019.2 Based on
the midpoint of the ranges.
As a result of Cenovus’s decision to temporarily suspend its
crude-by-rail program, the company will no longer be making use of
credits under Alberta’s Special Production Allowance (SPA) program.
Therefore, oil sands production in 2020 is now expected to average
between 350,000 barrels per day (bbls/d) and 400,000 bbls/d,
approximately 6% lower than the company’s December 9, 2019 guidance
for the year.
Capital originally budgeted to progress potential phase H
expansions at both Christina Lake and Foster Creek to
sanction-ready status this year has been put on hold, and the
majority of the remaining planned capital spend at the company’s
Deep Basin and Marten Hills operations has been suspended. Modest
spending on engineering and permitting for a potential diluent
recovery unit (DRU) will be completed, however, in the current
environment, Cenovus does not intend to sanction any new
projects.
Cenovus currently has liquidity of approximately $4.4 billion,
including undrawn credit facility capacity and cash on hand. Under
the terms of Cenovus’s committed credit facility, the company is
required to maintain a debt to capitalization ratio, as defined in
the agreement, not to exceed 65%. The company was well below
this limit at the end of 2019, and has no near-term debt
maturities.
Cenovus will continue to monitor the macro-economic and oil
price environment and will look for additional opportunities to
reduce operating and capital spending if necessary. The company
expects to provide an updated corporate guidance document in due
course.
ADVISORY
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).
Barrels of Oil Equivalent – Natural gas volumes
have been converted to barrels of oil equivalent (BOE) on the basis
of six thousand cubic feet (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.
Forward-looking InformationThis 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 document is identified by
words such as “commitment”, “committed”, “continue”, “delivering”,
“exercise”, “expect”, “intend”, “maintain”, “will” or similar
expressions and includes suggestions of future outcomes, including
statements about: reducing capital spending and maintaining balance
sheet strength; working towards funding revised capital program and
current dividend within cash flow; reducing capital while
maintaining base business and delivering safe and reliable
operations; intentions regarding sanctioning of new projects; and
all statements related to the company’s December 9, 2019
Guidance.
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 assumptions on which our
forward-looking information is based include: sufficient cash flow
to fund the revised capital program and current dividend; our
ability to reduce our 2020 oil sands production to average between
350,000 barrels per day (bbls/d) and 400,000 bbls/d; our ability to
adjust the company's storage capacity within our oil sands
reservoirs; the successful and timely implementation of sustaining
capital expenditures; and our ability to develop, access and
implement all technology necessary to achieve expected future
results.
The risks and uncertainties that could cause our actual results
to differ materially, include, but are not limited to: volatility
of commodity prices; the accuracy of cost estimates regarding
commodity prices, currency and interests rates; product supply and
demand; accuracy of our share price and market capitalization
assumptions; our ability to reduce production to desired levels;
our ability to finance sustaining capital expenditures; our ability
to maintain desirable ratios of debt to capitalization; changes in
credit ratings applicable to us or any of our securities; changes
in general economic, market and business conditions; the political
and economic conditions in the countries in which we operate or
supply; and the occurrence of unexpected events and the instability
resulting therefrom.
Additional information about risks, assumptions, uncertainties
and other factors that could influence Cenovus’s actual results is
provided in Cenovus’s Management’s Discussion and Analysis
(MD&A) for the year ended December 31, 2019 as well as its
Annual Information Form and Form 40-F for the year ended December
31, 2019 (all available on SEDAR at sedar.com, on EDGAR at sec.gov
and Cenovus's website at cenovus.com).
Readers are cautioned that the foregoing lists are not
exhaustive and are made as at the date hereof. Events or
circumstances could cause Cenovus's actual results to differ
materially from those estimated, projected, expressed, or implied
by the forward-looking information. Cenovus undertakes no
obligation to update or revise any forward-looking information
except as required by law.
Cenovus Energy Inc.Cenovus Energy Inc. is a
Canadian integrated oil and natural gas company. It is committed to
maximizing value by sustainably developing its assets in a safe,
innovative and cost-efficient manner, integrating environmental,
social and governance considerations into its business plans.
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
British Columbia. 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. For more
information, visit cenovus.com.
Find Cenovus on Facebook, Twitter, LinkedIn, YouTube and
Instagram.
CENOVUS
CONTACTS:
InvestorsInvestor Relations general
line403-766-7711 |
Media Media Relations general
line403-766-7751 |
Cenovus Energy (TSX:CVE)
Historical Stock Chart
From Jun 2024 to Jul 2024
Cenovus Energy (TSX:CVE)
Historical Stock Chart
From Jul 2023 to Jul 2024