Cenovus Energy Inc T.CVE.WT

RBC

[retiredcf]

July 20, 2023

Cenovus Energy Inc.
2Q Preview—An Important Second-Half Awaits

TSX: CVE | CAD 22.52 | Outperform | Price Target CAD 27.00

Sentiment: Neutral

Cenovus will report its second-quarter results before market open on Thursday, July 27.

Conference Call

• Time: 11:00 am ET, Thursday, July 27 • Dial-in: 888-664-6383

2Q Preview

RBC is slightly below Street consensus on OEPS and CFPS, while in line with consensus on production volumes and capital spending. Cenovus’ second-quarter was impacted by maintenance activities, Alberta wildfires and the continued ramp-up of some of its US downstream assets. We look forward to an update on both the Toledo and Superior refineries and the impact on the timing of reaching the company’s ultimate $4 billion net debt floor.

Observations

• Our second-quarter production outlook for Cenovus of 729,500 boe/d reflects Christina Lake production of 235,200 bbl/d and Foster Creek production of 163,500 bbl/d (including a 19,000 bbl/d quarterly impact due to a planned turnaround).

• Elsewhere, our second-quarter outlook includes Lloydminster thermal volumes of 118,500 bbl/d (inclusive of planned maintenance with a circa 1,500 bbl/d quarterly impact), Sunrise production volumes of 47,400 bbl/d, White Rose volumes of 6,000 bbl/d (due to maintenance) and Liwan production of 34,800 boe/d (net) (including 164 mmcf/d of natural gas at a realization of $12.63/mcf).

• Our second-quarter outlook for Canada gas volumes of 467.5 mmcf/d reflects the impact of Alberta wildfire shut-ins.

• In the downstream, we anticipate Canada + US refining (pre-tax) operating cash flow of $265 million in the quarter, inclusive of an approximate $150 million negative FIFO inventory adjustment in the US. Cenovus’ Toledo refinery is now online and running according to plan while its Superior refinery is now starting its last unit (catalytic cracker).

• Our estimates include $288 million in cash taxes, capital investment of $1.05 billion and $310 million of share repurchases in the second-quarter.

• All said, we peg Cenovus’ second-quarter operating cash flow at $1.9 billion ($0.97 per share) and free cash flow at $806 million (before estimated dividends of $266 million and working capital movements).