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Cenovus Energy Inc. 1Q First Glance—Boosts Base Dividend 29%
TSX: CVE | CAD 28.28 | Outperform | Price Target CAD 32.00
Sentiment: Positive
Cenovus Energy made further progress on its balance sheet deleveraging journey to $4.0 billion—with net debt of $4.83 billion as of March 31 (vs. RBC at $4.82 billion)—during the first-quarter amid in-line production, 10% lower capital spending and 5% higher AFFO/share vis-a-vis Street consensus. The company boosted its common share base dividend 29% to an annualized rate of $0.72 per share (2.5% yield) and also declared a variable dividend of $0.135 per share to fulfill its first-quarter shareholder returns allocation. Cenovus also modified its shareholder returns framework (see details below).
Conference Call
• Time: 11:00 am ET on Wednesday, May 1 • Dial-In: (888) 664-6383 Key Points
• Cenovus generated $1.2 billion of free funds flow (before dividends) in the quarter with its net debt (company definition) down modestly to $4.83 billion (vs. RBC at $4.82 billion) as of March 31 in part due to a working capital build of about $370 million (vs. RBC with a build of $225 million).
Christina Lake production came in at 236,500 bbl/d (1% below RBC at 239,700 bbl/d), while Foster Creek production came in at 196,000 bbl/d (largely in-line with RBC at 197,000 bbl/d).
Sunrise production volumes were 48,800 bbl/d in the first-quarter (in-line with RBC at 49,000 bbl/d) as the asset continues along its redevelopment plan.
Atlantic Offshore production of 7,200 bbl/d (20% above RBC) reflected the non-operated Terra Nova FPSO vessel resuming operations. Sales volumes was 3,900 bbl/d in the first-quarter, impacted by a timing difference between production and sales due to storage at an onshore terminal.
Refining margin (US + Canadian manufacturing) of $560 million (including $195 million of FIFO gains in the US refining segment vs. RBC at $50 million gain), came in 8% above our $519 million estimate.
Cenovus reported a cash tax expense of $410 million in the first-quarter, slightly above the $370 million factored into our estimates ($0.02 per share impact).
Cenovus returned $436 million of capital to shareholders in the first-quarter.
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