CENOVUS ENERGY INC. 2024 Budget: Mostly In Line With Our Expectations And
Consensus
Cenovus provided 2024 guidance that was mostly in line with our expectations
and consensus. The company has included $1.5 billion-$2.0 billion of
optimization and growth capital primarily focused on progressing West White
Rose, and advancing growth at Foster Creek, Christina Lake and Sunrise oil
sands facilities. The company will also look at implementing further initiatives
in its downstream business and development in the Conventional business.
Downstream throughput guidance includes turnarounds in Q2/24 at
Lloydminster and turnarounds through the year in U.S. refining. There was
no mention of timing to achieve the $4 billion net debt floor, but we estimate
Cenovus could achieve its goal in Q2/24 based on strip pricing. We suspect
the market’s focus will be on unit operating cost guidance despite the in-line
capex and production as well as speculation around the timing of achieving
the $4 billion net debt floor.
Key Takeaways.
• 2024 production guidance. Production of 770 MBoe/d-810 MBoe/d is in
line with our estimate of 796 MBoe/d and consensus of 798 MBoe/d
(range of 782 MBoe/d to 815 MBoe/d). Downstream throughput guidance
of 630 MBbl/d-670 MBbl/d is slightly below our estimate of 672 MBbl/d.
Capital spending of $4.5 billion-$5.0 billion is modestly higher than our
expectation of $4.5 billion and in line with consensus of $4.7 billion.
• Oil Sands. Oil sands and thermal projects production of 590 MBbl/d-610
MBbl/d reflects a turnaround at Christina Lake in Q3/24. Cenovus plans
to invest $2.5 billion-$2.75 billion in oil sands assets, including $650
million of growth and optimization capital relating to brownfield and multi-
year growth opportunities. Cenovus is focusing on Foster Creek
optimization, the Narrows Lake tie-back to Christina Lake, and
optimization and new pads at Sunrise, which will meaningfully increase
production starting in 2025. The opex for the oil sands is $12-$14/Bbl,
this is due to a rise in non-fuel costs associated with the turnaround at
Christina Lake. Unit operating costs in the oil sands is ~$1.50 per Bbl
higher than our expectations in 2024.
• Offshore. Offshore production guidance of 60 MBoe/d-70 MBoe/d is a
modest decrease Y/Y, which reflects the impact of the SeaRose FPSO
vessel asset life extension program scheduled to begin in January. The
company expects SeaRose to resume production late in Q3/24. Offshore
capex guidance of $850 million-$950 million will be primarily directed
towards West White Rose (WWR). First oil from WWR is expected in
H1/26.
• Valuation. Cenovus trades at a P/RNAV ratio of 72%, a 2024E
EV/DACF of 3.6x and a 2024E FCF yield of 20% vs. the large-cap group
at 82%, 4.4x and 16%, respectively.