Cenovus Energy Inc T.CVE.WT

RBC

[retiredcf]

April 19, 2023

Cenovus Energy Inc.
1Q Preview—Eyeing the Downstream

TSX: CVE | CAD 24.02 | Outperform | Price Target CAD 29.00

Sentiment: Neutral

Conference Call

• Time: 11:00 am ET on Wednesday, April 26 • Dial-in: TBA

1Q Preview

RBC vs. Consensus (Analyst Survey): RBC is below consensus on OEPS, in-line with consensus on CFPS and production volumes, and slightly above on capital spending. Notably, we forecast that Cenovus will increase its quarterly base dividend by approximately 14%, from $0.105/share to $0.12/share alongside its first-quarter results.

Observations

• Our first-quarter production outlook for Cenovus of 788,900 boe/d reflects Christina Lake production of 239,700 bbl/d, Foster Creek production of 187,500 bbl/d, Lloydminster thermal volumes of 120,000 bbl/d and Liwan production of 34,800 boe/d (net) (including 164 mmcf/d of natural gas at a realization of $12.72/mcf).

• In the downstream, we anticipate Canada + US refining (pre-tax) operating cash flow of just $25 million in the quarter, inclusive of a $200 million negative FIFO inventory adjustment in the US, as Cenovus continues to ramp-up its Toledo and Superior refineries.

• Our estimates include $81 million in cash taxes, capital investment of $1.1 billion (excluding A&D) and $60 million in share repurchases in the first-quarter.

• Also included in our outlook is the closing of Cenovus’ US$300 million acquisition of the additional 50% working interest in the Toledo refinery.

• All said, we peg Cenovus’ first-quarter operating cash flow at $1.4 billion ($0.75 per share) and free cash flow at $331 million (before dividends and working capital movements, excluding A&D).

• As per our outlook, Cenovus’ net debt (company definition) would sit at about $6.2 billion as of March 31, up from $4.3 billion on December 31.