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Near-term priorities. The company highlighted its priorities in the near-term which include getting its upstream and downstream assets back running at normalized rates while remaining laser-focused on debt reduction as it aims for its $4.0 billion net debt target.
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Stronger second-half expected. Cenovus expects a step-change in cash flow generation through the second-half of 2023 as its refining assets get fully up and running, and upstream momentum is regained.
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Net debt reduction and shareholder returns. Cenovus estimates that it may reach its ultimate net debt target of $4.0 billion in the fourth-quarter of 2023 (under current commodity prices), which would open the door to 100% allocation of excess quarterly free cash flow towards shareholder returns. At current share price levels, Cenovus’ preference is heavily skewed towards returning capital to shareholder through share buybacks.
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Upstream production guidance. Due to a planned turnaround at Foster Creek in the second-quarter (18,000-20,000 bbl/d quarterly impact) as well as the impact of the Alberta wildfires, Cenovus indicated its second-quarter production rates may be choppy. However, the company is maintaining its 2023 production guidance range of 790,000-810,000 boe/d.
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Toledo refinery. At Toledo (160,000 bbl/d), Cenovus’ ramp-up is running as expected with the east side (30,000 bbl/d) of the plant brought up in April and running smoothly, with the train on the west side of the refinery (120,000 bbl/d) expected to be running at full rates by the end of June.
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Superior refinery. Cenovus’ Superior refinery’s (49,000 bbl/d) crude unit came online in April, with ramp-up progressing on a unit-by-unit basis—currently running with rates at about 25,000-30,000 bbl/d. The catalytic cracking unit is in the process of being brought online, with full restart expected by the end of the second-quarter.
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Wood River refinery. At Wood River (50% non-operated wi, 173,000 bbl/d net), the company is seeing normalized rates following unplanned downtime in the first-quarter and planned maintenance activities completed in mid-May.
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Borger refinery. At Borger (50% non-operated wi, 75,000 bbl/d net), Cenovus indicated that the facility has been running normally after unplanned downtime in the first-quarter and has a planned turnaround in the fall.
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Lima refinery. The company’s Lima refinery continues to run well at rates proximate to nameplate capacity (179,000 bbl/d). Notably, Cenovus has opted to defer a circa 30-day planned turnaround slated for October 2023 into October 2024.
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Lloydminster thermals. Upstream-wise, Cenovus’ Lloydminster thermal operations have moved back above 100,000 bbl/d of heavy oil production, up from 99,000 bbl/d in the first-quarter.
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Sunrise. The company remains optimistic about increasing throughput rates and reducing its SOR at its Sunrise project (100% wi), which possesses a large resource base. Sunrise is currently producing about 45,000-50,000 bbl/d in the context of nameplate capacity of 60,000 bbl/d.
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Asia-Pacific. Cenovus looks upon its Asia-Pacific natural gas business as a reliable cash flow generator requiring low capital investment. The company is continuing to work on incremental gas sales contracts.
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Focusing on organic opportunities. On the M&A front, Cenovus indicated it’s focused on regaining operating momentum with its existing assets and organic growth opportunities in the near-term. The company has streamlined its portfolio in the past 18 months and indicated there is nothing material they are considering at this time.