Cenovus Energy Inc T.CVE.WT

RBC

[retiredcf]

October 19, 2023

Cenovus Energy Inc.
3Q Preview—US Downstream in Focus

TSX: CVE | CAD 29.03 | Outperform | Price Target CAD 30.00

Sentiment: Neutral

Cenovus will report its third-quarter results before market open on Thursday, November 2. We look forward to an update on the company’s execution in its US refining segment and its progress toward its stated $4.0 billion net debt floor.

Conference Call

• Time: 10:00am ET, Thursday, November 2 • Dial-in: TBA

3Q Preview

RBC vs. Consensus (Analyst Survey): RBC is slightly above Street consensus on OEPS and CFPS, while in line on production volumes and slightly below consensus on capital spending.

Observations

• Our third-quarter production outlook for Cenovus of 787,600 boe/d reflects Christina Lake production of 236,600 bbl/d and Foster Creek production of 185,000 bbl/d.

• Also included in our third-quarter outlook is Canada gas volumes of 585 mmcf/d.

• Elsewhere,our third quarter outlook includes Lloydminster thermal volumes of 123,500 bbl/d(inclusive of planned maintenance with a circa 1,500 bbl/d quarterly impact), Sunrise production volumes of 52,000 bbl/d, White Rose volumes of 10,500 bbl/d and Liwan production of 34,800 boe/d (net) (including 164 mmcf/d of natural gas at a realization of $12.62/mcf).

• In the downstream, we anticipate Canada + US refining (pre-tax) operating cash flow of $815 million in the quarter, inclusive of an approximate $75 million positive FIFO inventory adjustment in the US.

• Our estimates include $546 million in cash taxes, capital investment of $1.07 billion and $375 million of estimated share repurchases in the third quarter.

• Our estimates also factor in $525 million in warrant repurchases to supplement the company’s share buybacks as part of its shareholder returns allocation.

• All said, we peg Cenovus’ third-quarter operating cash flow at $3.2 billion ($1.69 per share) and free cash flow at $2.1 billion (before estimated dividends of $264 million and working capital movements).

• As per our outlook, Cenovus’ net debt (company definition) would sit at about $5.5 billion as of September 30, down modestly from $6.4 billion on June 30.