TSX:CVE - Post Discussion
Post by
retiredcf on Dec 07, 2022 8:09am
TD
Cenovus Energy Inc.
(CVE-T, CVE-N) C$25.14 | US$18.43
Introducing New Estimates Following 2023 Budget Release
Event
Updating estimates following yesterday's 2023 budget—our initial thoughts here.
Impact: NEUTRAL
Five-year growth plan laid out (Exhibit 2): CVE envisions production growth of 105-125+ mbbl/d through 2027 (3% CAGR vs. 2023E total production of ~820 mboe/ d). This growth is to be driven by: 1) 15-20 mbbl/d from Sunrise optimization over 2024-2025 (16% CAGR vs. ~47.5 mbbl/d 2023E production); 2) 20-30 mbbl/d from Narrows Lake tie-back to Christina Lake by YE2025 (5% CAGR vs. ~245 mbbl/d 2023E production); 3) 30+ mbbl/d from Foster Creek debottlenecking by YE2027 (4% CAGR vs. ~190 mbbl/d 2023E production); and 4) 45 mbbl/d from West White Rose by YE2026.
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For downstream, Lloydminster Refinery debottlenecking is expected to add ~3 mbbl/d of throughput capacity by 2023 (+8% vs. 30 mbbl/d current capacity), and another ~15 mbbl/d by 2026 through feedstock replacement (+50% vs. current capacity).
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Management also highlighted increasing heavy conversion capacity at Wood River (currently 120 mbbl/d heavy processing capacity on 173 mbbl/d net throughput capacity) and Borger (currently 18 mbbl/d heavy processing capacity on 75 mbbl/d net throughput capacity).
$1bln of capex anticipated for emissions reductions during 2023-2027: This includes several CCUS projects, continued energy efficiency and methane-reduction initiatives, in addition to longer-dated pilots/feasibility studies (small modular nuclear reactors for heat/power, Svante carbon capture technology, etc.). Recall, CVE is planning to reduce absolute Scope 1+2 emissions by 35% (from 2019 levels), slightly shy of CNQ's 40% reduction target over 2020-2035. We could see additional incentives in the April 2023 federal budget, which should dictate how quickly Pathways can advance CCUS development, in our view.
TD Investment Conclusion
The fundamental outlook for CVE remains constructive, especially since value- enhancing opportunities continue to be uncovered within the HSE portfolio. Transitioning to a 100% return of FFF in 2023 (from 50% currently) also puts CVE on a very competitive footing, in our view. Finally, it should enjoy significant CF tailwinds in 2023 with the y/y removal of COP contingent payments and hedging losses.
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