Bullboard - Stock Discussion Forum Cenovus Energy Inc T.CVE.WT

Primary Symbol: T.CVE Alternate Symbol(s): CVE | T.CVE.PR.A | T.CVE.PR.B | T.CVE.PR.C | T.CVE.PR.E | T.CVE.PR.G | CNVEF | CVE.WS

Energy Oil & Gas Integrated

Cenovus Energy Inc. is a Canada-based integrated energy company. The Company has oil and natural gas production operations in Canada and the Asia Pacific region, and upgrading, refining and marketing operations in Canada and the United States. The Company's segments include Upstream, Downstream, and Corporate and Eliminations. Its Upstream segment includes Oil Sands, Conventional, and Offshore.... see more

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TSX:CVE - Post Discussion

Cenovus Energy Inc > TD

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Post by retiredcf on Apr 27, 2023 8:30am

TD

Cenovus Energy Inc.

(CVE-T, CVE-N) C$23.18 | US$16.35

Q1/23 Conference Call Highlights and Updated Estimates

Event

Updated estimates following Q1/23 call (highlights below). Initial thoughts here.

Impact: NEUTRAL

Despite a noisy Q1/23, CVE remains confident in its ability to execute within its U.S. refining portfolio: Using the solid performance of the Lloyd Upgrader/ Asphalt Refinery and Lima Refinery as a proxy (i.e. since being acquired from HSE in 2021), CVE believes in its ability to replicate similarly strong utilization and margins at Superior/Toledo once they are fully ramped-up in H2/23.

Superior/Toledo expected to strengthen heavy oil value chain: Recall, Superior/Toledo have combined heavy processing capacity of 124 mbbl/d, increasing total U.S. heavy processing capacity to ~302 mbbl/d (net). In addition, CVE will consume ~400 mbbl/d of heavy blend (~50% of heavy blend production of ~800 mbbl/d) once all refineries are up-and-running.
Management also expecting a step-change in upstream operating performance heading into H2/23: As part of its near-term growth plans (note), CVE plans to bring on three pads at each of Foster Creek and Christina Lake in H2/23. We highlight that these pad additions coincide with the expected start-up of TMX in Q1/24, and note that we estimate TMX can support 2-4 years of heavy production growth based on historical trends and current production (note).

With Lloyd thermals production now sitting comfortably at >100 mbbl/d (following implementation of its lower-cost operating model), CVE has now set its sights on Sunrise. Here, it plans to bring production to nameplate capacity (60 mbbl/d) over the next 18 months, with line of sight to additional future debottlenecking opportunities.
As expected, management confirmed its near-term preference for opportunistic buybacks over variable dividends: Considering CVE's share price is down ~30% from Q2/22 highs (-14% YTD vs. peers +2%), this does not surprise us at all.

TD Investment Conclusion

Although this was an unusually tough quarter for CVE, the fundamental outlook remains constructive, in our view, especially since value-enhancing opportunities continue to be uncovered within the HSE portfolio. Notwithstanding the recent delay, transitioning to a 100% return of excess FFF in Q4/23 (from 50%) will also serve to put CVE on a competitive footing, in our view. Our target price falls to $29/share on revised financial estimates.