Refining operating cash flow increases 97% to $524 million
-
Cash flow was $971 million, or $1.28 per share in the first quarter, an
increase of 7% from the same period in 2012, mainly due to strong
performance from the company's refining business.
-
Operating cash flow from refining almost doubled to $524 million
compared with the same quarter a year earlier.
-
Combined oil sands production at Foster Creek and Christina Lake
averaged more than 100,000 barrels per day (bbls/d) net in the first
quarter, up 22% from a year earlier. Production at Christina Lake
increased 79% to an average of more than 44,000 bbls/d net.
-
Conventional oil production, including Pelican Lake, averaged almost
80,000 bbls/d in the quarter, a 7% increase from the same period a year
ago.
-
Regulatory applications and environmental impact assessments (EIAs) were
submitted for new phases at Christina Lake and Foster Creek.
-
Cenovus drilled 315 gross stratigraphic test wells in the first quarter,
primarily to support the expansion and development of the company's oil
sands projects.
"Our refining business continues to deliver excellent results, clearly
demonstrating the benefit of our integrated strategy. When our cash
flow from heavy oil production is affected by low commodity prices, our
refineries give us a financial advantage by turning that discounted
crude into higher-value refined products," said Brian Ferguson,
President & Chief Executive Officer of Cenovus. "We also delivered
another quarter of strong oil production growth, mainly due to our oil
sands assets."
Financial & production summary
|
(for the period ended March 31)
($ millions, except per share amounts)
|
2013 Q1
|
2012
Q1
|
% change
|
Cash flow1
Per share diluted
|
971 1.28
|
904
1.19
|
7
|
Operating earnings1
Per share diluted
|
391 0.52
|
340
0.45
|
15
|
Net earnings
Per share diluted
|
171 0.23
|
426
0.56
|
-60
|
Capital investment
|
915
|
900
|
2
|
Production (before royalties)
|
|
|
|
Oil sands total (bbls/d)
|
100,347
|
81,947
|
22
|
Conventional oil2 (bbls/d)
|
79,878
|
74,903
|
7
|
Total oil2(bbls/d)
|
180,225
|
156,850
|
15
|
Natural gas (MMcf/d)
|
545
|
636
|
-14
|
1 Cash flow and operating earnings are non-GAAP measures as defined in the
Advisory. See also the earnings reconciliation summary in the operating
earnings table.
2 Includes natural gas liquids (NGLs) production and production from
Pelican Lake.
CALGARY, April 24, 2013 /CNW/ - Cenovus Energy Inc. (TSX, NYSE: CVE)
reported strong first quarter performance, benefiting from its
integrated business plan. The company delivered excellent results from
its U.S. refining operations and continued growth in its oil
production. Cenovus achieved cash flow of $971 million, 7% higher than
the first quarter of 2012. Increased crude oil production was offset by
a 27% decline in the average crude oil sales price the company received
compared with the same period a year ago.
While lower oil prices had a negative impact on cash flow from the
company's oil producing assets, they benefited Cenovus's refining
operations. This is due to the company's ability to process discounted
heavy oil and at the same time receive elevated prices for its refined
products. Operating cash flow from refining increased to $524 million
in the first quarter, 97% higher than the year before.
During the first quarter, the price of Western Canadian Select (WCS),
the benchmark Canadian heavy oil blend, fell against the price of West
Texas Intermediate (WTI), the North American benchmark. The
differential averaged US$31.96/bbl in the first quarter, widening 49%
from the same period in 2012. The company's refineries, one in Illinois
and the second in Texas, have access to WCS and other discounted oil
feedstock.
Steady oil production growth
Average daily oil production in the quarter was 15% higher compared with
the same period in 2012, primarily led by growth at the company's
Christina Lake oil sands project. Combined output from Foster Creek and
Christina Lake averaged 100,347 bbls/d net in the first quarter, up 22%
from the same period in 2012. Production at Christina Lake averaged
44,351 bbls/d net, an increase of 79% from a year earlier, resulting
mainly from the successful ramp-up of the phase D expansion. Foster
Creek output averaged about 56,000 bbls/d net, down 2% from the same
period a year earlier due to higher than expected downtime on some
production wells.
There are now five phases operating at Foster Creek and four at
Christina Lake. Expansions continue at each of these projects, with a
combined 85,000 bbls/d of gross production capacity expected to be
added before the end of 2014, helping to advance Cenovus's long-term
oil growth strategy.
Cenovus has started moving wells at Foster Creek into the final phase of
production, called blowdown. This is a first at a major commercial
steam-assisted gravity drainage (SAGD) project. As SAGD wells are
prepared for blowdown, steam injection is reduced and pressure is
maintained with the co-injection of methane. In full blowdown, the well
continues to produce without steam, which lowers operating costs. The
steam is then redirected to a newer well pad. One well pad at Foster
Creek entered full blowdown mode in the first quarter and two more are
being converted.
Addressing market access challenges
The predictability of Cenovus's oil production growth, combined with its
financial strength, gives the company the confidence to consider
support for all proposed major pipeline projects that would open up
additional access to existing markets and potentially add new ones.
"It's vital to the economy that Canadian oil companies continue to
expand market access for their production," Ferguson said. "Without
pipelines to new markets, Canada's oil industry will continue to leave
billions of dollars in lost revenues on the table every year to the
detriment of all Canadians. With the third largest oil reserves in the
world, Canada has a tremendous opportunity to meet the growing global
demand for energy."
Cenovus continues to examine ways to mitigate the negative impact of
market access constraints on pricing for Canadian oil producers. The
company takes a portfolio approach to market access and continues to
proactively assess various options to transport its oil. Cenovus is
receiving higher international prices on about 40,000 bbls/d of oil
production through a combination of pipeline, barge and rail options
that provide access to ocean transport. For example, in early 2012,
Cenovus started shipping 11,500 bbls/d of oil under a firm service
agreement on the Trans Mountain pipeline that runs from Edmonton to the
West Coast. This enables Cenovus to receive a premium for its Foster
Creek production relative to the WCS heavy oil benchmark. In addition
to pipelines, Cenovus is now shipping about 6,000 bbls/d of
conventional oil to market by rail and is looking to increase that to
about 10,000 bbls/d by the end of this year.
Oil Projects
|
Daily production1 |
(Before royalties) (Mbbls/d)
|
2013
|
2012
|
2011
|
|
Q1
|
Full Year
|
Q4
|
Q3
|
Q2
|
Q1
|
Full Year
|
Oil sands
|
|
|
|
|
|
|
|
Foster Creek
|
56
|
58
|
59
|
63
|
52
|
57
|
55
|
Christina Lake
|
44
|
32
|
42
|
32
|
29
|
25
|
12
|
Oil sands total
|
100
|
90
|
101
|
96
|
80
|
82
|
67
|
Conventional oil
|
|
|
|
|
|
|
|
Pelican Lake
|
24
|
23
|
24
|
24
|
22
|
21
|
20
|
Weyburn
|
17
|
16
|
16
|
16
|
16
|
17
|
16
|
Other conventional2
|
39
|
37
|
37
|
36
|
36
|
38
|
31
|
Conventional total
|
80
|
76
|
77
|
76
|
75
|
75
|
68
|
Total oil2
|
180
|
165
|
178
|
171
|
156
|
157
|
134
|
1 Totals may not add due to rounding.
2 Includes NGLs production.
Oil sands
Cenovus has a substantial portfolio of oil sands assets in northern
Alberta with the potential to provide decades of growth. The two
currently producing operations, Foster Creek and Christina Lake, use
SAGD, which involves drilling into the reservoir and pumping the oil to
the surface. Cenovus has begun work on its third project, Narrows Lake,
which is part of the Christina Lake Region. These projects are operated
by Cenovus and are jointly owned with ConocoPhillips. Cenovus also has an enormous opportunity to deliver increased
shareholder value through production growth from future developments.
The company has identified several emerging projects and continues to
assess its resources to prioritize development plans and support
regulatory applications for new projects.
Foster Creek and Christina Lake
Production
-
Combined production at Foster Creek and Christina Lake increased 22% to
more than 100,000 bbls/d net in the first quarter of 2013 compared with
the same period a year earlier.
-
Christina Lake production increased 79% to an average of 44,351 bbls/d
net in the first quarter, compared with the same period a year earlier.
-
The substantial increase in production at Christina Lake was due to the
ramp-up of two new expansion phases. Phase C reached full capacity in
the first quarter of 2012, while phase D began producing in July 2012,
about three months ahead of schedule. Phase D demonstrated full
production capacity in January 2013, approximately six months after
first production.
-
Foster Creek produced an average of about 56,000 bbls/d net in the first
quarter, a 2% decline from the average production rate in the same
period a year earlier. The slight decline was mainly due to increased
downtime on some production wells. Work is being done on the wells and
the company anticipates production to once again be at the higher end
of its current expected range of 110,000 bbls/d to 120,000 bbls/d in
the third quarter.
-
About 14% of production at Foster Creek comes from 52 wells using
Cenovus's Wedge WellTM technology. These single horizontal wells, drilled between existing
SAGD well pairs, reach oil that would otherwise be unrecoverable. The
company's WedgeWellTM technology has the potential to increase overall recovery from the
reservoir between 10% and 15%, while reducing the steam to oil ratio
(SOR). Cenovus anticipates having an additional 11 wells at Foster
Creek using Wedge WellTM technology on production by the end of 2013.
-
Christina Lake is also benefiting from the use of Wedge WellTM technology with seven of these wells now producing and another three
drilled wells expected to be on line in the second quarter of this
year.
Expansions
-
The Christina Lake phase E project is about 90% complete. First
production is expected in the third quarter of 2013. Procurement, plant
construction and major equipment fabrication continue for phase F.
Engineering work continues for phase G.
-
At Foster Creek, overall progress of the combined F, G and H expansion
is approximately 46% complete, while the phase F central plant is about
73% complete. First production at phase F is expected in the third
quarter of 2014. Module assembly and piling work continues at phase G,
while site preparation, piling work and major equipment procurement are
underway for phase H.
-
Combined capital investment at Foster Creek and Christina Lake was $385
million in the first quarter, up 30% from the same period in 2012. This
includes spending on the expansion phases, stratigraphic test wells and
maintenance capital.
-
During the first quarter, Cenovus submitted regulatory applications and
environmental impact assessments for Christina Lake phase H and Foster
Creek phase J, with regulatory approvals anticipated in the fourth
quarter of 2014 and the first quarter of 2015, respectively.
Operating costs
-
Operating costs at Foster Creek averaged $14.03/bbl in the first
quarter, about 9% higher than $12.85/bbl a year earlier. The increase
came mostly from higher fuel prices and workforce costs, partially
offset by lower repair and maintenance expenses. Non-fuel operating
costs were $11.12/bbl in the quarter compared with $10.72/bbl in the
same period of 2012, a 4% increase.
-
Operating costs at Christina Lake were $12.93/bbl in the first quarter,
a 16% decrease from $15.33/bbl in the same period a year ago. Non-fuel
operating costs at Christina Lake were $9.24/bbl in the quarter
compared with $12.86/bbl in 2012, a 28% decrease. The cost declines
were primarily due to significantly higher production and lower repair
and maintenance expenses compared with the first quarter in 2012. These
were partially offset by an increase in fuel prices and volume, waste
fluid handling and trucking costs.
Steam to oil ratio
-
SOR measures the number of barrels of steam needed for every barrel of
oil produced. A lower SOR means less natural gas is used to generate
the steam, which results in reduced capital and operating costs, fewer
emissions and lower water usage.
-
Cenovus continues to achieve among the lowest SORs in the industry. The
first quarter SOR at Christina Lake was 1.9, down from 2.1 in the same
period a year ago, due to increased production. Foster Creek's SOR was
2.4, compared with 2.1 in the first quarter of 2012, due to slightly
lower production. The SOR at Foster Creek is expected to decrease once
production returns to anticipated rates and the company sees the
benefits that are anticipated from moving to blowdown. The combined SOR
for Cenovus's oil sands operations was 2.2 in the first quarter of
2013.
Christina Dilbit Blend (CDB)
-
CDB is a heavy oil blend stream launched in the fourth quarter of 2011.
While CDB is priced at a discount to WCS, it continues to gain
acceptance with a wide base of refiners, which has resulted in a
narrowing of the discount for the first quarter of 2013 compared with
the same period a year earlier.
-
The Wood River Refinery ran approximately 103,000 bbls/d gross of CDB or
equivalent high-TAN crudes during the first quarter of 2013. These
crudes represented approximately 60% of the total heavy crude volumes
processed at Wood River in the quarter, up from about 30% in the first
quarter of 2012.
Narrows Lake
-
Cenovus's next major oil sands development, a three-phase project at
Narrows Lake in northern Alberta, received regulatory approval in 2012
as well as partner approval for the first phase. Narrows Lake is
expected to be the industry's first project to demonstrate solvent
aided process (SAP), using butane, on a commercial scale.
-
Site preparation, which began in the third quarter of 2012, engineering
and procurement, are progressing as expected. Construction of the phase
A plant is scheduled to start in the third quarter of 2013. The first
phase of the project is anticipated to have production capacity of
45,000 bbls/d, with first oil expected in 2017.
-
Cenovus invested $25 million to advance the Narrows Lake project in the
first quarter of this year compared with $9 million in the same period
in 2012.
Emerging projects
Grand Rapids
-
At the company's 100%-owned Grand Rapids project, located within the
Greater Pelican Region, a SAGD pilot project is underway. The pilot
project is progressing and first production from a second well pair was
achieved in February.
-
A regulatory application and EIA for a 180,000 bbl/d commercial project
has been submitted and is proceeding on schedule. Cenovus anticipates
regulatory approval for Grand Rapids by the end of 2013.
-
Capital investment at Grand Rapids was $18 million in the first quarter
of 2013, down from $34 million a year ago. This was primarily due to
stratigraphic test well drilling initially scheduled for the first
quarter of this year being advanced into the fourth quarter of 2012.
Telephone Lake
-
Cenovus's 100%-owned Telephone Lake property is located within the
Borealis Region of northern Alberta. A revised application and EIA
submitted in December 2011 is advancing through the regulatory process
and approval is anticipated in 2014.
-
Cenovus is continuing its dewatering pilot project designed to remove a
layer of non-potable water that is sitting on top of the oil sands
deposit at Telephone Lake. The dewatering operations have been running
well. While dewatering is not essential to the development of Telephone
Lake, Cenovus believes it could improve the project's SORs by up to
30%, enhancing its economics and reducing its impact on the
environment.
-
Consistent with the development plan, capital spending in the first
quarter was $53 million, down from $91 million a year earlier.
Conventional oil
Pelican Lake
Cenovus produces heavy oil from the Wabiskaw formation at its 100%-owned
Pelican Lake operation in the Greater Pelican Region, about 300
kilometres north of Edmonton. While this property produces conventional
heavy oil, it's managed as part of Cenovus's oil sands segment. Since
2006, Cenovus has been injecting polymer to enhance production from the
reservoir, which is also under waterflood. Based on reservoir
performance of the polymer program, the company has a multi-year growth
plan for Pelican Lake with production expected to reach 55,000 bbls/d.
-
Pelican Lake produced 23,687 bbls/d in the first quarter of 2013, a 14%
increase in production compared with the same period in 2012 due to the
expansion of infill drilling and polymer injection. In the first
quarter, production response from the company's infill drilling and
polymer flood program was slower than expected for some of the well
pads as it's taking longer to build reservoir pressure. Stronger
production growth is expected later this year and in 2014 in response
to the polymer injection.
-
Cenovus invested $143 million at Pelican Lake in the first quarter to
increase infill drilling for the polymer flood program and on facility
expansion, up from $139 million in the same period of 2012. This
investment not only helps to grow production, but also to offset
natural declines.
-
The company has decided to delay some capital investment originally
planned for 2013 to align spending with the current response it's
receiving from the polymer flood program. A second oil battery
scheduled for construction this year has been delayed until 2014. The
move should allow Cenovus to optimize the battery design and
installation, which is expected to reduce overall costs. Work will
continue as planned on project engineering and long-lead items. In
addition, the company is reducing the number of drilling rigs to two
from the four that have been at site.
-
Cenovus still plans to drill about 1,000 additional production and
injection wells in the next five to seven years to expand the polymer
flood at Pelican Lake.
-
Operating costs at Pelican Lake averaged $19.23/bbl in the first
quarter, a 20% increase from $16.05/bbl in the same quarter a year
earlier. Per barrel operating costs have been impacted by the expanded
polymer injection program and workover activities. Production growth
expected later this year will help to reduce per barrel operating
costs.
Other conventional oil
In addition to Pelican Lake, Cenovus has conventional and tight oil
assets in Alberta as well as the established Weyburn operation in
Saskatchewan that uses carbon dioxide injection to enhance oil
recovery.
-
Alberta oil production averaged 32,960 bbls/d in the first quarter, up
8% from the same period in the previous year, primarily due to
increased light and medium crude production as a result of successful
horizontal well performance.
-
The company invested $190 million in its conventional oil assets, the
majority of which was dedicated to the continued development of its
emerging tight oil plays in southern Alberta.
-
Production at the Weyburn operation was about 16,700 bbls/d net compared
with approximately 16,600 bbls/d net in the first quarter of 2012.
-
Cenovus signed an agreement late last year for a new supply of carbon
dioxide (CO2)from SaskPower to supplement the supply it already receives from a coal
gasification plant in Beulah, North Dakota. This new supply agreement
improves the stability of the company's CO2 supply source for its enhanced oil recovery operation.
-
Combined crude oil production from the Bakken and Lower Shaunavon
operations averaged about 6,500 bbls/d, a 6% decrease from the same
quarter a year earlier. As previously announced, Cenovus has a process
underway to dispose of its interests in the Lower Shaunavon property
and the operated part of its Bakken property.
-
Operating costs for Cenovus's conventional oil operations, excluding
Pelican Lake, increased 5% to $16.52/bbl in the first quarter of 2013
compared with the same period in 2012. This was mainly due to higher
costs for electricity, workforce, waste fluid handling and trucking.
Natural Gas
|
(Before royalties)
(MMcf/d)
|
Daily production
|
2013
|
2012
|
2011
|
Q1
|
Full Year
|
Q4
|
Q3
|
Q2
|
Q1
|
Full Year
|
Natural Gas
|
545
|
594
|
566
|
577
|
596
|
636
|
656
|
Cenovus has a solid base of established, reliable natural gas properties
in Alberta. These assets are an important component of the company's
financial foundation, generating operating cash flow well in excess of
their ongoing capital investment requirements. The natural gas business
also acts as an economic hedge against price fluctuations, because
natural gas fuels the company's oil sands and refining operations.
-
Natural gas production in the first quarter of 2013 was approximately
545 million cubic feet per day (MMcf/d), down 14% from the same period
last year, as anticipated. The production drop was driven primarily by
expected natural declines and the decision to direct capital investment
toward the company's oil opportunities.
-
Cenovus's average realized sales price for natural gas, including
hedges, was $3.64 per thousand cubic feet (Mcf) in the period compared
with $3.53 per Mcf in the first quarter of 2012.
-
The company invested $9 million in its natural gas properties in the
first quarter of 2013. Operating cash flow from natural gas in excess
of capital investment was $106 million.
-
Cenovus anticipates managing an annual decline rate of 10% to 15% for
its natural gas production, targeting a long-term level of between 400
MMcf/d and 500 MMcf/d to match Cenovus's future anticipated internal
consumption at its oil sands and refining facilities.
Refining
Cenovus's refining operations allow the company to capture value from
crude oil production through to refined products such as diesel,
gasoline and jet fuel. This integrated strategy provides a natural
economic hedge against discounted crude oil prices by providing lower
feedstock costs to the Wood River Refinery in Illinois and Borger
Refinery in Texas, which Cenovus jointly owns with the operator,
Phillips 66.
-
Operating cash flow from refining increased to $524 million, 97% more
than in the first quarter of 2012. This was due to improved refining
margins, mainly attributable to higher benchmark crack spreads as well
as wider heavy oil price differentials, resulting in lower feedstock
costs.
-
The positive impact of lower feedstock costs was partially offset by
reduced product output due to planned maintenance at both refineries
during the quarter.
-
Cenovus's refineries processed an average of 416,000 bbls/d of crude oil
in the first quarter, resulting in 439,000 bbls/d of refined product
output. This was about 6% lower than in the same quarter a year ago
primarily due to planned maintenance work at Wood River.
-
For the second quarter of 2013, Cenovus is expecting operating cash flow
from the company's refining business to range between $250 million and
$350 million, based on a crack spread of $25/bbl and the recent
narrowing of light-heavy differentials.
-
The amount of Canadian heavy oil processed in the first quarter of 2013
was 197,000 bbls/d, compared with 199,000 bbls/d in the same period of
2012.
-
Cenovus's operating cash flow is calculated on a first-in, first-out
(FIFO) inventory accounting basis. Using the last-in, first-out (LIFO)
accounting method employed by most U.S. refiners, Cenovus's first
quarter 2013 refining operating cash flow would have been $20 million
lower than reported under FIFO, compared with $4 million lower in the
same quarter of 2012.
-
The company had refining capital investment of $25 million in the first
quarter of this year.
Financial
Dividend
The Cenovus Board of Directors declared a second quarter dividend of
$0.242 per share, payable on June 28, 2013 to common shareholders of
record as of June 14, 2013. Based on the April 23, 2013 closing share
price on the Toronto Stock Exchange of $28.75, this represents an
annualized yield of about 3.4%. Declaration of dividends is at the sole
discretion of the Board. Cenovus's continued commitment to the dividend
is an important aspect of the company's strategy to focus on increasing
total shareholder return.
Hedging strategy
Cenovus's natural gas and crude oil hedging strategy helps it to achieve
more predictability around cash flow and safeguard its capital program.
The Board-approved risk management policy allows the company to
financially hedge up to 75% of this year's and next year's expected
natural gas production, net of internal fuel usage, and up to 50% and
25%, respectively, in the two following years. The policy also allows
the company to enter fixed price hedges on as much as 50% of net
liquids production this year and next, as well as 25% of net liquids
production for each of the following two years. In addition to
financial hedges, Cenovus benefits from a natural hedge with its gas
production. About 135 MMcf/d of natural gas is expected to be consumed
at the company's SAGD and refinery operations, which is more than
offset by the gas Cenovus produces. The company's financial hedging
positions are determined after considering this natural hedge.
Cenovus's financial hedge positions at March 31, 2013 include:
-
approximately 10% or 18,500 bbls/d of expected oil production hedged for
2013 at an average Brent price of US$110.36/bbl and an additional 10%
or 18,500 bbls/d at an average Brent price of C$111.72/bbl
-
166 MMcf/d or approximately 32% of expected natural gas production
hedged for 2013 at an average NYMEX price of US$4.64/Mcf, plus internal
usage of about 135 MMcf/d of natural gas and long-term sales of 29
MMcf/d of natural gas
-
approximately 49,200 bbls/d of heavy crude exposure hedged for 2013 at
an average WCS differential to WTI of US$20.74/bbl
-
approximately 10,800 bbls/d of heavy crude exposure hedged for 2014 at
an average WCS differential to WTI of US$20.27/bbl.
Financial highlights
-
Cash flow in the first quarter was $971 million, or $1.28 per share
diluted, compared with $904 million, or $1.19 per share diluted, in the
same period a year earlier.
-
Operating earnings in the quarter were $391 million, or $0.52 per share
diluted, up 15% from the same quarter in 2012.
-
Cenovus had a realized after-tax hedging gain of $44 million in the
first quarter. The company received an average realized price,
including hedging, of $56.72/bbl for its oil in the first quarter,
compared with $72.61/bbl during the same period in 2012. The average
realized price, including hedging, for natural gas in the first quarter
was $3.64/Mcf, compared with $3.53/Mcf a year earlier.
-
Cenovus recorded income tax expense of $123 million in the first quarter
of 2013, giving the company an effective tax rate of 42%, compared with
an effective rate of 28% in the year-earlier period. The increased tax
rate reflects higher income from U.S. refining operations and a loss
from Canadian sources of income due to unrealized risk management
losses. A tax expense arises from the U.S. income, while there is a tax
recovery associated with the Canadian loss, which is calculated at the
lower Canadian rate.
-
Cenovus's net earnings for the first three months of 2013 were $171
million compared with $426 million in the first quarter of 2012. Net
earnings were negatively impacted by unrealized risk management and
foreign exchange losses in the quarter compared with gains in the same
period of 2012.
-
Capital investment during the quarter was $915 million. That was a 2%
increase from $900 million in the first quarter of 2012 as the company
continued to advance development of its oil opportunities.
-
General and administrative (G&A) expenses were $83 million in the first
quarter of this year. G&A expenses were 11% lower than in the first
quarter of 2012, primarily due to a decline in long-term incentive
expenses.
-
Over the long term, Cenovus continues to target a debt to capitalization
ratio of between 30% and 40% and a debt to adjusted EBITDA ratio of
between 1.0 and 2.0 times. At March 31, 2013, the company's debt to
capitalization ratio was 33% and debt to adjusted EBITDA, on a trailing
12-month basis, was 1.1 times.
Operating earnings
|
(for the period ended March 31)
($ millions, except per share amounts)
|
2013 Q1
|
2012 Q1
|
Net earnings
Add back (deduct):
|
171
|
426
|
Unrealized risk management (gains) losses, after-tax
|
173
|
(48)
|
Non-operating unrealized foreign exchange (gains) losses, after-tax
|
47
|
(38)
|
Operating earnings
|
391
|
340
|
Per share diluted
|
0.52
|
0.45
|
Oil sands project schedule
|
|
Project phase
|
Regulatory status
|
First production target
|
Expected production capacity (bbls/d) gross
|
Foster Creek1 A - E
|
|
|
120,000
|
F
|
Approved
|
Q3-2014F
|
45,0002 |
G
|
Approved
|
2015F
|
40,000
|
H
|
Approved
|
2016F
|
40,000
|
J
|
Submitted Q1-2013
|
2019F
|
50,000
|
Future optimization
|
|
|
15,000
|
Total capacity
|
|
|
310,000
|
Christina Lake1 A - D
|
|
|
98,000
|
E
|
Approved
|
Q3-2013F
|
40,000
|
F
|
Approved
|
2016F
|
50,000
|
G
|
Approved
|
2017F
|
50,000
|
H
|
Submitted Q1-2013
|
2019F
|
50,000
|
Future optimization
|
|
|
12,000
|
Total capacity
|
|
|
300,000
|
Narrows Lake1
|
|
|
|
A
|
Approved
|
2017F
|
45,000
|
B-C
|
Approved
|
TBD
|
85,000
|
Total Capacity
|
|
|
130,000
|
Grand Rapids
|
Submitted Q4-2011
|
2017F
|
180,000
|
Telephone Lake3
|
Submitted Q4-2011
|
TBD
|
90,000
|
1 Properties 50% owned by ConocoPhillips. Certain phases may be subject to
partner approval.
2 Includes 5,000 bbls/d gross submitted to the regulator in Q1 2013.
3 Projected total capacity of more than 300,000 bbls/d.
Conference call today
9 a.m. Mountain Time (11 a.m. Eastern Time)
Cenovus will host a conference call today, April 24, 2013, starting at 9
a.m. MT (11 a.m. ET). To participate, please dial 888-231-8191
(toll-free in North America) or 647-427-7450 approximately 10 minutes
prior to the conference call. An archived recording of the call will be
available from approximately 1 p.m. MT on April 24, 2013, until
midnight May 1, 2013, by dialing 855-859-2056 or 416-849-0833 and
entering passcode 23074842. A live audio webcast of the conference call
will also be available via cenovus.com or via the following URL: http://event.on24.com/r.htm?e=596612&s=1&k=0D405CC046D10E2B744548CBF1E6E02F
The webcast will be archived for approximately 90 days.
ADVISORY
FINANCIAL INFORMATION
Basis of Presentation Cenovus reports financial results in Canadian dollars and presents
production volumes on a net to Cenovus before royalties basis, unless
otherwise stated. Cenovus prepares its financial statements in
accordance with International Financial Reporting Standards (IFRS).
Non-GAAP Measures This news release contains references to non-GAAP measures as follows:
-
Operating cash flow is defined as revenues, less purchased product,
transportation and blending, operating expenses, production and mineral
taxes plus realized gains, less realized losses on risk management
activities and is used to provide a consistent measure of the cash
generating performance of the company's assets and improves the
comparability of Cenovus's underlying financial performance between
periods.
-
Cash flow is defined as cash from operating activities excluding net
change in other assets and liabilities and net change in non-cash
working capital, both of which are defined on the Consolidated
Statement of Cash Flows in Cenovus's interim and annual consolidated
financial statements.
-
Operating earnings is defined as net earnings excluding after-tax gain
(loss) on discontinuance, after-tax gain on bargain purchase, after-tax
effect of unrealized risk management gains (losses) on derivative
instruments, after-tax unrealized foreign exchange gains (losses) on
translation of U.S. dollar denominated notes issued from Canada and the
Partnership Contribution Receivable, after-tax foreign exchange gains
(losses) on settlement of intercompany transactions, after-tax gains
(losses) on divestiture of assets, deferred income tax on foreign
exchange recognized for tax purposes only related to U.S. dollar
intercompany debt and the effect of changes in statutory income tax
rates. Management views operating earnings as a better measure of
performance than net earnings because the excluded items reduce the
comparability of the company's underlying financial performance between
periods. The majority of the U.S. dollar debt issued from Canada has
maturity dates in excess of five years.
-
Free cash flow is defined as cash flow in excess of capital investment,
excluding net acquisitions and divestitures, and is used to determine
the funds available for other investing and/or financing activities.
-
Debt to capitalization and debt to adjusted EBITDA are two ratios that
management uses to steward the company's overall debt position as
measures of the company's overall financial strength. Debt is defined
as short-term borrowings and long-term debt, including the current
portion, excluding any amounts with respect to the partnership
contribution payable and receivable. Capitalization is a non-GAAP
measure defined as debt plus shareholders' equity. Adjusted EBITDA is
defined as adjusted earnings before interest income, finance costs,
income taxes, depreciation, depletion and amortization, exploration
expense, unrealized gain or loss on risk management, foreign exchange
gains or losses, gains or losses on divestiture of assets and other
income and loss, calculated on a trailing 12-month basis.
These measures have been described and presented in this news release in
order to provide shareholders and potential investors with additional
information regarding Cenovus's liquidity and its ability to generate
funds to finance its operations. For further information, refer to
Cenovus's most recent Management's Discussion & Analysis (MD&A)
available at cenovus.com.
FORWARD-LOOKING INFORMATION
This document contains certain forward-looking statements and other
information (collectively "forward-looking information") about our
current expectations, estimates and projections, made in light of our
experience and perception of historical trends. Forward-looking
information in this document is identified by words such as
"anticipate", "believe", "expect", "plan", "forecast" or "F", "target",
"project", "could", "focus", "vision", "goal", "proposed", "scheduled",
"outlook", "potential", "may", "strategy" or similar expressions and
includes suggestions of future outcomes, including statements about our
growth strategy and related schedules, projected future value or net
asset value, forecast operating and financial results, planned capital
expenditures, expected future production, including the timing,
stability or growth thereof, expected future refining capacity,
anticipated finding and development costs, expected reserves and
contingent and prospective resources estimates, potential dividends and
dividend growth strategy, anticipated timelines for future regulatory,
partner or internal approvals, future impact of regulatory measures,
forecasted commodity prices, future use and development of technology
and projected increasing shareholder value. Readers are cautioned not
to place undue reliance on forward-looking information as our actual
results may differ materially from those expressed or implied.
Developing forward-looking information involves reliance on a number of
assumptions and consideration of certain risks and uncertainties, some
of which are specific to Cenovus and others that apply to the industry
generally.
The factors or assumptions on which the forward-looking information is
based include: assumptions inherent in our current guidance, available
at cenovus.com; our projected capital investment levels, the flexibility of our
capital spending plans and the associated source of funding; estimates
of quantities of oil, bitumen, natural gas and liquids from properties
and other sources not currently classified as proved; our ability to
obtain necessary regulatory and partner approvals; the successful and
timely implementation of capital projects or stages thereof; our
ability to generate sufficient cash flow from operations to meet our
current and future obligations; and other risks and uncertainties
described from time to time in the filings we make with securities
regulatory authorities.
The risk factors and uncertainties that could cause our actual results
to differ materially, include: volatility of and assumptions regarding
oil and gas prices; the effectiveness of our risk management program,
including the impact of derivative financial instruments and the
success of our hedging strategies; the accuracy of cost estimates;
fluctuations in commodity prices, currency and interest rates;
fluctuations in product supply and demand; market competition,
including from alternative energy sources; risks inherent in our
marketing operations, including credit risks; maintaining desirable
ratios of debt to adjusted EBITDA as well as debt to capitalization;
our ability to access various sources of debt and equity capital;
accuracy of our reserves, resources and future production estimates;
our ability to replace and expand oil and gas reserves; our ability to
maintain our relationships with our partners and to successfully manage
and operate our integrated heavy oil business; reliability of our
assets; potential disruption or unexpected technical difficulties in
developing new products and manufacturing processes; refining and
marketing margins; potential failure of new products to achieve
acceptance in the market; unexpected cost increases or technical
difficulties in constructing or modifying manufacturing or refining
facilities; unexpected difficulties in producing, transporting or
refining of crude oil into petroleum and chemical products; risks
associated with technology and its application to our business; the
timing and the costs of well and pipeline construction; our ability to
secure adequate product transportation; changes in the regulatory
framework in any of the locations in which we operate, including
changes to the regulatory approval process and land-use designations,
royalty, tax, environmental, greenhouse gas, carbon and other laws or
regulations, or changes to the interpretation of such laws and
regulations, as adopted or proposed, the impact thereof and the costs
associated with compliance; the expected impact and timing of various
accounting pronouncements, rule changes and standards on our business,
our financial results and our consolidated financial statements;
changes in the general economic, market and business conditions; the
political and economic conditions in the countries in which we operate;
the occurrence of unexpected events such as war, terrorist threats and
the instability resulting therefrom; and risks associated with existing
and potential future lawsuits and regulatory actions against us.
Readers are cautioned that the foregoing lists are not exhaustive and
are made as at the date hereof. For a full discussion of our material
risk factors, see "Risk Factors" in our most recent Annual Information
Form/Form 40-F, "Risk Management" in our current and annual MD&A and
risk factors described in other documents we file from time to time
with securities regulatory authorities, all of which are available on
SEDAR at www.sedar.com, EDGAR at www.sec.gov and our website at cenovus.com.
TM denotes a trademark of Cenovus Energy Inc.
Cenovus Energy Inc.
Cenovus Energy Inc. is a Canadian integrated oil company. It is
committed to applying fresh, progressive thinking to safely and
responsibly unlock energy resources the world needs. Operations include
oil sands projects in northern Alberta, which use specialized methods
to drill and pump the oil to the surface, and established natural gas
and oil production in Alberta and Saskatchewan. The company also has
50% ownership in two U.S. refineries. Cenovus shares trade under the
symbol CVE, and are listed on the Toronto and New York stock exchanges.
Its enterprise value is approximately $27 billion. For more
information, visit cenovus.com.
Find Cenovus on Facebook, Twitter, Linkedin and YouTube.
Video with caption: "Video: Cenovus President & CEO Brian Ferguson discusses Q1 results". Video available at: http://stream1.newswire.ca/cgi-bin/playback.cgi?file=20130424_C7943_VIDEO_EN_25932.mp4&posterurl=http://photos.newswire.ca/images/20130424_C7943_PHOTO_EN_25932.jpg&clientName=Cenovus%20Energy%20Inc%2E&caption=Video%3A%20Cenovus%20President%20%26%20CEO%20Brian%20Ferguson%20discusses%20Q1%20results&title=CENOVUS%20ENERGY%20INC%2E%20%2D%20Cenovus%20oil%20production%20climbs%2015%25%20in%20first%20quarter&headline=Cenovus%20oil%20production%20climbs%2015%25%20in%20first%20quarter
Image with caption: "Expansion work at Cenovus's Christina Lake operations in northern Alberta (CNW Group/Cenovus Energy Inc.)". Image available at: http://photos.newswire.ca/images/download/20130424_C7943_PHOTO_EN_25843.jpg
Image with caption: "Cenovus's Christina Lake operations in northern Alberta (CNW Group/Cenovus Energy Inc.)". Image available at: http://photos.newswire.ca/images/download/20130424_C7943_PHOTO_EN_25844.jpg
Image with caption: "Cenovus has 50% ownership in the Wood River Refinery in Illinois (CNW Group/Cenovus Energy Inc.)". Image available at: http://photos.newswire.ca/images/download/20130424_C7943_PHOTO_EN_25845.jpg
SOURCE: Cenovus Energy Inc.