Cenovus announces second quarter 2024 results

Press Release

CALGARY, Alberta, Aug. 01, 2024 — Cenovus Energy Inc. (TSX: CVE) (NYSE: CVE) delivered strong operational performance across its portfolio in the second quarter of 2024, with solid production from its upstream assets and improved crude throughput at the company’s U.S. refineries, which operated at an overall utilization rate of 93%. Net debt was $4.26 billion at June 30, 2024, and in July the company achieved its net debt target of $4.0 billion. As a result, beginning in the third quarter, Cenovus will begin returning 100% of excess free funds flow (EFFF) to shareholders, as per the company’s shareholder returns framework.

“With the achievement of this significant financial milestone, we are now in a position to substantially increase our shareholder returns,” said Jon McKenzie, Cenovus President & Chief Executive Officer. “We will continue our focus on safely delivering profitable and predictable operations, while progressing our growth projects to further improve the resiliency of the company.”

Recent highlights

• Achieved net debt target of $4.0 billion in July, immediately shifting to returning 100% excess free funds flow to shareholders.
• As a result of strong first half performance, increased the midpoint of Upstream production guidance to 797,500 barrels of oil equivalent per day (BOE/d)¹ and the midpoint of Downstream throughput guidance to 655,000 barrels per day (bbls/d). Capital investment range is unchanged.
• The Narrows Lake tie-back pipeline to Christina Lake is expected to achieve mechanical completion by the end of the year, and remains on schedule to deliver first oil mid-2025.
• At Sunrise, the company began steaming two well pads which will be brought on production in the third and fourth quarters of this year.
• Achieved significant milestones on the West White Rose project as the concrete gravity structure reached its final height and topsides were structurally completed.
• Safely completed the largest turnaround in the Lloydminster Upgrader’s history, with the facility now returned to full operations.

Financial, production & throughput summary
For the period ended June 30	2024 Q2	2024 Q1	2023 Q2
	Financial ($ millions, except per share amounts)
Cash from (used in) operating activities	2,807	1,925	1,990
Adjusted funds flow2	2,361	2,242	1,899
Per share (diluted)2	1.26	1.19	0.98
Capital investment	1,155	1,036	1,002
Free funds flow2	1,206	1,206	897
Excess free funds flow2	735	832	505
Net earnings (loss)	1,000	1,176	866
Per share (diluted)	0.53	0.62	0.44
Long-term debt, including current portion	7,275	7,227	8,534
Net debt	4,258	4,827	6,367
	Production and throughput (before royalties, net to Cenovus)
Oil and NGLs (bbls/d)1	656,300	658,200	608,400
Conventional natural gas (MMcf/d)	867.2	855.8	729.4
Total upstream production (BOE/d)1	800,800	800,900	729,900
Total downstream throughput (bbls/d)	622,700	655,200	537,800
(1) See Advisory for production by product type.
(2) Non-GAAP financial measure or contains a non-GAAP financial measure. See Advisory.

Second-quarter results
Operating results¹

Cenovus’s total revenues were approximately $14.9 billion in the second quarter of 2024, up from $13.4 billion in the first quarter, driven primarily by improved benchmark oil prices, including a narrower light-heavy crude oil differential, combined with strong operating results. Upstream revenues were about $7.9 billion, an increase from $7.1 billion in the first quarter, while downstream revenues were approximately $9.1 billion, up from $8.6 billion in the first quarter. Total operating margin³ was about $2.9 billion, compared with $3.2 billion in the previous quarter. Upstream operating margin⁴ was approximately $3.1 billion, up from $2.6 billion in the first quarter. The company had a downstream operating margin⁴ shortfall of $153 million in the second quarter, compared with an operating margin of $560 million in the previous quarter as the Lloydminster Upgrader underwent a major planned turnaround. The turnaround was impacted by weather-related delays which resulted in additional costs due to lost productivity. The turnaround is now complete and the Upgrader has ramped up to full rates. Downstream operating margin was further impacted by narrower light-heavy crude oil differentials in addition to planned and unplanned outages. In the second quarter, operating margin in U.S. Refining benefited from approximately $80 million of first in, first out (FIFO) gains.

Total upstream production was 800,800 BOE/d in the second quarter, in line with the first quarter. Foster Creek volumes were 195,000 bbls/d compared with 196,000 bbls/d in the first quarter and Christina Lake production was 237,100 bbls/d, in line with the first quarter. Christina Lake will commence planned turnaround activity in September, which is expected to reduce third-quarter production volumes by approximately 45,000 bbls/d. Sunrise production was 46,100 bbls/d in the second quarter, a slight decline from the previous quarter, reflecting a planned outage. Lloydminster thermal production was 113,500 bbls/d, which reflects a successful redevelopment program and base well optimization. Lloydminster conventional heavy oil production was 18,100 bbls/d, in line with the first quarter. In the second quarter, Cenovus loaded its first vessels at the Westridge Marine Terminal following the successful startup of the Trans Mountain pipeline expansion.

Production in the Conventional segment was 123,100 BOE/d in the second quarter, an increase from 120,700 BOE/d in the prior quarter. Conventional operating costs declined approximately 14% from the first quarter of 2024, to $11.25/BOE⁴, reflecting lower repair and maintenance expenses, the divestment of higher-cost assets and the company’s commitment to cost discipline.

In the Offshore segment, production was 66,200 BOE/d compared with 64,900 BOE/d in the first quarter. In Asia Pacific, sales volumes were 57,800 BOE/d, reflecting strong natural gas demand in the region. In the Atlantic, production was 8,400 bbls/d, up from 7,200 bbls/d in the prior quarter as the non-operated Terra Nova field continues to ramp up to full rates. Sales volumes in the Atlantic region in the second quarter were 14,800 bbls/d, compared with 3,900 bbls/d in the first quarter. Planned maintenance work on the SeaRose floating production, storage and offloading (FPSO) vessel is nearing completion and the company anticipates the return of the vessel to the White Rose field late in the third quarter of this year.

Refining throughput in the second quarter was 622,700 bbls/d, a decrease from 655,200 bbls/d in the first quarter, due to planned maintenance activities in Canadian Refining as well as both planned and minor unplanned outages in U.S. Refining. Crude throughput in the Canadian Refining segment was 53,800 bbls/d in the second quarter, compared with 104,100 bbls/d in the first quarter, with the decrease due to the turnaround at the Lloydminster Upgrader. The turnaround was safely and successfully completed, and the Upgrader has now ramped up to normal rates. Weather-related delays impacting the turnaround resulted in cost increases due to lost productivity and extended the scheduled timeline.

In U.S. Refining, crude throughput was 568,900 bbls/d in the second quarter, compared with 551,100 bbls/d in the first quarter. Throughput in the quarter increased primarily due to improved operating performance and availability across the company’s operated and non-operated refining assets and lower levels of planned maintenance when compared with the prior quarter. In addition, the company has optimized planned turnaround activity at the Lima Refinery in the second half of the year, leveraging the integration of the company’s expanded refinery network. This, combined with the deferral of some planned turnaround activities into 2025, is now reflected in the planned maintenance summary below and in the company’s updated guidance range for crude throughput.

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