“As expected, upstream operating performance was excellent through the final months of the year. This period also marked the second full quarter that our full suite of operated refining assets were available to us and I am very pleased with our progress,” said
Fourth-quarter and year-end highlights
- Achieved a strong upstream exit rate in 2023, with fourth quarter average production of 809,000 barrels of oil equivalent per day (BOE/d)1.
- Returned a total of
$731 million to shareholders in the fourth quarter, including the payment of the remaining warrant purchase liability. In 2023, returned$2.8 billion to shareholders, including$1.1 billion through share buybacks,$1.0 billion through common and preferred share dividends and$711 million on the purchase and cancellation of common share warrants. - Reduced net debt by
$916 million in the fourth quarter, to$5.1 billion . Long-term debt, including the current portion, was$7.1 billion at the end of the fourth quarter, a reduction of$1.6 billion compared with year-end 2022, and reflects the continued strengthening of our capital structure with the repurchase ofUS$1 billion of long-term debt in 2023.
Financial, production & throughput summary | |||||
For the period ended | 2023 Q4 | 2023 Q3 | 2022 Q4 | 2023 FY | 2022 FY |
Financial ($ millions, except per share amounts) | |||||
Cash from (used in) operating activities | 2,946 | 2,738 | 2,970 | 7,388 | 11,403 |
Adjusted funds flow2 | 2,062 | 3,447 | 2,346 | 8,803 | 10,978 |
Per share (diluted)2 | 1.09 | 1.81 | 1.19 | 4.57 | 5.47 |
Capital investment | 1,170 | 1,025 | 1,274 | 4,298 | 3,708 |
Free funds flow2 | 892 | 2,422 | 1,072 | 4,505 | 7,270 |
Excess free funds flow2 | 471 | 1,989 | 786 | ||
Net earnings (loss) | 743 | 1,864 | 784 | 4,109 | 6,450 |
Per share (diluted) | 0.39 | 0.97 | 0.39 | 2.12 | 3.20 |
Long-term debt, including current portion | 7,108 | 7,224 | 8,691 | 7,108 | 8,691 |
Net debt | 5,060 | 5,976 | 4,282 | 5,060 | 4,282 |
Production and throughput (before royalties, net to Cenovus) | |||||
Oil and NGLs (bbls/d)1 | 662,600 | 652,400 | 664,900 | 640,000 | 641,900 |
Conventional natural gas (MMcf/d) | 876.3 | 867.4 | 852.0 | 832.6 | 866.1 |
Total upstream production (BOE/d)1 | 808,600 | 797,000 | 806,900 | 778,700 | 786,200 |
Total downstream throughput (bbls/d) | 579,100 | 664,300 | 473,300 | 560,400 | 493,700 |
1 See Advisory for production by product type.
2 Non-GAAP financial measure or contains a non-GAAP financial measure. See Advisory.
Fourth-quarter results
Operatingresults1
Cenovus’s total revenues were approximately
Total upstream production was 808,600 BOE/d in the fourth quarter, an increase of approximately 12,000 barrels per day (bbls/d) from the third quarter, as the company progressed the start-up of new oil sands well pads and the
Production in the Conventional segment was 123,800 BOE/d in the fourth quarter, a decrease from 127,200 BOE/d in the third quarter. Cenovus experienced higher production rates from certain wells in the third quarter following shut-ins that occurred in the second quarter of 2023 due to the
In the Offshore segment, production was 70,200 BOE/d compared with 66,400 BOE/d in the third quarter. In
Crude throughput in the Canadian Refining segment was 100,300 bbls/d in the fourth quarter, compared with crude throughput of 108,400 bbls/d in the third quarter. Throughput was reduced primarily due to an unplanned outage at the Lloydminster Upgrader in October, which returned to full rates in November.
In
3 Non-GAAP financial measure. Total operating margin is the total of Upstream operating margin plus Downstream operating margin. See Advisory.
4 Specified financial measure. See Advisory.
Financial results
Fourth-quarter cash from operating activities, which includes changes in non-cash working capital, was about
Net earnings in the fourth quarter were
Long-term debt, including the current portion, was reduced to
Capital investment of
Full-year results
In 2023, Cenovus’s total upstream production averaged 778,700 BOE/d, compared with 786,200 BOE/d in 2022, which reflects the impact of wildfire activity in
Total revenues were about
Cash from operating activities was
Reserves
Cenovus’s proved and probable reserves are evaluated each year by independent qualified reserves evaluators. At the end of 2023, Cenovus’s total proved and total proved plus probable reserves were approximately 5.9 billion BOE and 8.7 billion BOE respectively, relatively unchanged compared to the prior year. Total proved and total proved plus probable bitumen reserves were approximately 5.4 billion barrels and approximately 7.9 billion barrels respectively, both relatively unchanged compared to the prior year. At year-end 2023, Cenovus had a proved reserves life index of approximately 21 years and a proved plus probable reserves life index of approximately 31 years.
More details about Cenovus’s reserves and other oil and gas information are available in the Advisory and the Management’s Discussion & Analysis (MD&A), Annual Information Form (AIF) and Annual Report on Form 40-F for the year ended
Cenovus year-end disclosure documents
Today, Cenovus is filing its audited Consolidated Financial Statements, MD&A and AIF with Canadian securities regulatory authorities. The company is also filing its Annual Report on Form 40-F for the year ended
Dividend declarations and share purchases
The Board of Directors has declared a quarterly base dividend of
Preferred shares dividend summary | ||
Share series | Rate (%) | Amount ($/share) |
Series 1 | 2.577 | 0.16106 |
Series 2 | 6.772 | 0.42094 |
Series 3 | 4.689 | 0.29306 |
Series 5 | 4.591 | 0.28694 |
Series 7 | 3.935 | 0.24594 |
All dividends paid on Cenovus’s common and preferred shares will be designated as “eligible dividends” for Canadian federal income tax purposes. Declaration of dividends is at the sole discretion of the Board and will continue to be evaluated on a quarterly basis.
Cenovus’s shareholder returns framework has a target of returning 50% of excess free funds flow to shareholders for quarters where the ending net debt is between
2024 planned maintenance
The following table provides details on planned maintenance activities at Cenovus assets through 2024 and anticipated production or throughput impacts.
2024 planned maintenance | |||||
Potential quarterly production/throughput impact (Mbbls/d) | |||||
Q1 | Q2 | Q3 | Q4 | Annualized impact | |
Upstream | |||||
Oil Sands | — | 2 - 3 | 50 - 60 | — | 13 - 16 |
8 - 10 | 8 - 10 | 8 - 10 | — | 5 - 7 | |
Conventional | — | 3 - 5 | 4 - 6 | — | 2 - 4 |
Downstream | |||||
Canadian Refining | — | 42 - 46 | — | — | 10 - 12 |
20 - 24 | 12 - 16 | 30 - 34 | 56 - 60 | 30 - 35 | |
Sustainability
In 2023, Cenovus made progress in several of its environmental, social and governance focus areas. The company announced a new milestone to reduce absolute methane emissions in its upstream operations by 80 percent by year-end 2028, from a 2019 baseline. In addition, Cenovus has reached its target of spending at least
Cenovus continues to work with its peers in the
Chief Sustainability Officer update
Cenovus Chief Sustainability Officer & Executive Vice-President, Stakeholder Engagement,
Conference call today Cenovus will host a conference call today, To join the conference call without operator assistance, please register here approximately 5 minutes in advance to receive an automated call-back when the session begins. Alternatively, you can dial 888-664-6383 (toll-free in |
Advisory
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) Accounting Standards.
Barrels of Oil Equivalent
Natural gas volumes have been converted to barrels of oil equivalent (BOE) on the basis of six thousand cubic feet (Mcf) to one barrel (bbl). BOE may be misleading, particularly if used in isolation. A conversion ratio of one bbl to six Mcf is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil compared with natural gas is significantly different from the energy equivalency conversion ratio of 6:1, utilizing a conversion on a 6:1 basis is not an accurate reflection of value.
Product types
Product type by operating segment | ||
Three months ended | Full year ended | |
Oil Sands | ||
Bitumen (Mbbls/d) | 595.1 | 576.7 |
Heavy crude oil (Mbbls/d) | 17.5 | 16.7 |
Conventional natural gas (MMcf/d) | 12.3 | 11.9 |
Total Oil Sands segment production (MBOE/d) | 614.6 | 595.4 |
Conventional | ||
Light crude oil (Mbbls/d) | 6.1 | 5.9 |
Natural gas liquids (Mbbls/d) | 22.8 | 21.7 |
Conventional natural gas (MMcf/d) | 569.6 | 554.1 |
Total Conventional segment production (MBOE/d) | 123.8 | 119.9 |
Offshore | ||
Light crude oil (Mbbls/d) | 9.7 | 8.2 |
Natural gas liquids (Mbbls/d) | 11.4 | 10.8 |
Conventional natural gas (MMcf/d) | 294.4 | 266.6 |
Total Offshore segment production (MBOE/d) | 70.2 | 63.4 |
Total upstream production (MBOE/d) | 808.6 | 778.7 |
Forward‐looking Information
This news release contains certain forward‐looking statements and forward‐looking information (collectively referred to as “forward‐looking information”) within the meaning of applicable securities legislation about Cenovus’s current expectations, estimates and projections about the future of the company, based on certain assumptions made in light of the company’s experiences and perceptions of historical trends. Although Cenovus believes that the expectations represented by such forward‐looking information are reasonable, there can be no assurance that such expectations will prove to be correct.
Forward‐looking information in this document is identified by words such as “anticipate”, “continue”, “deliver”, “focus”, “progress”, and “will” or similar expressions and includes suggestions of future outcomes, including, but not limited to, statements about: performance for the rest of 2024 and beyond; market pricing; capturing margin; achieving net debt of
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 in this news release are based include, but are not limited to: the allocation of free funds flow to reducing net debt; commodity prices, inflation and supply chain constraints; Cenovus’s ability to produce on an unconstrained basis; Cenovus’s ability to access sufficient insurance coverage to pursue development plans; Cenovus’s ability to deliver safe and reliable operations and demonstrate strong governance; and the assumptions inherent in Cenovus’s 2024 Guidance available on cenovus.com.
The risk factors and uncertainties that could cause actual results to differ materially from the forward‐looking information in this news release include, but are not limited to: the accuracy of estimates regarding commodity production and operating expenses, inflation, taxes, royalties, capital costs and currency and interest rates; risks inherent in the operation of Cenovus’s business; and risks associated with climate change and Cenovus’s assumptions relating thereto and other risks identified under “Risk Management and Risk Factors” and “Advisory” in Cenovus’s Management’s Discussion and Analysis (MD&A) for the year ended
Except as required by applicable securities laws, Cenovus disclaims any intention or obligation to publicly update or revise any forward‐looking statements, whether as a result of new information, future events or otherwise. Readers are cautioned that the foregoing lists are not exhaustive and are made as at the date hereof. Events or circumstances could cause actual results to differ materially from those estimated or projected and expressed in, or implied by, the forward‐looking information. For additional information regarding Cenovus’s material risk factors, the assumptions made, and risks and uncertainties which could cause actual results to differ from the anticipated results, refer to “Risk Management and Risk Factors” and “Advisory” in Cenovus’s MD&A for the period ended
Specified Financial Measures
This news release contains references to certain specified financial measures that do not have standardized meanings prescribed by IFRS. Readers should not consider these measures in isolation or as a substitute for analysis of the company’s results as reported under IFRS. These measures are defined differently by different companies and, therefore, might not be comparable to similar measures presented by other issuers. For information on the composition of these measures, as well as an explanation of how the company uses these measures, refer to the Specified Financial Measures Advisory located in Cenovus’s MD&A for the period ended
Upstream Operating Margin and Downstream Operating Margin
Upstream Operating Margin and Downstream Operating Margin, and the individual components thereof, are included in Note 1 to the interim Consolidated Financial Statements.
Total Operating Margin
Total Operating Margin is the total of Upstream Operating Margin plus Downstream Operating Margin.
Upstream(1) | Downstream(1) | Total | ||||||||||||||||||
($ millions) | Q4 2023 | Q3 2023 | Q4 2022 | Q4 2023 | Q3 2023 | Q4 2022 | Q4 2023 | Q3 2023 | Q4 2022 | |||||||||||
Revenues | ||||||||||||||||||||
Gross Sales | 7,797 | 8,783 | 8,251 | 8,404 | 9,658 | 8,302 | 16,201 | 18,441 | 16,553 | |||||||||||
Less: Royalties | 902 | 1,135 | 875 | — | — | — | 902 | 1,135 | 875 | |||||||||||
6,895 | 7,648 | 7,376 | 8,404 | 9,658 | 8,302 | 15,299 | 17,306 | 15,678 | ||||||||||||
Expenses | ||||||||||||||||||||
Purchased Product | 663 | 900 | 1,079 | 7,888 | 7,947 | 6,993 | 8,551 | 8,847 | 8,072 | |||||||||||
Transportation and Blending | 2,894 | 2,397 | 2,984 | — | — | — | 2,894 | 2,397 | 2,984 | |||||||||||
Operating | 864 | 914 | 955 | 826 | 778 | 759 | 1,690 | 1,692 | 1,714 | |||||||||||
Realized (Gain) Loss on Risk Management | 19 | (10 | ) | 134 | (6 | ) | 11 | (8 | ) | 13 | 1 | 126 | ||||||||
Operating Margin | 2,455 | 3,447 | 2,224 | (304 | ) | 922 | 558 | 2,151 | 4,369 | 2,782 |
(1) Found in the
Upstream(1) | Downstream(1) | Total | |||||||||
($ millions) | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | |||||
Revenues | |||||||||||
Gross Sales | 31,082 | 41,142 | 32,626 | 38,010 | 63,708 | 79,152 | |||||
Less: Royalties | 3,270 | 4,868 | — | — | 3,270 | 4,868 | |||||
27,812 | 36,274 | 32,626 | 38,010 | 60,438 | 74,284 | ||||||
Expenses | |||||||||||
Purchased Product | 3,152 | 6,741 | 28,273 | 32,409 | 31,425 | 39,150 | |||||
Transportation and Blending | 11,088 | 12,301 | — | — | 11,088 | 12,301 | |||||
Operating | 3,690 | 3,789 | 3,201 | 3,050 | 6,891 | 6,839 | |||||
Realized (Gain) Loss on Risk Management | 12 | 1,619 | — | 112 | 12 | 1,731 | |||||
Operating Margin | 9,870 | 11,824 | 1,152 | 2,439 | 11,022 | 14,263 |
(1) Found in the
Adjusted Funds Flow, Free Funds Flow and Excess Free Funds Flow
The following table provides a reconciliation of cash from (used in) operating activities found in Cenovus’s Consolidated Financial Statements to Adjusted Funds Flow, Free Funds Flow and Excess Free Funds Flow. Adjusted Funds Flow per Share – Basic and Adjusted Funds Flow per Share – Diluted are calculated by dividing Adjusted Funds Flow by the respective basic or diluted weighted average number of common shares outstanding during the period and may be useful to evaluate a company’s ability to generate cash.
Three Months Ended | Twelve Months Ended | ||||||||||
($ millions) | |||||||||||
Cash From (Used in) Operating Activities(1) | 2,946 | 2,738 | 2,970 | 7,388 | 11,403 | ||||||
(Add) Deduct: | |||||||||||
Settlement of Decommissioning Liabilities | (65 | ) | (68 | ) | (49 | ) | (222 | ) | (150 | ) | |
Net Change in | 949 | (641 | ) | 673 | (1,193 | ) | 575 | ||||
Adjusted Funds Flow | 2,062 | 3,447 | 2,346 | 8,803 | 10,978 | ||||||
1,170 | 1,025 | 1,274 | 4,298 | 3,708 | |||||||
Free Funds Flow | 892 | 2,422 | 1,072 | 4,505 | 7,270 | ||||||
Add (Deduct): | |||||||||||
Base Dividends Paid on Common Shares | (261 | ) | (264 | ) | (201 | ) | |||||
Dividends Paid on Preferred Shares | (9 | ) | — | — | |||||||
Settlement of Decommissioning Liabilities | (65 | ) | (68 | ) | (49 | ) | |||||
Principal Repayment of Leases | (72 | ) | (70 | ) | (74 | ) | |||||
Acquisitions, Net of Cash Acquired | (14 | ) | (32 | ) | (7 | ) | |||||
Proceeds From Divestitures | — | 1 | 45 | ||||||||
Excess Free Funds Flow | 471 | 1,989 | 786 |
(1) Found in the
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