Cenovus Energy delivered strong financial performance in the third quarter of 2023. The company generated $2.7 billion in cash from operating activities, $3.4 billion in adjusted funds flow and $2.4 billion in free funds flow in the quarter. Total upstream production was 797,000 barrels of oil equivalent per day (BOE/d)1 and downstream throughput averaged over 664,000 barrels per day (bbls/d).

“We were pleased with the improved results that our assets and integrated business produced over the quarter,” said Jon McKenzie, Cenovus President & Chief Executive Officer. “The strong operating performance at our assets, combined with a supportive commodity price environment drove significantly higher financial results compared with the previous quarter.”

Highlights

• Delivered $1.2 billion to shareholders, including $600 million for the partial payment of the common share warrants obligation, $361 million in share buybacks and $264 million through common share dividends.
• Increased U.S. Manufacturing crude oil throughput 26% to 555,900 bbls/d from the second quarter.
• Reduced long-term debt, including current portion, by US$1.0 billion, to $7.2 billion and net debt to $6.0 billion at the end of the quarter.
• Received Board of Directors approval to file an application with the TSX to renew Cenovus’s normal course issuer bid (NCIB) for another year.

Operating results

Cenovus’s total revenues were approximately $14.6 billion in the third quarter, up from $12.2 billion in the second quarter of 2023. Upstream revenues were about $7.6 billion, an increase from $6.6 billion in the previous quarter, and downstream revenues were approximately $9.7 billion, compared with $7.4 billion in the second quarter of 2023. 

Total upstream production was 797,000 BOE/d in the third quarter, an increase of 9% from the second quarter as the company restarted production that had been offline due to Alberta wildfires and planned maintenance activity. Foster Creek volumes increased to 189,300 bbls/d, from 167,000 bbls/d in the second quarter, reflecting production from new well pads and the completion of planned maintenance in the second quarter. Christina Lake production was 237,600 bbls/d, in line with the second quarter. Sunrise output was 54,500 bbls/d, an increase of 17% compared with the second quarter as the company completed its 2023 redevelopment program. At the Lloydminster thermal projects, production of 104,600 bbls/d was in line with the prior quarter, as the company continued to focus on optimization of the asset.

Production in the Conventional segment increased to 127,200 BOE/d in the third quarter, compared with 104,600 BOE/d in the second quarter, as the company resumed normal operations after shutting in several fields and processing plants in response to wildfire activity in Alberta during May and June. Most of the Conventional asset outages were resolved by the end of August.

In the Offshore segment, production was 66,400 BOE/d compared with 51,500 BOE/d in the previous quarter. In Asia Pacific, sales volumes increased compared with the second quarter, which was impacted by a temporary unplanned outage in China. In Indonesia, the company achieved first gas production from the MAC field in September. In the Atlantic region, production was 8,900 bbls/d compared with 5,300 bbls/d in the prior quarter, which was impacted by planned maintenance. During the third quarter, the non-operated Terra Nova floating production, storage and offloading (FPSO) vessel returned to offshore Newfoundland and Labrador and commissioning activities are ongoing with production expected to resume in the fourth quarter.

In U.S. Manufacturing, crude utilization was 88% in the third quarter, with throughput of 555,900 bbls/d, compared with 70% and 442,500 bbls/d in the second quarter. The Toledo Refinery performed well following its restart in the second quarter, and at the Superior Refinery, the full and stable start-up of the fluid catalytic cracking unit was achieved in early October after operational challenges in the second quarter.

Crude utilization in the Canadian Manufacturing segment was 98% with throughput of 108,400 bbls/d in the third quarter, compared with crude utilization and throughput of 86% and 95,300 bbls/d in the second quarter. Both the Lloydminster Upgrader and Lloydminster Refinery operated at or near full capacity, with utilization rates of 99% and 96%, respectively.

Financial results

Third-quarter cash from operating activities, which includes changes in non-cash working capital, was about $2.7 billion, compared with $2.0 billion in the second quarter of 2023. Adjusted funds flow was approximately $3.4 billion, compared with $1.9 billion in the prior period, and free funds flow increased to about $2.4 billion from $897 million in the second quarter. Third-quarter financial results improved compared with the second quarter, primarily due to higher price realizations in the Oil Sands segment, driven by narrower light-heavy crude oil differentials and the timing of condensate cost recognition, as well as higher refined product volumes in the downstream business and an increase in refined product pricing. These factors were partially offset by higher cash taxes and royalties, and Oil Sands segment sales volumes lagging production by approximately 6,000 BOE/d in the quarter.

Capital investment of $1.0 billion in the third quarter was primarily directed towards sustaining production in the Oil Sands segment, drilling, completion, tie-in, and infrastructure projects in the Conventional business as well as refining reliability initiatives in the U.S. Manufacturing segment. In addition, the company continues to progress growth and optimization projects. These include the construction of the West White Rose project, including preparation for the asset life extension project at the SeaRose FPSO, which will commence in January 2024, the tie-back of Narrows Lake to Christina Lake, Sunrise optimization and Foster Creek expansion.

Net earnings in the third quarter were almost $1.9 billion, compared with $866 million in the previous quarter. The increase in net earnings was primarily due to higher operating margin and lower financing costs. These factors were partially offset by higher income taxes, an unrealized foreign exchange loss compared with an unrealized gain in the second quarter, and higher general and administrative expenses due to long-term incentive costs.

Long‐term debt, including the current portion, was $7.2 billion at September 30, 2023, compared with $8.5 billion at June 30, 2023. The reduction of long‐term debt in the quarter was primarily due to the company’s purchase of US$1.0 billion of outstanding notes that were due between 2029 and 2047. Net debt was approximately $6.0 billion at September 30, 2023, a decrease from $6.4 billion at June 30, 2023, primarily due to free funds flow of $2.4 billion in the third quarter, partially offset by a working capital build. In the third quarter, the company built working capital, primarily due to an increase in accounts receivable and inventories and the partial payment of the common share warrants obligation. Cenovus continues to focus on making progress towards its net debt target of $4.0 billion.

KeyFacts Energy: Cenovus Canada country profile