Cenovus Energy Inc. (TSX: CVE) (NYSE: CVE) today announced its 2023
budget, delivering disciplined capital allocation and focused
investment plans to progress opportunities across its integrated
portfolio, holding oil sands and conventional operating costs flat,
reducing downstream operating costs and positioning the company for
continued growth in shareholder returns. Cenovus plans to invest
between $4.0 billion and $4.5 billion in 2023, including about $2.8
billion of sustaining capital to maintain base production and
support continued safe and reliable operations. A range of $1.2
billion to $1.7 billion will be directed towards optimization and
growth, including construction of the West White Rose project in
Atlantic Canada, continued optimization of Cenovus’s oil sands
assets and opportunities in the downstream business to improve
reliability and increase margin capture.
“We’re pursuing strategic initiatives in 2023 that will both
enhance our integrated business today and drive our ability to
continue growing shareholder returns into the future,” said Alex
Pourbaix, Cenovus President & Chief Executive Officer. “In
addition, we continue delivering on our commitments to
shareholders, including being well on our way to reaching our net
debt floor of $4 billion around year end 2022. This will see us
return 100% of excess free funds flow to shareholders while at that
level.”
2023 budget highlights:
- Total upstream production of between 800,000 barrels of oil
equivalent/day (BOE/d) and 840,000 BOE/d, a year-over-year increase
of more than 3%1.
- Total downstream crude throughput of 610,000 barrels per day
(bbls/d) to 660,000 bbls/d, an increase of nearly 28% year over
year2.
- Oil Sands operating expenses per barrel of $12.50 to $14.00 are
flat year over year and U.S. Manufacturing operating expenses
of $11.25/bbl to $13.25/bbl represent a decrease of nearly
22%2.
2023 Guidance (C$ before royalties) |
|
(MBOE/d) |
Capital investments($Millions) |
Operating costs4($/BOE) |
Upstream3 |
Production |
|
|
Oil sands |
582 - 642 |
2,200 - 2,400 |
12.50 - 14.00 |
Conventional |
125 - 140 |
350 - 450 |
10.00 - 11.50 |
Offshore |
65 - 78 |
600 - 700 |
18.00 - 21.00 |
Total
upstream |
800 - 840 |
|
|
Downstream |
Throughput |
|
|
Canadian Manufacturing |
100 - 110 |
|
11.25 - 13.25 |
U.S. Manufacturing |
510 - 550 |
|
11.25 - 13.25 |
Total
downstream |
610 - 660 |
800 - 900 |
|
Total |
|
4,000 - 4,500 |
|
1Percentage increase when compared to the midpoint of 2022
corporate guidance dated July 27, 2022.2Percentage increase when
compared to actual nine months ended September 30, 2022.3See Q3
2022 Management’s Discussion & Analysis for summary of
production by product type as at September 30, 2022.4Upstream
operating expenses are divided by sales volumes. Downstream is
divided by barrels of crude oil throughput.Note: Totals may not add
due to rounding. Cenovus’s full 2023 guidance can be found on
cenovus.com.
2023 guidance In 2023 Cenovus anticipates total
upstream production of between 800,000 BOE/d and 840,000 BOE/d,
including the impact of planned turnarounds, which captures the one
at Foster Creek deferred from 2022. Canadian and U.S. Manufacturing
expected combined throughput is between 610,000 bbls/d and 660,000
bbls/d, reflecting less planned turnaround work following
significant major turnaround activity in 2022, the startup of the
Superior Refinery and the assumed acquisition of the outstanding
50% working interest in the Toledo Refinery, which has not yet
closed. The 2023 budget and throughput guidance assume the Toledo
Refinery acquisition closes and the refinery resumes operations by
the end of the first quarter of 2023. The actual timing of when
operations will resume, and the status and timing of the closing of
the transaction, remain to be determined by Cenovus and bp, its
partner and the current operator.
Guidance for total capital expenditures is between $4.0 billion
and $4.5 billion. This includes sustaining capital of approximately
$2.8 billion, which increased year over year. This is mainly due to
portfolio adjustments including the increase to 100% working
interest in Sunrise for the full year, the planned restart of the
Superior Refinery and the assumed Toledo acquisition and restart,
as well as the impact of inflation across the company’s
portfolio.
Cenovus expects to invest between $1.2 billion and $1.7 billion
in optimization and growth capital to continue asset enhancement
and growing production to maximize shareholder value. In the
Upstream segment, these include construction of the West White Rose
project, progressing the Narrows Lake tie-back to Christina Lake,
continued optimization of Foster Creek and the Lloydminster thermal
projects, and application of Cenovus’s operating model at Sunrise.
Cenovus has also identified several margin expansion and
debottlenecking opportunities in the downstream, which include
feedstock replacement at the Lloydminster Refinery as part of the
company’s Rewire Alberta initiative and increasing heavy conversion
capacity and distillate output at the Wood River and Borger
refineries. These initiatives will further balance the company’s
exposure to light-heavy oil differentials, even as crude oil
production grows over time.
General and administrative (G&A) less stock-based
compensation expenses are expected to be in the range of $550
million to $600 million in 2023, an increase of approximately $75
million when compared with 2022 guidance. This is primarily driven
by an increase in spending related to information technology (IT),
Cenovus’s share of expenses relating to the Pathways Alliance and
an increase in social investments, which include the company’s
Indigenous Housing Initiative. The incremental IT expenditures
included in 2023 G&A are offset by lower corporate capital for
IT in 2023 when compared with 2022.
Oil SandsOil sands production guidance for 2023
is 582,000 bbls/d to 642,000 bbls/d. Christina Lake and Foster
Creek production guidance ranges are 235,000 bbls/d to 255,000
bbls/d and 180,000 bbls/d to 200,000 bbls/d, respectively. Sunrise
production guidance is 45,000 bbls/d to 50,000 bbls/d and
production guidance for the Lloydminster thermal projects is
between 105,000 bbls/d and 115,000 bbls/d.
Oil sands operating costs are expected to be in the range of
$12.50/bbl to $14.00/bbl in 2023, which is comparable to 2022. This
reflects ongoing work to mitigate inflation in the base business,
as well as a lower natural gas price assumption than in 2022.
Cenovus plans to invest $2.2 billion to $2.4 billion of capital
in its Oil Sands assets, an increase of approximately $650 million
compared with 2022, largely related to brownfield optimization and
growth opportunities that will increase production at Foster Creek,
Sunrise and Christina Lake over the next several years.
At Foster Creek, Cenovus has identified several high-return
debottlenecking opportunities. This multi-year investment will
utilize existing equipment to boost steam generation and increase
production at Foster Creek by more than 30,000 bbls/d by the end of
2027. Additionally, investment in a sulphur recovery process is
expected to improve environmental performance and decrease annual
operating costs at Foster Creek by nearly $0.75/bbl by 2026.
At Sunrise, optimization capital will be directed to applying
Cenovus operating strategies, already successfully deployed at the
Lloydminster thermal projects, and is expected to increase
production above its nameplate capacity of 60,000 bbls/d within the
next two to three years, while also reducing the steam-oil ratio
and greenhouse gas emissions intensity, and further lowering
operating costs per barrel by approximately 20%.
Cenovus will also continue to progress the tie-back of Narrows
Lake to the Christina Lake central processing facilities, including
the construction of a 17-kilometre pipeline to connect the assets.
Total capital for the Narrows Lake tie-back is expected to be
approximately $300 million, including $100 million in 2023. With
the addition of production from Narrows Lake, the company expects
to add 20,000 bbls/d to 30,000 bbls/d at Christina Lake around the
end of 2025.
ConventionalTotal production is expected to be
between 125,000 BOE/d and 140,000 BOE/d, including about 570
million cubic feet/day (MMcf/d) to 620 MMcf/d of natural gas.
Conventional operating costs are expected to be between
$10.00/BOE and $11.50/BOE, which are flat year over year even with
inflationary pressures. The company continues to identify
opportunities to further reduce the impacts of inflation in the
Conventional business and evaluate potential areas for future
development drilling.
The company plans to invest between $350 million and $450
million in its Conventional assets, including about $75 million in
optimization and growth capital. That’s an increase of
approximately $125 million from 2022, some of which addresses the
impact of inflation seen in 2022. Capital will be primarily
directed to offsetting natural declines and optimizing gas handling
infrastructure to take advantage of commodity price strength, and
will be focused in core areas. Cenovus also plans to begin building
infrastructure to support future production growth, while reducing
methane emissions.
OffshoreTotal Offshore production is expected
to be in the range of 65,000 BOE/d to 78,000 BOE/d. This includes
between 17,000 bbls/d and 21,000 bbls/d in the Atlantic region,
32,000 BOE/d to 36,000 BOE/d offshore China and 16,000 BOE/d to
21,000 BOE/d in Indonesia. The offshore production guidance
reflects anticipated lower volumes from the Liwan 3-1 field with
the planned expiry of one of the gas sales amendments,
substantially offset by the partner-operated Terra Nova field
returning to production in early 2023 and higher volumes in
Indonesia where the MDA/MBH fields began producing in the fourth
quarter of 2022 and where the MAC field is expected to begin
producing in mid-2023.
Offshore operating costs in 2023 are expected to be between
$18.00/BOE and $21.00/BOE, an increase from 2022 of approximately
$4.50/BOE as a result of lower production from China, partially
offset by higher Atlantic and Indonesian production.
Capital spending of between $600 million and $700 million will
be primarily directed towards the construction of the West White
Rose project in the Atlantic region, with first oil expected in
2026.
DownstreamThroughput is expected to be between
610,000 bbls/d and 660,000 bbls/d, including 100,000 bbls/d to
110,000 bbls/d in the Canadian Manufacturing segment and 510,000
bbls/d to 550,000 bbls/d in U.S. Manufacturing. Crude oil
throughput will increase by 28% from 2022 with the restart of the
Superior Refinery and the expected additional 50% interest in the
Toledo Refinery. This will improve Cenovus's heavy oil value chain
integration, further mitigating the impact of WTI-WCS light-heavy
differentials.
Operating expenses in Canadian Manufacturing are expected to be
$11.25/bbl to $13.25/bbl, a decrease of about 5% from 2022 due
to less maintenance activity at the Lloydminster Upgrader and
Refinery. In U.S. Manufacturing, operating expenses are expected to
be $11.25/bbl to $13.25/bbl, a decrease of nearly 22%, reflecting
throughput from the Superior and Toledo refineries which are
expected to ramp up in the first quarter and into the second
quarter of 2023.
Capital investment in the downstream business is projected to be
between $800 million to $900 million. Sustaining capital will focus
primarily on safety and reliability initiatives in Canadian
Manufacturing and reflects the restart of the Superior and Toledo
refineries in early 2023. Growth and optimization capital will be
allocated towards debottlenecking work at the Lloydminster
Refinery, part of the Rewire Alberta project which will increase
integration of the Lloydminster complex with Cenovus’s oil sands
assets, including processing production from Foster Creek. Growth
and optimization capital will also be directed toward optimizing
heavy throughput and increasing distillate yields at the Wood River
and Borger refineries. In addition, capital has been allocated
towards integrating the Toledo and Lima refineries using existing
infrastructure and capturing identified synergies after Cenovus
assumes full ownership and operatorship of Toledo.
SustainabilityCenovus continues to make good
progress towards its environmental, social and governance (ESG)
targets announced in December 2021. Over the next five years
Cenovus plans to spend approximately $1 billion on initiatives that
advance its goal of reducing absolute scope 1 and 2 emissions by
35% by year-end 2035, from 2019 levels, on a net equity basis. This
includes progressing carbon capture projects at the Minnedosa
Ethanol Plant, Elmworth gas plant, Lloydminster Upgrader and
Christina Lake, as well as methane reduction initiatives across
conventional operations, continuing work to increase energy
efficiency at Cenovus’s conventional and Canadian offshore assets,
and advancing additional technology assessments.
Along with its Pathways Alliance peers, Cenovus is also
progressing pre-work on the proposed foundational carbon capture
and storage project, which will transport CO2 via pipeline from
multiple oil sands facilities to be stored safely and permanently
in the Cold Lake region of Alberta. Cenovus and its Alliance peers
continue to work closely with the federal and provincial
governments to land on policy that supports the progress of these
large decarbonization projects while ensuring Canada remains
globally competitive and continues to attract investment.
2023 planned maintenanceThe following table
provides details on planned turnaround activities at Cenovus assets
in 2023 and anticipated production or throughput impacts. These
planned turnarounds are reflected in Cenovus’s Corporate Guidance
assumptions.
2023 Planned maintenance |
Potential quarterly production/throughput impact
(Mbbls/d) |
|
Q1 |
Q2 |
Q3 |
Q4 |
Upstream |
|
Foster Creek |
- |
18 - 20 |
- |
- |
Lloydminster Thermals |
- |
1 - 2 |
1 - 2 |
- |
Atlantic |
- |
- |
1 - 2 |
- |
Downstream |
|
U.S. Manufacturing |
18 - 22 |
- |
18 - 22 |
50 - 60 |
For further details on Cenovus’s 2023 budget, see the company’s
2023 guidance available under Investors at cenovus.com.
Board updateCenovus has appointed Melanie A.
Little to its Board of Directors, effective January 1, 2023. Ms.
Little is Executive Vice-President and Chief Operating Officer of
Magellan Midstream Partners, L.P. She is also a Director of the
International Liquid Terminals Association and The Discovery
Lab.
“Ms. Little has a breadth of experience in, and knowledge of,
the midstream business, particularly in the United States,” said
Keith A. MacPhail, Chair of Cenovus’s Board of Directors. “Her more
than 20 years of experience in the industry, along with her
operations and regulatory expertise, will be a substantial benefit
to the company.”
Ms. Little currently serves on the board of directors of
Diversified Energy Company plc, a public oil and gas producer in
the U.S., with a term that will end on December 31, 2022.
AdvisoryBasis of
PresentationCenovus 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).
Barrels of Oil EquivalentNatural 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.
Forward-looking InformationThis news release
contains forward-looking statements and other information
(collectively referred to as “forward-looking information”) about
the company’s current expectations, estimates and projections, made
in light of the company’s experience and perception of historical
trends. Although the company 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.
This forward-looking information is current only as of the date
indicated above. Readers are cautioned not to place undue reliance
on forward-looking information as actual results may differ
materially from those expressed or implied. Cenovus undertakes no
obligation to update or revise any forward-looking information
except as required by law.
Forward-looking information in this news release is identified
by words such as “anticipates”, “continue”, “deliver”, “expect”,
“focus”, “opportunity”, “plan”, “position”, “progressing”, “pursue”
and “will” or similar words or expressions and includes suggestions
of future outcomes, including, but not limited to, statements
about: capital allocation; operating costs and expenses and
general and administrative expenses; shareholder returns; capital
investment; optimization and growth; downstream reliability and
margin capture; strategic initiatives; net debt; upstream
production and downstream throughput; planned turnarounds; Superior
Refinery startup; closing of the Toledo acquisition and resumption
of operations; downstream optimization; environmental performance;
steam-oil ratio and GHG emissions intensity; the tie-back of
Narrows Lake to Christina Lake; the impact of inflation; optimizing
gas handling infrastructure in conventional and building
infrastructure; methane emissions; heavy oil value chain
integration; ESG targets; GHG emissions spending; carbon capture
projects; and carbon capture and storage within the Pathways
Alliance. The 2023 guidance, as updated December 6, 2022 and
available on cenovus.com, assumes: Brent prices of US$83.00 per
barrel; WTI prices of US$77.00 per barrel; WCS of US$54.50 per
barrel; differential WTI-WCS of US$22.50 per barrel; AECO natural
gas prices of $4.85 per thousand cubic feet; Chicago 3-2-1 crack
spread of US$26.50 per barrel; and an exchange rate of $0.75
US$/C$.
In addition to the price assumptions disclosed herein, the
factors or assumptions on which the forward-looking information in
this news release is based include: projected capital investment
levels, the flexibility of capital spending plans and associated
sources of funding; achievement of further operating efficiencies,
cost reductions and sustainability thereof; achieving corporate,
operating and sustaining capital synergies as a result of the
acquisition of Husky Energy Inc.; our forecast production volumes
are subject to potential ramp down of production based on business
and market conditions; foreign exchange rate, including with
respect to our US$ debt and refining capital and operating
expenses; future improvements in availability of product
transportation capacity; realization of expected impacts of storage
capacity within oil sands reservoirs; the ability of our refining
capacity and existing pipeline commitments to mitigate a portion of
heavy oil volumes against wider differentials; planned turnaround
and maintenance activity at both upstream and downstream
facilities; status and timing of the Superior rebuild and closing
of the Toledo transaction; accounting estimates and judgments;
ability to obtain necessary regulatory and partner approvals; and
the successful and timely implementation of capital projects or
stages thereof.
The information in this news release is also subject to risks
disclosed in our annual Management’s Discussion and Analysis
(MD&A) for the period ended December 31, 2021, supplemented by
updates in our most recent quarterly MD&A, available on SEDAR
at sedar.com, on EDGAR at sec.gov and at cenovus.com.
Cenovus Energy Inc.
Cenovus Energy Inc. is an integrated energy company with 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 is focused on managing its
assets in a safe, innovative and cost-efficient manner, integrating
environmental, social and governance considerations into its
business plans. Cenovus common shares and warrants are listed on
the Toronto and New York stock exchanges, and the company’s
preferred shares are listed on the Toronto Stock Exchange. For more
information, visit cenovus.com.
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Cenovus contacts:
Investors |
Media |
Investor Relations general
line |
Media Relations general line |
403-766-7711 |
403-766-7751 |
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