Cenovus Energy Inc. (TSX: CVE) released its financial results for the third quarter of 2024, showing mixed outcomes influenced by operational milestones, turnaround activities, and fluctuating commodity prices.
Net earnings for Q3 2024 stood at $820 million, translating to $0.42 per share, a decrease from $1.0 billion, or $0.53 per share, in Q2 2024, and a more pronounced drop from $1.9 billion, or $0.97 per share, in Q3 2023. Cenovus attributed the reduction in earnings primarily to lower benchmark prices, turnaround expenses, and FIFO (first in, first out) inventory losses in its U.S. refining operations.
Total revenues for the quarter were approximately $14.2 billion, down from $14.9 billion in Q2 2024, reflecting the effects of lower commodity prices. Upstream revenues fell from $7.9 billion in the prior quarter to about $7.3 billion, while downstream revenues saw a modest increase to $9.2 billion from $9.1 billion in Q2.
The firm generated cash from operating activities totaling nearly $2.5 billion in Q3 2024, a slight decline from $2.8 billion in Q2 and $2.7 billion in Q3 of 2023. Adjusted funds flow also showed a decrease, amounting to $2.0 billion, compared to $2.4 billion in the previous quarter and a significant $3.4 billion in Q3 of 2023. The company’s free funds flow dropped to $614 million, down sharply from $1.2 billion in Q2 2024 and $2.4 billion a year ago.
In Q3 2024, Cenovus reported upstream production of 771,300 barrels of oil equivalent per day (BOE/d), a slight decline from 800,800 BOE/d in Q2 and from 797,000 BOE/d in Q3 of 2023. The reduction is mainly due to turnaround activities, particularly at the Christina Lake oil sands facility. Cenovus has since completed the Christina Lake turnaround ahead of schedule, leading to a production rate that exceeded its forecast by 15,000 to 20,000 barrels per day.
The Foster Creek site demonstrated growth, producing 198,000 barrels per day (bbls/d) compared to 195,000 bbls/d in the previous quarter. Similarly, the Sunrise facility’s production rose from 46,100 bbls/d to 50,400 bbls/d. Production at Lloydminster, both thermal and conventional, remained slightly lower than in the previous quarter.
Downstream throughput rose to nearly 643,000 bbls/d, up from approximately 622,700 bbls/d in Q2 2024. This improvement was primarily driven by the successful completion of a major turnaround at the Lima Refinery. The maintenance allowed Cenovus to avoid a full shutdown by maintaining crude runs at a reduced rate. However, the Lima turnaround, along with unplanned outages at other refineries, affected the U.S. refining segment’s overall margin, which recorded a shortfall of $323 million in Q3, compared to a $153 million shortfall in the previous quarter.
In the Offshore segment, Asia Pacific production saw minor disruptions due to scheduled maintenance, with sales volumes slightly down at 56,500 BOE/d from Q2. In the Atlantic region, production from the Terra Nova field rose to 9,000 bbls/d as it approached full operational capacity. Maintenance on the SeaRose FPSO, completed in Belfast, is expected to facilitate production resumption at the White Rose field by year-end.
Cenovus maintained its capital expenditure focus with a $1.3 billion investment in Q3 2024, up from $1.2 billion in Q2 and $1.0 billion in Q3 of 2023. These funds were directed towards advancing several key projects, including the Narrows Lake pipeline, Sunrise growth program, and the West White Rose offshore development.
The company reported a slight reduction in long-term debt, standing at $7.2 billion by the end of September 2024, with net debt decreasing to $4.2 billion, down from $4.3 billion in Q2 2024. Cenovus is aiming to bring this figure closer to $4.0 billion, thereby allowing the firm to allocate more resources to shareholder returns.
In line with its commitment to returning capital to shareholders, Cenovus distributed $1.1 billion in Q3, comprised of $732 million in share repurchases and $329 million in dividends. Since the initiation of its share buyback program in November 2021, Cenovus has repurchased approximately 227 million shares, equating to a total shareholder return of $5.3 billion. The company’s current share repurchase authorization expires on November 8, 2024, but Cenovus has received Board approval to pursue another repurchase program for up to 127 million shares.
In addition, the Board declared a quarterly base dividend of $0.18 per common share, payable on December 31, 2024.
“We are efficiently and effectively progressing our major projects, and our growth plan is on track to deliver increased production that will enhance shareholder returns for the long term,” CEO Jon McKenzie said.
Looking ahead, Cenovus is optimistic about its ongoing growth projects, with several key developments progressing on schedule. The Narrows Lake Pipeline is nearing completion and is expected to enhance production by mid-2025. The Foster Creek Optimization project is projected to come online by mid-2026, which should improve operational efficiency. Meanwhile, the West White Rose Project is approximately 85% complete, with a production ramp-up anticipated in 2025 after the SeaRose FPSO returns to the White Rose field.
These projects aim to sustain Cenovus’s growth and increase production capacity over the next few years.
Cenovus Energy last traded at $22.13 on the TSX.
Information for this briefing was found via Sedar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
