Cenovus: More Than Meets The Eye
Michael Fitzsimmons • 49 Comments
Michael Fitzsimmons • 49 Comments
Sat, May 7, 12:32 AM
- The devastating wildfires in and around Alberta's Fort McMurray may double in size to 2K sq. km over the weekend and burn for weeks, officials say.
- Bank of Montreal has cut its Q2 Canadian GDP growth estimate to zero from 1.5%, citing “severe disruptions to oil production” due to the fires, and said the estimate was just a placeholder dependent on more information on the scope of the disaster.
- Royal Bank of Canada estimates that as much as 1M bbls/day of production has been shut, or ~40% of oil sands output, as companies including Suncor (NYSE:SU), Shell (RDS.A, RDS.B), Exxon (NYSE:XOM) subsidiary Imperial Oil (NYSEMKT:IMO), ConocoPhillips (NYSE:COP), Husky Energy (OTCPK:HUSKF) and Athabasca Oil (OTCPK:ATHOF) cut production.
- The fire is said to be “at the gates” of Nexen’s (NYSE:CEO) Long Lake project, but a few companies including Canadian Natural Resources (NYSE:CNQ), Cenovus (NYSE:CVE) and MEG Energy (OTCPK:MEGEF) say their production has been unaffected so far.
- Among pipeline companies, no assets have incurred significant damage, but Enbridge (NYSE:ENB) shut all pipelines in and out of Cheecham Terminal, Inter Pipeline (OTCPK:IPPLF) shut parts of its system in the province, and Keyera's (OTC:KEYUF) South Cheecham rail and truck terminal is shut down; TransCanada (NYSE:TRP) says it does not expect the fires to affect deliveries of natural gas.
- SU, Phillips 66 (NYSE:PSX) and Statoil (NYSE:STO) have declared force majeure on supplies from the region.
Wed, Apr. 27, 6:42 PM
- Cenovus Energy (NYSE:CVE) says it may build a diluent recovery unit at its Bruderheim crude-by-rail terminal in Alberta, which would allow it to ship raw bitumen in tank cars and save on condensate costs.
- CEO Brian Ferguson tells Reuters that stripping out condensate could improve margins by $2-$4/bbl, depending on market conditions.
- The CEO notes that building the unit would take 2-3 years and require permits, but surmises that such a plan may fit in with the Canadian government's aim of encouraging innovation and be eligible for incentives.
- CVE earlier reported a Q1 loss and said bitumen realizations from its oil sands projects were hurt by high condensate prices; Financial Post reports that Q1 bitumen prices were so low that CVE would have lost money on every barrel of oil sands crude it produced if not for its hedging program.
Wed, Apr. 27, 10:33 AM
Wed, Apr. 27, 8:23 AM
- Cenovus Energy (NYSE:CVE) reports a smaller Y/Y Q1 loss but falls well short of analyst estimates, and a 28% Y/Y drop in revenues to C$2.25B, hurt by low oil and gas prices and weak sales volumes.
- The smaller loss largely flowed from forex gains of C$403M, compared with forex losses of C$515M in the year-ago quarter.
- CVE says it is cutting its 2016 capital spending budget by C$300M to C$1.2B, after saying in February it would cut its budget by C$200M-C$300M to C$1.2B-C$1.3B.
- Total cash flow plunged by 95% Y/Y to C$26M, but exited Q1 with nearly $8B in liquidity, including $3.9B in cash and net debt to capitalization of 16%.
- CVE says Q1 oil production fell 9% Y/Y to 197.5K bbl/day, in line with its expectations.
- Says it is on track at Foster Creek to achieve expected volumes of 60K-65K bbl/day net in H1 and then ramp up to finish the year at more than 70K bbl/day, in line with guidance.
Wed, Apr. 27, 6:02 AM
Thu, Apr. 21, 6:17 PM
- Alberta's provincial government releases technical formulas for its new oil and gas royalty framework, a move welcomed by the energy industry as providing clarity to potential investors and enabling producers to move forward with drilling and investment plans.
- Analysts say the technical formulas are a net positive for producers by basing well cost allowances on the 2012-15 period when costs were higher, but oil prices - and whether they recover or continue to languish near $40/bbl - would have a much greater impact on investment decisions in Alberta than the royalty structure.
- Alberta's new NDP government unveiled its new royalty framework in January which left rates largely unchanged on oil sands projects and existing wells.
- Relevant tickers: SU, CVE, OTCPK:HUSKF, RDS.A, RDS.B, IMO, XOM, CNQ, ENB, TRP, PDS, OTCPK:MEGEF
- Now read Which Canadian mid-cap pipelines pay out safe dividends?
Mon, Apr. 18, 6:53 PM
- Moody's (NYSE:MCO) has emerged as a new problem for energy companies, as the bond rater has deprived 19 energy companies of their investment-grade ratings this year, and has dropped some by several notches into the deeper reaches of junk territory, WSJ reports.
- At the same time, Standard & Poor’s rates only four of the 19 companies that lost an investment-grade rating at Moody’s as below investment grade, while Fitch rates just two below investment grade.
- So far, the market has largely shaken off the Moody’s reassessment of the oil sector; for example, Anadarko Petroleum (NYSE:APC) was cut by Moody's to junk status but still managed to raise large sums in the bond market last month at favorable terms vs. what it would have needed to pay a month earlier.
- Nevertheless, companies that Moody’s has dropped to junk are in a vulnerable position because they need investment-grade ratings from two of the three ratings firms to remain in the Barclays investment-grade corporate bond index and thus retain access to a large pool of investors that are not allowed to invest in bonds outside of the index.
- Among other oil companies Moody's has downgraded this year: ECA, ENLK, ESV, CVE, MUR
Mon, Apr. 18, 2:47 PM
- Goldman Sachs expects energy investors will maintain a "buy the dip" mentality, and suggests focusing specifically on its Buy-rated shale productivity favorites such as Hess (HES +4.3%), EOG Resources (EOG +2.2%), Cenovus Energy (CVE +0.3%), PDC Energy (PDCE +4.3%) and Diamondback Energy (FANG +1.7%).
- Even after the Doha collapse, Goldman maintains its forecast for Q4 2016 WTI of $45/bbl and FY 2017 average of $58/bbl, as low near-term oil prices should ultimately enable mechanisms that will bring oil markets into better balance.
- Now read Goldman names nine favorites for Goldilocks ideal $35 oil
Wed, Apr. 13, 12:57 PM
- The era of megaprojects in Canada’s oil sands likely is over as crude is seen staying lower for longer, according to executives from Suncor Energy (SU +0.2%), Cenovus Energy (CVE -1.1%) and Meg Energy (OTCPK:MEGEF).
- “We’re more likely into smaller, more modular-type projects.” says SU CFO Alister Cowen, adding that the C$13B (US$10B) Fort Hills project being pursued by SU and Teck Resources (TCK -0.1%), probably will be the last oil sands mine built for many years.
- Producers in Canada’s oil sands, among the most expensive reserves in the world to develop, are depending on technology and process improvements to bring down costs; CVE CFO Ivor Ruste and Meg CFO Eric Toews say their companies are looking at solvents to reduce the amount of steam used to get bitumen from their wells, and Cowen says SU is experimenting with radio waves to potentially replace steam entirely.
- Now read Suncor says still looking for deals after purchasing Canadian Oil Sands
Thu, Apr. 7, 5:46 PM
- Spending in Canada’s oil and natural gas sector has fallen by a record C$50B (US$38B) over the past two years, a 62% drop that marks the biggest two-year decline since 1947 when data was first collected, according to the Canadian Association of Petroleum Producers.
- The group predicts total capital investment in the oil and natural gas sector will fall to C$31B in 2016, down from C$48B in 2015 and a record C$81B in 2014.
- CAPP also forecasts that the total number of wells drilled in Canada’s western provinces, home to the world's third largest oil reserves, will fall to 3,500 in 2016 from 10,400 drilled in 2014 and that capital spending there will drop to $17B this year, about half of 2014 levels.
- Relevant tickers: SU, CVE, IMO, XOM, RDS.A, RDS.B, CNQ, ENB, TRP, PDS, OTCPK:HUSKF, OTCQX:COSWF, OTCPK:MEGEF
- Now read Canada's biggest oil producers sitting on near-record cash pile
Thu, Apr. 7, 2:26 PM
- Goldman Sachs says crude oil at $35/bbl is the Goldilocks ideal - priced neither too high nor too low but just right - to make shares of U.S. explorers worth buying, suggesting investors and use volatility to add to positions of shale productivity winners.
- The $30-$35 range should keep behavior of U.S. oil producers unchanged and accommodate $55-$60 oil in 2017, Goldman says, providing opportunity for equities, while a near-term rally to $45-$50 oil would reduce 2017 upside but still be favorable for equities, at least temporarily.
- Goldman says it favors "secular productivity winners" EOG Resources (EOG -0.6%), Diamondback Energy (FANG +1.3%) and PDC Energy (PDCE -4.4%), as well as stocks in “the next rung down,” including Hess (HES -3.5%), Cenovus Energy (CVE -1.8%), Anadarko Petroleum (APC -1.1%), Encana (ECA -4%), Continental Resources (CLR -2.1%) and Whiting Petroleum (WLL -0.6%).
- Now read Oil, interest rates and game theory: Why prices have further to fall
Fri, Apr. 1, 12:57 PM
- Cenovus Energy (CVE -2.1%) says it is cutting another 440 jobs because of low oil prices, bringing the total workforce reduction to ~1,600 since the end of 2014 and leaving total staff numbers down 31% at 3,600 employees.
- CVE said in February that it was aiming to cut operating and administrative costs by $200M this year, in part via job cuts.
- The Canadian Association of Petroleum Producers estimates that at least 41K direct jobs have been cut in the energy sector, along with many more indirect jobs.
- Now read Why Cenovus Energy may benefit from a new wave of mergers in oil and gas
Wed, Mar. 16, 12:48 PM
- Canada's five largest oil producers are sitting on a near-record $8.5B in cash, Bloomberg reports, providing the resources to keep investing and manage debt while weathering the current oil price rout.
- Divestitures, cost cutting, equity raises and dividend cuts have buttressed balance sheets as Canadian producers buckle down for “lower for longer” oil prices, and needing the money to keep operations expanding.
- Suncor’s (SU +0.8%) Fort Hills bitumen mine alone this year could eat up half the company’s available cash; spending on Fort Hills will cost $4.5B this year, with SU responsible for roughly half the outlay.
- Imperial Oil (IMO -0.7%) and Cenovus Energy (CVE +0.9%) also need to cash to develop assets using steam technology; IMO's new Alberta oil sands project that would produce 50K bbl/day from 2022, while expansions at CVE’s Foster Creek and Christina Lake sites will begin producing oil in Q3.
- Canadian Natural Resources (CNQ +1.6%) has the smallest cash pile of the five largest producers, while Husky Energy (OTCPK:HUSKF +2.1%) says it capex will remain in balance with cash flow this year.
Fri, Mar. 11, 5:38 PM
Fri, Feb. 26, 5:41 PM
Fri, Feb. 19, 8:36 AM
- Cenovus Energy (NYSE:CVE) and Encana (NYSE:ECA) had their debt ratings downgraded to junk by Moody’s, reflecting reduced cash flow and significantly weakened leverage and interest coverage metrics in the current oil price environment.
- Moody’s cut the ratings of senior unsecured notes for both Canadian producers by three notches to Ba2, two levels below investment grade, from Baa2, while reaffirming the investment-grade Baa2 rating of Husky Energy (OTCPK:HUSKF).
- The downgrades were issued in two separate statements: I, II.
Cenovus Energy, Inc. is an oil company. Its operations include oil sands properties and established crude oil and natural gas production in Alberta and Saskatchewan. The company operates through the following four segments: Oil Sands, Conventional, Refining & Marketing and Corporate &... More
Sector: Basic Materials
Industry: Oil & Gas Drilling & Exploration
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