Cenovus Energy Inc. Q4 FY2024 earnings call

• Safety Performance: Cenovus achieved best-ever process safety performance in 2024, reducing Tier 1 and 2 process safety events by 44% and lost time injuries by 23% compared to 2023.
• Operational Milestones: 2024 saw production growth in Upstream, with record Oil Sands production. Successfully executed four major turnarounds. Downstream restarted Toledo and Superior refineries. Major project milestones included Narrows Lake pipeline mechanical completion, West White Rose project mechanical completion, Foster Creek optimization progress, and Sunrise production expected to increase from late 2025.
• Fourth Quarter Results: Upstream production over 816,000 boe per day, Downstream had a weighted average crack spread decline, U.S. Refining had 92% utilization and improved operating expenses, Canadian Refining had 97% utilization and improved operating expenses.

Upstream

• In 2024, Upstream production grew to 797,000 boe per day, an increase from 779,000 boe per day in 2023. Oil Sands segment production increased by about 3% year-over-year to 610,700 boe per day in 2024. Offshore production in 2024 was about 67,000 boe per day, with Asia Pacific generating approximately $1 billion in free funds flow for the fourth consecutive year. In the fourth quarter of 2024, Upstream production was over 816,000 boe per day, a 6% quarter-over-quarter increase. Oil Sands operating margin in the fourth quarter was over CAD2.3 billion, slightly down from the prior quarter. Offshore production in the fourth quarter was about 70,000 boe per day, a 6% increase from the prior quarter.

Downstream

• In 2024, total crude throughput was 647,000 barrels per day, with U.S. Refining throughput at 556,000 barrels per day (91% utilization) and Canadian Refining throughput at 104,000 barrels per day (97% utilization). In the fourth quarter, the weighted average crack spread, net of RINs, averaged $8.20 per barrel, a 45% decline from the third quarter. Downstream operating margin in the fourth quarter was a shortfall of CAD396 million, including inventory timing loss, turnaround costs, and shortfall from non-operated refining assets.

• 2025 capital investment budget is CAD4.6 to CAD5 billion, including CAD3.2 billion sustaining capital and CAD1.4 to CAD1.8 billion growth capital.
• Production guidance for 2025 is 108,000 to 145,000 boe per day (~3% growth relative to 2024).
• Downstream crude throughput guidance is 650,000 to 685,000 barrels per day (~3% increase from 2024).
• Unit operating cost reduction expected: 15% for Canadian Refining and 5% for U.S. Refining excluding turnarounds in 2025.

• Impact of tariffs on various factors such as oil prices, condensate prices, natural gas prices, refining margins, and FX rates. Uncertainty around who bears the tariff burden and its overall impact on the company, as it affects multiple variables influencing cash flow.

Q: Menno Hulshof from TD Securities asks about U.S. refinery market capture.

A: Jon McKenzie responds that in a normalized environment, U.S. market capture should be in the 70% plus range.

Q: Menno Hulshof asks about accelerating buybacks and weighing against pref redemptions.

A: Kam Sandhar states they will continue to assess, aim to not lean on balance sheet, and continue buybacks where opportunity exists.

Q: Dennis Fong from CIBC World Markets asks about U.S. Downstream projects.

A: Jon McKenzie talks about work on refinery units like electricity reliability at Lloydminster Upgrader, coker units, and upcoming work at Toledo refinery in spring.

Q: Greg Pardy from RBC Capital Markets asks about Asia gas and portfolio.

A: Jon McKenzie mentions Asian business is high-margin, focuses on contract extensions, and strong gas demand in Asia.

Q: Neil Mehta from Goldman Sachs asks about mid-con market and capital spend.

A: Jon McKenzie discusses mid-con competitive advantages, seasonal softness, and growth capital tapering in 2025 with increased free cash flow to shareholders.

Q: John Royall from JPMorgan asks about balance sheet and conventional business.

A: Kam Sandhar talks about net debt drift and commitment to CAD4 billion target, Jon McKenzie discusses conventional business investment for high returns.

Q: Dennis Fong from CIBC World Markets asks about Toledo product supply agreement.

A: Geoff Murray states it's relatively immaterial, but evaluated for future optimization.

Q: Manav Gupta from UBS asks about heavy-light differentials.

A: Jon McKenzie and Geoff Murray discuss narrow differential benefits, Upstream exposure, and monitoring price signals for impact.

Q: Chris Barko from Calgary Herald asks about tariffs and pathway project.

A: Jon McKenzie talks about no impact on 2025 capital spending, monitoring price signals for tariff impact, and uncertainty on who bears tariffs and election impact on pathway project.