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Cenovus Energy (CVE)
Q3 2012 Earnings Call
October 25, 2012 11:00 am ET
Susan Grey - Former Manager Of Investor Relations
Brian C. Ferguson - Chief Executive Officer, President and Non-independent Director
John K. Brannan - Chief Operating Officer and Executive Vice-President
Ivor Melvin Ruste - Chief Financial Officer and Executive Vice President
Harbir S. Chhina - Executive Vice-President of Oil Sands
Donald T. Swystun - Executive Vice President of Refining, Marketing, Transportation and Development
George Toriola - UBS Investment Bank, Research Division
Michael P. Dunn - FirstEnergy Capital Corp., Research Division
Barbara Betanski - Addenda Capital Inc.
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Please be advised that this conference call may not be recorded or rebroadcast without the express consent of Cenovus Energy. I would now like to turn the conference call over to Susan Grey, Director, Investor Relations.
Please go ahead, Ms. Grey.
Thank you, operator, and welcome, everyone, to our third quarter 2012 results conference call. I would like to refer you to the advisories located at the end of today's news release. In particular, I draw your attention to the risk factors and assumptions. Additional information is available in our Annual Information Form and quarterly report. Today's quarterly results have been presented in Canadian dollars and on a before-royalties basis. Brian Ferguson, President and Chief Executive Officer, will begin with an overview of our results. John Brannan, Executive Vice President and Chief Operating Officer, will then discuss our operating performance. And Ivor Ruste, Executive Vice President and Chief Financial Officer, will discuss our financial performance. Brian will provide closing comments before we begin the Q&A portion of the call. Please go ahead, Brian.
Brian C. Ferguson
Thanks, Susan. Good morning. I am pleased to share with you today some of the highlights of Cenovus' third quarter performance and our outlook for the remainder of the year.
We have delivered another strong quarter, highlighted by production growth across all of our oil sands operations combined with refining results that affirm the value of our integrated strategy.
This has all resulted in the strongest quarterly financial performance in our 3-year history. We continue to develop oil sands resources responsibly, on time and at industry-leading cost structures.
Once we bring on a new SAGD phase, we are ramping up quickly and sustaining production at or above design capacity. This is operational excellence, and it contributes to increased project returns and building net asset value.
This quarter, at Foster Creek, our production averaged 5% above design capacity. We also sustained full capacity at Christina Lake Phase C and we are quickly ramping up Phase D. John Brannan will provide more detail on our operations, but I believe we are raising the bar for what SAGD projects are capable of and our op [ph] and our performance at Christina Lake, and Foster Creek confirms these. Overall, we are continuing to meet our commitments and we remain on track with our development plans that will see expected oil production grow to 500,000 barrels per day, net to Cenovus by the end of 2021.
As I said, operational performance has translated into financial performance. Our integrated oil strategy gives us confidence to continue to invest in our oil sands assets despite fluctuations and light-heavy differentials. We expect continued volatility in Canadian crude prices over the next few years.
To help mitigate this volatility, we continue to pursue new markets and support pipeline projects through long-term commitments in addition to our strategic investment in refining.
This quarter, we enhanced our financial position with some additional liquidity through a debt offering which provides flexibility and further supports our growth plans at attractive long-term fixed rates. Additionally, we extended the term of our existing credit facility to 2016. Ivor Ruste will provide more details about this.
We've also provided an update to our guidance as noted in our news release. Changes include increased production estimates at Foster Creek and Christina Lake and higher operating cash flow expectations from refining for the year.
The guidance now reflects actual production and commodity prices for the first 9 months of the year, as well as projections for the fourth quarter. Overall, we now expect that cash flow will be about 20% higher than last year. Our low-cost oil sands projects, strong balance sheet, flexible conventional capital programs and downstream integration allow us to be resilient in times of commodity price volatility. We are well-positioned for future growth in both net asset value and our dividend. We are focused on total shareholder return.
I'm now going to turn the call over to our Chief Operating Officer, John Brannan.
John K. Brannan
Thank you Bryan, and good morning. We had another great quarter across our operating areas as the teams continued to execute on our development plans. Our oil sands operations posted strong production volumes with net production at Foster Creek and Christina Lake averaging more than 95,000 barrels per day at an average steam-to-oil ratio of 2.0.
At Foster Creek, we averaged over 126,000 barrels per day gross during the quarter, well above design capacity.
Operating performance by our teams, plant optimization and ongoing success of our wedge well technology have all contributed to this result.
Construction of the expansion phases at Foster Creek continued during the quarter. We are now just over 60% complete at the Phase F facility with pipe rack and module assembly progressing well.