Cenovus to Increase 2020 Capital Investment & Production

Cenovus Energy Inc. CVE recently announced the intention of increasing capital spending for 2020 to C$1.3-C$1.5 billion from the 2019 estimated level of C$1.1-C$1.2 billion. The rise can be attributed to a deferral of spending this year, following production curtailments introduced by regulators in Alberta. Notably, 70% of the capital spending will likely be used for sustaining production levels, primarily at the company’s Foster Creek and Christina Lake oil sands operations.

The firm intends to make its high-return projects ready for sanctions. Depending on market improvement, it plans to make final investment decisions for the projects as early as the second half of next year.


While total production for the current year is expected within 440-464 thousand barrels of oil equivalent per day (MBoe/d), the metric will likely rise 7% to 472-496 MBoe/d in 2020. The company’s crude-by-rail program and the local government’s Special Production Allowances will likely lead to the higher production.

Markedly, the rise in output will be supported by its oil sands operations that are likely to increase 13% year over year to 390-410 thousand barrels per day (MBbls/d) in 2020. The production growth is expected to be partially offset by 15% year-over-year fall in Deep Basin output. 

Refining and Marketing

Cenovus is planning to increase capital investment in Refining and Marketing assets in 2020 to C$285-C$330 from the 2019 estimated level of C$260-C$290. Apart from transporting and selling crude oil, natural gas and NGLs, the company’s Refining and Marketing segment includes the joint ownership of two refineries in the United States. In each of the Borger and Wood River refineries, Cenovus has a 50% ownership, with Phillips 66 PSX being the operator. Moreover, Cenovus operates a crude rail terminal in Alberta, wherein it has full ownership. The segment accounted for 46% of revenues in the September quarter of 2019.

Oil Sands

The company is planning to invest C$705-C$820 million in the Oil Sands business in 2020, higher than the 2019 estimated level of C$595-C$640 million. The segment contributed 51.6% to Cenovus’ total revenues in third-quarter 2019. Notably, it expects low sustaining capital costs for oil sands operations and a 5% reduction in non-fuel operating costs per barrel in 2020.

Price Performance

Cenovus’ shares have gained 33.7% in the year-to-date period compared with the 15.6% rally of the industry it belongs to.

Zacks Rank and Stocks to Consider

Currently, Cenovus carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the energy sector include Antero Midstream Corporation AM and Enbridge Inc ENB, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Antero Midstream’s bottom line for the current quarter is expected to skyrocket 120% year over year.

Enbridge’s 2019 earnings per share have witnessed two upward estimate revisions and no downward movement in the past 60 days.

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Cenovus Energy Inc (CVE): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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