Cenovus Energy(CVE)2025-02-20 20:38Financial Data and Key Metrics Changes - In 2024, Cenovus generated over CAD 8 billion of adjusted funds flow and returned about CAD 3.2 billion to shareholders through dividends, share repurchases, and the redemption of preferred shares [14] - The company achieved its CAD 4 billion net debt target in 2024, marking a significant milestone [14] - In Q4 2024, Cenovus generated CAD 2.3 billion of operating margin, approximately CAD 1.6 billion of adjusted funds flow, and about CAD 125 million of free funds flow [15] Business Line Data and Key Metrics Changes - Upstream production grew by about 2.5% from 790,000 boe per day in 2023 to 797,000 boe per day in 2024, with Oil Sands production increasing by about 3% year-over-year to 610,700 boe per day [10] - Total offshore production increased to about 67,000 boe per day, with approximately 59,000 boe per day from the Asia Pacific business [11] - In the Downstream segment, total crude throughput increased by 87,000 barrels per day year-over-year to 647,000 barrels per day in 2024 [12] Market Data and Key Metrics Changes - The weighted average crack spread in the Downstream averaged $8.20 per barrel in Q4, a decline of 45% compared to Q3 [18] - U.S. Refining throughput in Q4 was 562,000 barrels per day, representing a utilization rate of 92%, an increase of 3% quarter-over-quarter and 17% year-over-year [20] - Canadian Refining throughput was 104,000 barrels per day, with a utilization rate of about 97%, an increase of 5% quarter-over-quarter [22] Company Strategy and Development Direction - Cenovus plans a capital investment budget of CAD 4.6 to CAD 5 billion for 2025, marking the final year of a three-year growth investment cycle [26] - The company expects to bring on about 150,000 boe per day by 2028, which will drive growth in free funds flow [27] - The focus remains on improving operational performance and driving costs down in the Downstream segment [19] Management's Comments on Operating Environment and Future Outlook - Management highlighted a strong operational performance in 2024, with record production from Oil Sands assets and improving Downstream performance [30] - The company anticipates a year-over-year reduction in unit operating costs excluding turnarounds of 15% and 5% for Canadian and U.S. Refining businesses respectively [29] - Management expressed confidence in achieving free cash flow growth and significant returns to shareholders in the coming years [30] Other Important Information - Cenovus achieved its best-ever process safety performance in 2024, reducing Tier 1 and Tier 2 process safety events by 44% compared to 2023 [7] - The company completed major turnarounds at key facilities, including the Lloyd Upgrader and the Lima Refinery, which are expected to enhance operational performance [13] Q&A Session Summary Question: U.S. Refinery market capture expectations - Management indicated that in a normalized environment, U.S. market capture should settle in the 70% plus range [34] Question: Accelerating buybacks versus preferred redemptions - Management acknowledged the opportunity for buybacks but emphasized the importance of maintaining a disciplined capital structure and not leaning on the balance sheet [36][39] Question: U.S. Downstream operations and upcoming projects - Management discussed ongoing efforts to improve reliability and mechanical availability of assets, highlighting significant work done at the Lloydminster Upgrader and U.S. assets [45][46] Question: West White Rose drilling plans - Drilling is expected to start in Q4 of next year, with first production anticipated in the mid-first half of 2026 [53] Question: Heavy-light differentials impact - Management noted that a narrow differential is beneficial for the company, with expectations for continued narrow differentials due to increased capacity from Trans Mountain [114][115] Question: Impact of tariffs on capital spending plans - Management stated that tariffs would not impact 2025 spending plans, emphasizing a focus on completing important projects [121]