Cenovus Energy (CVE.TO)(CVE) CEO Alex Pourbaix says his company will be “very cautious” with its capital spending in 2022, even as major global oil contracts trade near seven-year highs.
“Although we’re pleased to see these higher prices, it’s not something we can count on,” Pourbaix told analysts on a post-earnings conference call on Tuesday. “We won’t invest in a project that doesn’t deliver an acceptable return at the bottom of the cycle. Which, for oil, we would describe as US$45 WTI.”
The price of North American Benchmark West Texas Intermediate (WTI) crude (CL=F) fell 1.98 per cent to US$89.51 per barrel at 12:36 p.m. ET.
Cenovus, like many of its peers in Canada’s oil patch, says it will continue to prioritize debt repayment and returning cash to investors through dividends and share buybacks.
“We are very focused on the importance and urgency of returning more value to our shareholders,” Pourbaix added. “You’ve seen us double the dividend. And here we are, rapidly heading towards below eight billion in net debt.”
Cenovus says its net debt fell below $9.6 billion at the end of the quarter, down $1.4 billion from the prior period. The company says it repurchased approximately 17 million common shares in 2021, with another nine million bought back so far in 2022. Pourbaix says investors can expect an updated plan to increase rewards for shareholders “in fairly short order.”
The company announced in November plans to double its dividend, effective in the fourth quarter of 2021, and a buyback program representing about 10 per cent of its public float.
Cenovus shares fell on Tuesday after the company’s quarterly loss more than doubled to $408 million. Cenovus says this was largely due to a $1.9 billion one-time non-cash impairment charge related to its U.S. refinery business.
The Calgary-based integrated oil and gas firm’s loss amounted to $0.21 per share for the three months ended Dec. 31, compared with a loss of $153 million or $0.12 per share a year earlier.
Toronto-listed Cenovus shares fell 5.47 per cent to $18.47 at 1:37 p.m. ET on Tuesday. The stock has climbed more than 138 per cent in the past 12 months, riding an uptick in investor enthusiasm for Canadian oil and gas shares.
Cenovus says its U.S. manufacturing unit, which includes three refineries, reported a net operating loss of $97 million in the fourth quarter. Credit Suisse analyst Manav Gupta says in a note to clients that the consensus estimate was for a profit of $15 million. Pourbaix says a “one-in-every-five-year event” involving plant outages at its Lima refinery cost the company $145 million.
Cenovus completed its acquisition of rival Husky Energy last March, creating Canada’s third-largest oil and gas producer. Pourbaix stated in a news release on Tuesday that the combination “exceeded our expected transaction synergies and enhanced shareholder returns.”
“In our first year as a combined company, we delivered exceptional operational performance at our upstream business, successfully integrated the assets acquired in the Husky transaction and aggressively reduced debt, creating a stronger company,” Pourbaix said.
Cenovus says revenue for the fourth quarter climbed to $13.7 billion, up from $3.5 billion a year ago, and $12.7 billion in the previous quarter. Free funds flow in the fourth quarter hit $1.1 billion, compared to just $91 million a year earlier.
Upstream production for the quarter increased to 825,300 barrels of oil equivalent per day (boe/d), compared with 467,200 boe/d in the fourth quarter of 2020. Downstream throughput for the quarter was 469,900 barrels per day, up from 169,000 a year earlier.
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.
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-With files from Reuters
