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.
-With files from Reuters
$65 oil on the horizon if a recession hits, Citi warns – CNBC Television
What every Canadian investor needs to know today – The Globe and Mail
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Major indexes on both sides of the border fell at Tuesday’s open as recession concerns continue to weigh on global sentiment.
Shortly after the opening bell, the Toronto Stock Exchange’s S&P/TSX composite index was down 239.36 points, or 1.26 per cent, at 18,789.5.
In the U.S., the Dow Jones Industrial Average fell 194.14 points, or 0.62 per cent, at the open to 30,903.12.
The S&P 500 opened lower by 32.72 points, or 0.86 per cent, at 3,792.61, while the Nasdaq Composite dropped 163.66 points, or 1.47 per cent, to 10,964.18 at the opening bell.
“Volatility remains elevated across every asset class to be sure, although a U.S. holiday [on Monday] meant a 12-hour break from the noise,” OANDA senior analyst Jeffrey Halley said.
“What is clear is that the strategy of watching the rooster fight from the sidelines instead of getting involved remains the sensible one,” he said. “The financial markets continue to tie themselves in knots so complicated, that they would give even the saltiest mariner a headache, as they try to price in a recession no recession and its impact on asset prices.”
In the U.S. traders are now looking ahead to the release of the minutes from the latest Federal Reserve on Wednesday and fresh jobs numbers on Friday. Canadian investors also get employment figures Friday morning.
The Globe’s Mark Rendell reports that Canadian consumers and businesses expect inflation to remain high for several years, adding pressure on the Bank of Canada to announce another oversized interest rate increase next week to prevent rapid consumer price growth from becoming entrenched. The central bank released its business outlook and consumer expectations surveys on Monday.
Those surveys come ahead of next week’s Bank of Canada policy announcements. Markets are expecting the central bank to hike rates by three-quarters of a percentage point after the Fed made a similar move in its last policy announcement.
On Tuesday, Canadian investors will got May building permit figures from Statistics Canada. The agency said the total value of building permits rose 2.3 per cent. Permits in the non-residential sector jumped 7 per cent while residential permits slid 0.1 per cent.
Later in the morning, the latest home sale figures from the Real Estate Board of Greater Vancouver will be released. Toronto home sales numbers follow on Wednesday.
Overseas, the pan-European STOXX 600 was off 1.83 per cent by afternoon. Britain’s FTSE 100 fell 2.40 per cent. Germany’s DAX and France’s CAC 40 lost 2.49 per cent and 2.41 per cent, respectively.
In Asia, Japan’s Nikkei gained 1.03 per cent. Hong Kong’s Hang Seng edged up 0.10 per cent.
Crude prices struggled in early going as recession concerns continue to weigh on sentiment.
The day range on Brent is US$112.82 to US$114.75. The range on West Texas Intermediate is US$107.25 to US$111.45.
“Although oil is trading supported on the day due to improved risk sentiment and the possible easing of U.S. trade tariffs against China, oil is still struggling to break out from its current recessionary malaise as the market pivots away from inflation to economic despair,” Stephen Innes, managing director with SPI Asset Management, said.
Meanwhile, Norwegian offshore workers began a strike Tuesday that will reduce oil and gas output.
Reuters reports that Norwegian producer Equinor has said the strike is expected to reduce oil and gas output by 89,000 barrels of oil equivalent per day (boepd), of which gas output makes up 27,500 boepd.
In other commodities, gold prices slipped, hit by an elevated U.S. dollar.
Spot gold was down 0.2 per cent at US$1,805.20 per ounce early Tuesday morning, while U.S. gold futures gained 0.4 per cent to US$1,807.80.
The Canadian dollar was lower alongside weaker risk sentiment in the broader markets while its U.S. counterpart touched a fresh two-decade high against a group of world currencies.
The day range on the loonie is 77.37 US cents to 77.97 US cents.
“The hawkish BoC remains an important tailwind for the CAD alongside an economy that appears more resilient than that of other major advanced countries,” Shaun Osborne, chief FX strategist with Scotiabank, said.
“However, markets may trade cautiously in the days ahead as they look to the release of the Fed’s minutes tomorrow and US ISM, ADP and NFP data later in the week.”
There were no major Canadian economic reports due Tuesday.
On world markets, the U.S. dollar index, which weighs the greenback against a basket of global peers, gained 0.8 per cent to 105.98, a new two-decade high for the currency, according to figures from Reuters.
The euro, meanwhile, fell to a two-decade low against the U.S. dollar amid continued recession concerns.
The euro’s 0.8-per-cent fall on the day took the currency to its weakest since late 2002.
The Australian dollar, meanwhile, was also weaker despite that country’s central bank’s decision to raise rates for the third time in as many months.
The Australian dollar slid 0.09-per-cent lower to US$0.6820, after trading as high as US$0.6895 earlier in the day.
In bonds, the yield on the U.S. 10-year note was down slightly at 2.882 per cent in the predawn period.
More company news
A two-week strike at Canadian National Railway Co. is ending after the union representing 750 signals and communications workers agreed to binding arbitration. Steve Martin, a spokesman for the International Brotherhood of Electrical Workers, said the strike that was launched June 18 will end just after midnight. Employees will return to their roles Wednesday morning, the company said in a news release.
French music streaming platform Deezer failed to attract much investor interest for its Paris market debut seven years after its first flotation was aborted, with its shares dropping sharply in early dealing on Tuesday. Deezer, whose larger rivals include Spotify, was down 27.15% at 0947 GMT at 6.00 euros per share, after opening at 8.50 euros.
British Airways is cancelling more flights scheduled for the summer holiday season, it said on Tuesday, at a time of widespread disruption at airports caused by staff shortages and a surge in travel demand. The airline said it would now reduce its April-October schedule by 11%, having said in May the cuts would amount to 10%.
(830 am ET) Canada building permits for May.
(10 am ET) U.S. factory orders for May.
With Reuters and The Canadian Press
Is Canada heading for a recession? – CBC News
BOE's Cunliffe Says Economy Is Slowing Due to Spending Squeeze – Bloomberg
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Europe kicks off vaccination programs | All media content | DW | 27.12.2020 – Deutsche Welle
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