Cenovus Energy Inc Cuts Capital Spending by $700m

Cenovus now budgeting between $1.8 billion and $2 billion in capital expenditures for 2015

Little more than a month after Cenovus Energy Inc (TSE:CVE, Mkt cap 18.79B, P/E 16.25, Div/yield 0.27/4.29, EPS 1.53, Shares 757.00M) unveiled a significantly reduced capital budget for 2015, plunging oil prices have forced its hand once again, leaving the oilsands major with little choice but to announce a further $700 million in spending cuts.

Cenovus Energy Cuts Capital SpendingAs the Financial Post reports, the Calgary-based firm will trim the number of contractors it employs in order to bring it in line with the current oil landscape.

The company is now budgeting between $1.8 billion and $2 billion in capital expenditures for 2015, which represents a 27% reduction on the budget it announced Dec. 11, and a 37% drop from its 2014 budget.

Predictably, Cenovus pointed at the ever subsiding oil prices as the reason it was cutting $700 million from its spending plans, adding that it aims to take another $400 million to $500 million off from its operating and capital expenses over the next 12 months.

Contractors are thought to make up around a third of Cenovus' 5,200-strong workforce, but the company was not prepared to reveal just how many of those positions were being eliminated.

"We don't have a specific target at this point," said Cenovus spokesperson Brett Harris. "That's something that we're going to be determining over the course of the next couple months."

The Canadian oil company's president and CEO Brian Ferguson said in a statement that the plan is to move "at a pace we believe is more in line with the current pricing environment."

The new budget has been calculated on the assumption that the West Texas Intermediate (WTI) benchmark oil price will average US$50.50 per barrel through 2015, which is significantly less than the company's previous estimate of US$74 per barrel.

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Cenovus Sets Out More Cautious Approach For 2015

Cenovus CEO Brian Ferguson said that the company plans to maintain its dividend "through these difficult times."

Cenovus Energy Inc. (TSE:CVE, Mkt cap 14.60B, P/E 12.63, Div/yield 0.27/5.52, EPS 1.53, Shares 757.00M) is hitting "pause" on hiring for the first time as it waits for stability to return to the oil market, adding that it will also strip back its capital budget by 15% next year.


Cenovus Cautious Approach 2015As the Financial Post reports, the Calgary-based oil company is the latest in a string of Canadian energy companies to unveil reduced spending plans for next year following the drop in oil prices.


Cenovus president and CEO Brian Ferguson said the company has no plans to lay off any staff, but it will not be increasing its headcount. Instead, it will be looking at how and where it can allocate employees.


Cenovus, which split from Encana Corp. in 2009, is said to be one of the fastest growing companies in the oilsands, with the number of its employees increasing 59% to 3,544 from 2,221 since the separation.


However, the staffing announcement, coupled with the news that the company is to limit its capital budget so that it falls between $2.5 billion and $2.7 billion in 2015, puts the brakes on this expansion somewhat.


Cenovus explained that it would be able to fund its committed capital with internal cash flow if West Texas Intermediate prices averaged US$65 per barrel next year. But the company has forecast a 29% drop in cash flows to between $2.6 billion and $2.9 billion in 2015 – a considerable comedown from the $3.8 billion to $3.9 billion expected in 2014.


Ferguson says, though, that the company plans to maintain its dividend "through these difficult times."


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The opinions expressed here are ours alone. They are provided for information purposes only and are not tailored to the needs of any particular individual or company, are not an endorsement, recommendation, or sponsorship of any entity or security, and do not constitute investment advice. We strongly recommend that you seek advice from a qualified investment advisor before making any investment decision.
 

 

 

 

Stockwatch – Michael Sprung on BNN Market Call Tonight

Stockwatch – Top Picks

Stockwatch – Cenovus Energy Inc., CVE-T, Owned by clients, Last Purchase May 12, 2014, $31.25

Cenovus is an integrated oil and gas company focused on the development of bitumen assets in Alberta with significant joint venture operations at Foster Creek and Christina Lake.  Production should ramp up strongly over the next few years resulting in increasing earnings, cash flow and potential dividend increases.  The stock has lagged the energy sector over the past year and appears attractive at current levels.

Stockwatch – Fortis Inc., FTS-T, Owned by clients, Last Purchase March 4, 2014, $30.55

Fortis is the largest investor owned gas and electric distribution utility in Canada with operations in the US and Belize.  Over the next few years, Fortis is expected to significantly increase its rate base.   The acquisition of UNS in Arizona is closed on August 15, well ahead of schedule.  The addition of UNS is a major step for the Company.  During this period of transition, the yield will support the stock and given the longer term anticipated earning growth, the investment should do well.

Stockwatch – Stuart Olson Inc., SOX-T, Owned by clients, Last Purchase March 20, 2014, $9.00

Stockwatch - Michael Sprung BNN Market Call Top Stock Pick Stuart Olson Inc formerly The Churchill Corporation

Stockwatch – Michael Sprung on BNN Market Call. Top Stock Pick: Stuart Olson Inc., formerly The Churchill Corporation

Stuart Olson Inc, formerly The Churchill Corporation, is one of Canada’s largest construction firms providing general contracting and electrical building systems contracting in the institutional and commercial construction markets as well as electrical, mechanical and specialty services in the industrial construction markets.  The Company is recovering from an acquisition in 2010 that resulted in losses from poorly priced contracts.  With a record high backlog of projects at better margins, profitability should increase going forward.  The dividend currently yields 4.8%.

Stockwatch – Outlook:

Investors have been the beneficiaries of surging markets in North America over the past few years as the economies have recovered from the financial crisis.  Valuations have been stretched as multiples have expanded.  In this environment, taking some profits where securities have had large appreciation may be prudent.  A larger weighting in cash can provide a good option to be deployed should any market setback occur.

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The opinions expressed here are ours alone. They are provided for information purposes only and are not tailored to the needs of any particular individual or company, are not an endorsement, recommendation, or sponsorship of any entity or security, and do not constitute investment advice. We strongly recommend that you seek advice from a qualified investment advisor before making any investment decision.

    Stockwatch – Cenovus Energy Marks Record Cash Flow in Q2

    Stockwatch – Independent oil producer Cenovus Energy Inc (TSE:CVE, Mkt cap 25.30B, P/E 21.58, Div/yield 0.27/3.19, EPS 1.55, Shares 756.94M) recently published its results for the second quarter of this year, which ended on June 30. Brian Ferguson, president and CEO of the firm, pointed out in the announcement that the company had generated record cash flow during the period – a jump of 37% or $1.19 billion.

    Cenovus Grand Rapids SAGD Total

    Stockwatch – Cenovus Energy generates record cash flow

    The increased cash flow was aided by 34% higher operating cash flow from Cenovus’s oil and natural gas-producing assets. This, in turn, could be explained with the year-over-year increase in oil sands production, as well as the higher prices of crude oil and natural gas.

    Cenovus generated a net income of $615 million – net earnings more than tripled compared to the same period last year. Higher operating earnings and a non-operating unrealised foreign exchange gain in the amount of $177 million contributed to the increase. The company’s operating profits saw a rise as well, up 85% to $473 million.

    Cenovus said increased production at its Christina Lake oil sands project served as a boost to its second quarter profits. Christina Lake production marked a 77% rise from the second quarter in 2013, averaging almost 68,000 barrels per day net.

    Production at the company’s other sand project, Foster Creek, rose 3% compared to the same period in 2013, averaging nearly 57,000 barrels per day net.

    John Brannan, Cenovus Energy’s executive vice-president & chief operating Officer, noted in the announcement that the marked growth in oil sands production, as well as the robust cash flow coming from the company’s conventional and refining assets, serve to show that Cenovus Energy’s integrated business strategy really works.

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    The opinions expressed here are ours alone. They are provided for information purposes only and are not tailored to the needs of any particular individual or company, are not an endorsement, recommendation, or sponsorship of any entity or security, and do not constitute investment advice. We strongly recommend that you seek advice from a qualified investment advisor before making any investment decision.

    Stock Watch – Cenovus Buys Oil Sands Processing Facilities from French Total

    Stock Watch –  Cenovus will use SAGD facilities at its planned Grand Rapids oil sands project.

    Canadian oil sands producer  Cenovus Energy Inc (TSE:CVE, Mkt cap 24.20B, P/E 36.61, Div/yield 0.27/3.33, EPS 0.87, Shares 756.51M) has bought steam-assisted gravity drainage facilities from French oil and gas major Total SA that will be used at its planned Grand Rapids oil sands project.

    Cenovus Grand Rapids SAGD Total

    Stock Watch- Cenovus will use SAGD facilities at its planned Grand Rapids oil sands project

    The processing facilities, which have the capacity to produce around 10,000 barrels of oil a day, were built for Total’s Joslyn oil sands project but were eventually abandoned after an over-pressurized well blew up. The equipment will be now moved to the Grand Rapids site where Cenovus expects to produce 180,000 barrels of oil a day.

    The Calgary-based company, which ended the first quarter with higher-than-expected earnings, obtained approval from the Alberta Energy Regulator for the Grand Rapids thermal oil sands project in northern Alberta in the first quarter of the year. The first phase of the project is expected to start producing oil in 2017.

    CEO John Brannon said in the company’s quarterly conference call that the facilities have been adequately maintained but he declined to disclose the price Cenovus paid for the assets, saying that the information was confidential.

    Cenovus reported net income of C$247 million, or C$0.33 a share, for the three months to March, up from C$171 million, or C$0.23 a share, in the same quarter of 2013. Its operating earnings slipped 3% on the year to C$378 million, or C$50 per share, but were above the average estimate of C$48 a share among analysts polled by Thomson Reuters.

    Production at company’s Foster Creek operations stood at 54,706 b/d in the quarter, down 2% from 2013, while the company’s other major oil sands project, Christina Lake, had an average output of 65,738 b/d, an increase of 48% year-on-year.

    Cenovus Energy Inc
    TSE:CVE

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    The opinions expressed here are ours alone. They are provided for information purposes only and are not tailored to the needs of any particular individual or company, are not an endorsement, recommendation, or sponsorship of any entity or security, and do not constitute investment advice. We strongly recommend that you seek advice from a qualified investment advisor before making any investment decision.

     

    Cenovus Gets Regulatory Go-Ahead for New Oil Sands Project

    Cenovus Energy Inc will develop the Grand Rapids thermal oil sands project, located in northern Alberta, in several phases

    The Alberta Energy Regulator has given the thumbs-up to Canadian oil producer Cenovus Energy Inc (TSE:CVE, Mkt cap 23.78B, P/E 35.97, Div/yield 0.27/3.39, EPS 0.87, Shares 756.51M) to develop a new oil sands project with an expected production capacity of up to 180,000 barrels of oil per day. The news sent the company’s stock 1.8% higher in Toronto on Friday, closing at C$30.50 after touching C$30.63 earlier in the session.

    Cenovus Grand Rapids thermal oil sands project northern Alberta developed several phases

    Cenovus – the Grand Rapids thermal oil sands project, located in northern Alberta, will be developed in several phases.

    The Grand Rapids thermal oil sands project is located in northern Alberta and will be developed in several phases. It is the company’s fourth approved oil sands project and is expected to have a life of 40 years. Calgary-based Cenovus said it would decide on when to start developing the field later in 2014.

    Cenovus has been producing oil in the area for over 15 years from the Wabiskaw formation and has operated a steam-assisted gravity drainage (SAGD) pilot project at the site for more than three years. The oil producer said that it has so far drilled around 180 stratigraphic test wells at Grand Rapids to qualify for the permit and support its development plans. The results have confirmed that the reservoir is “very consistent.”

    Cenovus’s other oil sands projects include Foster Creek, which has a production capacity of some 110,000 barrels of oil per day, and Christina Lake, which has a daily output of 130,000 barrels of oil. The company plans expansions at both fields and expects that its third project, Narrows Lake, will start production in 2017. Cenovus owns these three projects together with ConocoPhillips.

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    The opinions expressed here are ours alone. They are provided for information purposes only and are not tailored to the needs of any particular individual or company, are not an endorsement, recommendation, or sponsorship of any entity or security, and do not constitute investment advice. We strongly recommend that you seek advice from a qualified investment advisor before making any investment decision.

     

    Top Stock Picks and Market Outlook – BNN Market Call, Friday March 7

    Top Stock Picks and Market Outlook – Michael Sprung Interviewed by Mark Bunting on BNN Market Call

    Top Stock Picks

    Cenovus to improve Foster Creek's SOR ratio in 2014

    Cenovus has taken steps to improve Foster Creek’s SOR ratio.

    Michael’s top stock picks for Friday March 7 are:

    Cenovus Energy Inc. (TSE:CVE, Mkt cap 22.22B, P/E 33.63, Div/yield 0.27/3.62, EPS 0.87, Shares 756.12M) Owned by clients, last purchase March 6, 2014 $29.08.
    Cenovus is an integrated oil and gas company focused on the development of bitumen assets in Alberta with significant joint venture operations at Foster Creek and Christina Lake.  Production should ramp up strongly over the next few years resulting in increasing earnings, cash flow and potential dividend increases.

    Fortis Inc. (TSE:FTS, Mkt cap 6.54B, P/E 18.82, Div/yield 0.32/4.17, EPS 1.63, Shares 213.16M) Owned by clients, Last purchase March 4, 2014 $30.55.

    Fortis Inc. owns 51% of the Waneta Dam in BC. Expansion will add a second powerhouse located immediately downstream of existing dam.

    Fortis Inc. owns 51% of the Waneta Dam in BC.

    Fortis is the largest investor owned gas and electric distribution utility in Canada with operations in the US and Belize.  Over the next few years, Fortis is expected to significantly increase its rate base.  Approval for the acquisition of UNS in Arizona is expected later this year.  During this period of transition, the yield will support the stock and given the longer term anticipated earnings growth, the investment should do well.n the longer term anticipated earnings growth, the investment should do well.

     

    Enercare is focused on the securitizing and renting of water heaters and sub-meters.

    Enercare is focused on the securitizing and renting of water heaters and sub-meters.

    Enercare Inc. (TSE:ECI, Mkt cap 607.93M, P/E 347.01, Div/yield 0.06/6.69, EPS 0.03, Shares 58.46M) Owned by clients, Last purchase March 5, 2014 $10.19

    Enercare is focused on the securitizing and renting of water heaters and sub-meters (primarily in multi-residential buildings).  Results have been improving as attrition in rentals has been dramatically reduced.  Sub-metering is growing and debt has been reduced.  We anticipate that the stock will continue to reflect the ongoing improvements in Enercare’s operations.

     

    Market Outlook

    The Canadian market has had a relatively good start to the year buoyed by stronger energy and precious metal prices and advances in the Health Care and Information Technology sectors.  Weakness in the emerging markets and Asia reflect investor concerns as to the sustainability of the recovery despite evidence of continued improvement in the US and greater stability in the Eurozone.  As evidenced earlier this  week, geopolitical events have an immediate impact on investor sentiment.  We anticipate that more disruptions are likely in the coming months and that investors should be prepared to seize opportunities during these periods.

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    The opinions expressed here are ours alone. They are provided for information purposes only and are not tailored to the needs of any particular individual or company, are not an endorsement, recommendation, or sponsorship of any entity or security, and do not constitute investment advice. We strongly recommend that you seek advice from a qualified investment advisor before making any investment decision.

    Cenovus Set To Improve Performance At Alberta Oil Sands Project

    Cenovus to improve operating efficiency at its Foster Creek operation

    Cenovus Energy Inc. (TSE:CVE, Mkt cap 21.42B, P/E 35.66, Div/yield 0.27/3.76, EPS 0.79, Shares 755.95M) is looking to change the way it uses steam at its Foster Creek oil sands project in a bid to enhance the site’s efficiency, CEO Brian Ferguson said on the sidelines of a conference call on Thursday.

    Cenovus to improve Foster Creek's SOR ratio in 2014

    Cenovus has taken steps to improve Foster Creek’s SOR ratio to between 2.6 and 3.0 in 2014

    The project in northeastern Alberta has started to suck up more steam, which has resulted in an increase in its steam-to-oil-ratio (SOR), measuring the volume of steam used to produce a barrel of oil in steam-assisted gravity drainage (SAGD) projects, to 2.5 in 2013 from 2.2 the previous year. The output from the site has also declined, registering an 8% year-on-year fall to 53,000 barrels per day. According to Ferguson, the project is capable of producing oil in excess of 300,000 barrels a day.

    Cenovus has also found that steam chambers at Foster Creek’s wells have started to merge, which has further hampered its efficiency. In order to overcome these limitations the company will make changes to the way starts planned expansions at the field. The measures will include leaving steam to circulate for a longer period before starting oil production. The changes are expected to lift the SOR ratio to between 2.6 and 3.0 in 2014 but Cenovus believes that they will result in long-term production benefits that outweigh the costs of a temporarily higher SOR.

    Also on Thursday, the oil producer reported a $212 million operating profit for the fourth quarter of 2013, or $0.28 per share, recovering from a loss of $188 million or $0.25 per share a year earlier. Despite the improvement, the result was below the mean forecast for earnings of $0.36 per share among analysts polled by Thomson Reuters.  We view the deferment of expansion phases at Foster Creek will ultimately benefit operations as more data will enable greater optimization of the resource.

    Cenovus also announced a 10% increase in its quarterly dividend to $0.2662 per share.

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    The opinions expressed here are ours alone. They are provided for information purposes only and are not tailored to the needs of any particular individual or company, are not an endorsement, recommendation, or sponsorship of any entity or security, and do not constitute investment advice. We strongly recommend that you seek advice from a qualified investment advisor before making any investment decision.