The producer returned $1.4 billion to shareholders even as earnings fell short of analyst forecasts
Cenovus Energy Inc. returned $1.4bn to shareholders and raised its full-year production outlook after second-quarter profit more than tripled, even as the results came in below what analysts had forecast.
The Calgary-based producer reported net earnings of $2.87bn, or $1.53 per diluted share, for the three months ended June 30, up from $851m, or 45 cents per share, a year earlier.
That fell short of the $1.62 per share analysts had expected on average, the Canadian Press citing LSEG Data & Analytics.
Revenue reached $17.4bn, up from $12.3bn a year earlier,.
Total upstream production drove the quarter.
Reuters reported output climbed 27 percent to 970,400 barrels of oil equivalent per day from 765,900 a year earlier, with the oil sands segment setting a quarterly record and both the Christina Lake and Sunrise facilities delivering record volumes, according to the company.
On the strength of that performance, Cenovus lifted its full-year upstream guidance by the equivalent of 25,000 barrels per day, to a range of 970,000 to 1.01 million.
Chief executive Jon McKenzie told analysts on Wednesday's earnings call that July output will pass one million barrels a day for the first time.
He said it marked the company's first month at that level and credited its people and assets.
Bloomberg reported the threshold places Cenovus among fewer than 20 producers worldwide pumping more than a million barrels of oil and gas a day, a group that includes Shell Plc and ExxonMobil and just one other Canadian company, Canadian Natural Resources Ltd.
Higher oil prices underpinned the results.
The war in Iran tightened global supply, Reuters reported, and North American crude reached US$100 a barrel during the quarter, according to the Financial Post.
McKenzie kept some distance from that tailwind.
“We would never apologize nor take credit for a higher commodity price environment, but the key is to run well while it lasts, and capitalize on the opportunity,” he told the Financial Post.
On shareholder returns, the company said its $1.4bn payout comprised $1.0bn in buybacks of 26.2 million common shares and $0.4bn in dividends.
Directors declared a quarterly base dividend of $0.22 per share, payable September 29 to holders of record as of September 15.
Net debt fell to $5.4bn as at June 30, down $2.7bn from the prior quarter, after Cenovus repaid the remaining $2.2bn on a term loan used to fund its MEG Energy Corp. acquisition.
The company reached its interim net debt threshold of $6bn during the quarter and said it will target returning about 75 percent of excess free funds flow to shareholders while net debt sits between $6bn and $4bn.
That MEG deal, valued at $8.6bn and closed in November after a bidding war with Strathcona Resources Ltd., added more than 100,000 barrels a day of output next to Cenovus's Christina Lake operations, per Reuters.
McKenzie said the company remains on track to lift MEG production to 150,000 barrels a day by 2028, the Canadian Press reported.
Cenovus also trimmed its oil sands operating cost guidance, to a range of $10.75 to $11.75 per barrel from $11.25 to $12.75, according to the company.
The quarter coincided with a shifting policy backdrop.
Cenovus belongs to the Oil Sands Alliance, which signed a memorandum of understanding this month, the Canadian Press reported.
The agreement links progress on the alliance's Pathways carbon capture and storage project to Ottawa's approval of a new West Coast pipeline that Alberta has proposed and government-owned Trans Mountain Corp would build.
Bloomberg reported that McKenzie welcomed the latest agreement as "meaningful progress toward creating a competitive investment environment" for the oilsands, a shift from the first-quarter call where he attacked the energy dialogue as "myopically focused on the climate agenda."
He still objected to what he called "provisions for an uncompetitive carbon tax that uniquely burdens Canadian industry."
For McKenzie, the significance runs beyond a single quarter.
“Where we are today and what's been discussed and agreed on unlocks this business in terms of its investability,” he told the Financial Post.
Cenovus expects first oil from its West White Rose project off Newfoundland at the end of the third quarter, the company said.
Investors responded on the day.
Cenovus shares rose about 4 percent in Toronto, the Canadian Press reported, while its US-listed shares gained almost 5 percent by midday, according to Reuters.
Asked to explain the production gains, McKenzie pointed past the recent policy signals.
“Everyone wants to know the special sauce, but it's two decades worth of work,” he said, as reported by the Financial Post.
