Cenovus Energy delivered record oil sands production in the fourth quarter of 2021, contributing to total upstream output of more than 825,000 barrels of oil equivalent per day (BOE/d) and almost 792,000 BOE/d for the full year. The company generated fourth-quarter cash from operating activities of $2.2 billion and adjusted funds flow of $1.9 billion. With free funds flow of $1.1 billion in the quarter, and proceeds from recent divestitures, net debt was below $9.6 billion at year end, a reduction of more than $1.4 billion from the end of the third quarter and $3.5 billion in 2021 following the acquisition of Husky Energy. Total long-term debt was $12.4 billion as at December 31, 2021, down nearly $1.7 billion from January 1, 2021, and expected to decrease by approximately US$384 million on February 9 when Cenovus redeems the remaining principal amount of its notes due in 2023 and 2024. As part of its plan to enhance shareholder returns, Cenovus continues to buy back common shares under its previously announced Normal Course Issuer Bid (NCIB) and as of February 7 had repurchased approximately 26 million common shares at a volume weighted price of $16.31 per share.

“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,” said Alex Pourbaix, Cenovus President & Chief Executive Officer. “We exceeded our expected transaction synergies and enhanced shareholder returns, doubling our quarterly dividend and commencing our share buyback program. In addition, we’re well positioned to consider future opportunities to further enhance returns for our shareholders.”

4Q Highlights

In the fourth quarter, Cenovus achieved upstream production of 825,300 BOE/d, including record average daily oil sands production of almost 251,000 barrels per day (bbls/d) at Christina Lake and nearly 212,000 bbls/d at Foster Creek. Christina Lake production added more than 8,000 bbls/d compared with the third quarter, benefiting from the continued success of Cenovus’s well redevelopment plan. Production at Foster Creek increased almost 25,000 bbls/d from the previous quarter, primarily due to new wells from the asset’s west development area now operating at full production rates. The Lloydminster thermal projects continued to demonstrate strong and reliable performance, achieving production of 99,000 bbls/d, up from 98,000 bbls/d in the third quarter. The Offshore segment contributed more than 73,000 BOE/d, including production of 62,500 BOE/d from the Asia Pacific region and 10,600 bbls/d from the Atlantic region, while the Conventional segment had production of 125,300 BOE/d.

“In 2021, we clearly delivered on our operational strength in the Upstream and Canadian Manufacturing businesses,” said Pourbaix. “In 2022, we are focused on building a similarly strong executional track record in U.S. Manufacturing and demonstrating the additional value that business will generate for our shareholders.”

Full-year results

On a full-year basis, Cenovus achieved total Upstream production of 791,500 BOE/d, reflecting production increases at most of the company’s assets, including record output in its Oil Sands segment over the course of the year. Total Oil Sands segment production was 581,500 bbls/d, including nearly 180,000 bbls/d at Foster Creek, a 10% increase from 2020, and about 237,000 bbls/d at Christina Lake, up 8% from the previous year. Record production was also delivered at the Lloydminster thermal projects with almost 98,000 bbls/d for the year. In Conventional, production increased to 133,600 BOE/d from approximately 89,900 BOE/d in 2020, with the increase largely related to assets acquired through the Husky transaction. Offshore total production was 74,400 BOE/d.

In Canadian Manufacturing, average utilization for the year was 96% and average throughput was 106,500 bbls/d, reflecting the top-tier performance of the Lloydminster Upgrader and Lloydminster Refinery. In U.S. Manufacturing, full-year utilization was 80% and average throughput was 401,500 bbls/d.

Total revenues were about $46.4 billion in 2021 and total operating margin was almost $9.4 billion, compared with revenues of $13.5 billion and total operating margin of $921 million in 2020. Year-overyear differences in both total revenues and total operating margin largely related to increased commodity prices and assets acquired in the Husky transaction.

Cash from operating activities was nearly $6 billion for the year, compared with $273 million in 2020. Adjusted funds flow was $7.2 billion and free funds flow was $4.7 billion. Total capital expenditures for the year were approximately $2.6 billion, primarily concentrated on sustaining production at the company’s upstream assets and maintenance capital for the downstream assets, as well as investment in the Superior Refinery rebuild. Full-year net earnings for 2021 were $587 million compared with a loss of $2.4 billion the previous year.

Reserves

At the end of 2021, Cenovus’s total proved reserves rose 21% to approximately 6.1 billion BOE, while total proved plus probable reserves increased 24% to approximately 8.3 billion BOE largely due to the Husky transaction. Total proved bitumen reserves were approximately 5.6 billion barrels, an increase of 16% from 2020, while total proved plus probable bitumen reserves rose 17% to approximately 7.4 billion barrels. At year-end 2021, Cenovus had a proved reserves life index of approximately 21 years, and a proved plus probable reserves life index of approximately 29 years.

KeyFacts Energy: Cenovus Canada country profile