Cenovus Delivers Solid Q2 2025 Results

Q2 2025 Financial & Operational Highlights

Financial Performance

• Cash from operating activities: $2.37B (up from $1.31B in Q1; down from $2.81B in Q2 2024)
• Adjusted funds flow (AFF): $1.52B (down from $2.21B in Q1; down from $2.36B in Q2 2024)
• Free funds flow (FFF): $355M (down from $983M in Q1; down from $1.21B in Q2 2024)
• Net earnings: $851M ($0.45/share), down slightly from Q1 ($859M)
• Capital investment: $1.16B (steady YoY)
• Net debt: $4.93B (down from $5.08B in Q1)
• Return to shareholders: $819M
  • $301M share buybacks
  • $368M dividends
  • $150M preferred share redemption

Revenue & Margins

• Total revenue: $12.3B (down from $13.3B in Q1)
• Operating margin: $2.1B (down from $2.8B in Q1)
  • Upstream margin: $2.1B (down from $3.0B in Q1)
  • Downstream margin shortfall: ($71M) (improved from Q1 shortfall of $237M)

Production & Throughput

• Upstream production: 765,900 BOE/d (down from 818,900 in Q1)
  • Christina Lake: 217,900 bbls/d (↓ wildfire disruption)
  • Foster Creek: 186,100 bbls/d (↓ planned maintenance)
  • Sunrise: 50,300 bbls/d (↓ maintenance)
  • Lloydminster thermal: 97,800 bbls/d (↓ outage at Rush Lake)
• Downstream crude throughput: 665,800 bbls/d (steady; utilization 92%)
  • Canadian refining: 112,400 bbls/d (104% utilization)
  • U.S. refining: 553,400 bbls/d (90% utilization)

Key Growth & Project Updates

• Narrows Lake: Achieved first oil (July), ramping to 20–30K bbls/d by year-end.
• Foster Creek optimization: 87% complete; 4 new boilers adding 80K bbls/d steam capacity.
• West White Rose: CGS installed; topsides placed; 92% complete, drilling starts by year-end; first oil expected Q2 2026.
• Maintenance execution: Toledo turnaround finished 11 days early.

✅ Analysis & Outlook

Strengths

✔ Exceptional operational execution—turnarounds ahead of schedule, safe wildfire recovery.

✔ Strong liquidity & deleveraging—net debt reduced despite heavy capital spending and shareholder returns.

✔ Major growth projects on track—Narrows Lake and West White Rose add long-term production.

✔ Refining utilization remained high despite planned outages, benefiting from stronger crack spreads.

Weaknesses

✖ Free cash flow under pressure—FFF down 64% QoQ, impacted by heavy turnaround activity and lower prices.

✖ Upstream volumes down 6.5% QoQ due to wildfire and planned maintenance.

✖ Excess FFF negative (-$306M)—short-term funding gap covered by working capital release.

✖ Commodity price sensitivity—lower benchmark oil prices weighed on margins.

Opportunities

• Project completion (Foster Creek optimization, West White Rose) should drive production growth in 2026+.
• Narrows Lake ramp-up adds incremental oil sands output in H2 2025.
• Improved downstream margins as U.S. crack spreads remain supportive.

Risks

• Commodity volatility—WTI weakness would pressure AFF/FFF.
• Execution risk on large projects (White Rose, Foster Creek).
• Regulatory and ESG headwinds in Canadian oil sands sector.

✅ Key Metrics vs Prior Periods

Metric Q2 2025 Q1 2025 Q2 2024

Cash from ops ($B) 2.37 1.31 2.81

AFF ($B) 1.52 2.21 2.36

FFF ($M) 355 983 1,206

Net earnings ($M) 851 859 1,000

Upstream prod (BOE/d) 765,900 818,900 800,800

Downstream throughput 665,800 665,400 622,700

Net debt ($B) 4.93 5.08 4.26

Outlook Guidance

• H2 2025 should improve FFF as turnarounds decline and Narrows Lake ramps.
• Cenovus remains committed to its net debt target of $4B and returning 100% of EFFF to shareholders over time.
• Large growth projects (Foster Creek, West White Rose) expected to materially lift production and cash flows in 2026.