Cenovus Energy Inc. (NYSE:CVE) Q1 2018 Earnings Conference Call - Preliminary Transcript

Apr 25, 2018 • 11:00 am ET


Cenovus Energy Inc. (NYSE:CVE) Q1 2018 Earnings Conference Call - Preliminary Transcript


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Good day, ladies and gentlemen, and thank you for standing by. Welcome to Cenovus Energy First Quarter 2018 Financial and Operating Results. As a reminder, today's call is being recorded. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session.

Please be advised that this conference call may not be recorded or rebroadcast without the expressed consent of Cenovus Energy.

I would now like to turn the conference call over to Mr. Kam Sandhar, Senior Vice President, Strategy & Corporate Development. Please go ahead, Mr. Sandhar.

Kam Sandhar

Thank you, operator. And welcome, everyone, to our first quarter 2018 results conference call. I would like to refer you to the advisories located at the end of today's news release. These advisories describe the forward-looking information; non-GAAP measures and oil and gas terms referred to today and outline the risk factors and assumptions relevant to this discussion. Additional information is available in our annual MD&A and the most recent Annual Information Form and Form 40-F. The quarterly results have been presented in Canadian dollars and on a before-royalties basis.

We've also posted our results on our website at cenovus.com. Alex Pourbaix, our President and Chief Executive Officer, will provide brief comments. And then we will turn to Q&A portion of the call with Cenovus' leadership team. Please go ahead, Alex.

Alex Pourbaix

Thanks, Kam. Let me first begin by addressing the obvious. This was a challenging quarter for us financially. Our results were significantly impacted by sizable hedging losses, the widest light-heavy oil differentials we've seen since late 2013, and one of the largest maintenance turnarounds ever executed at our jointly owned refineries.

I want to be clear that these are temporary not structural financial challenges and they are not indicative of our future potential to generate funds flow and earnings. As a company that's primarily focused on the oil sands, we are in this business for the long-term and one quarter alone does not represent the strength of our company.

For example, in the first quarter we can attribute over $600 million to hedging losses, increased downstream operating costs associated with turnarounds at our refineries and one-time severance. That's without considering the loss of refining revenues associated with planned maintenance. You should also note the sensitivity provided in our guidance document indicating that with every $1 decrease in WTI-WCS differentials, we expect $80 million of increased annual adjusted funds flow. We have seen differentials narrow in April.

Our oil sands and Deep Basin operations were very strong in the first three months of the year. I really want to emphasize again that our financial results are not a reflection of our operational performance. I joined Cenovus six months ago because I believe the Company has top tier assets and I saw the opportunity to generate significant value for shareholders. What I have seen over the last two quarters has only reinforced that belief. These assets live up to their reputation and continue to perform very well.