Cenovus Energy is a large integrated oil and gas company based in Canada. The company owns oil sands projects in Northern Alberta and natural gas and oil fields in Alberta and British Columbia. It also has a 50% interest in two US refineries. Cenovus ‘asset portfolio was boosted by the acquisition of most of ConocoPhillips’ operations in Western Canada in 2017.

Cenovus Energy sells oil to industrial users, wholesalers and raw material buyers around the world. An extensive network of pipelines, rail and ship tankers transports the company’s products. A huge portfolio of oil sands, natural gas and liquid plants in the Deep Basin of Western Canada should support production growth.

As a result of the combination with Husky, the company’s portfolio now consists of high-quality oil sands and heavy oil systems with an extensive trading, supply and logistics infrastructure as well as a downstream infrastructure.

The company’s reportable segments are Upstream (~ 60% of 2020 gross sales) and Downstream (~ 40%). The upstream segment includes conventional and offshore tar sands, while the downstream segment consists of Canadian manufacturing, retail and US manufacturing. Total production from Cenovus’ upstream facilities averaged ~ 472,000 BOE / day, and the refineries were processing ~ 372,000 gross barrels of crude oil per day in 2020.

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Investment data

Sales growth and market presence

Cenovus was officially launched in 2009 as a result of a spin-off from Encana, but has a history that dates back to the 1880s. An integrated business model continues to generate significant value through its refining and marketing activities, as well as its world-class asset base and cost-effective structure.

Cenovus’ stake in US refineries reduces the risk of heavy fuel oil differences. Additionally, with the acquisition of Husky, Cenovus has further diminished its exposure to heavy oil price differentials in Alberta. Premium asset quality, superb execution, an integrated model and reputation are the main competitive strengths of Cenovus.

Canadian energy companies have had a tough time last year. Crude oil demand continued to be negatively impacted by the effects of the COVID-19 pandemic, while production cuts by leading oil companies also reduced global crude oil supplies. The pandemic also resulted in a low global oil price environment. The average realized crude sales price reached $ 28.82 / barrel in 2020, compared to $ 53.95 / barrel in the previous year.

Cenovus completed the Husky acquisition in January 2021, creating the third largest Canadian oil and natural gas producer and second largest Canadian refinery and modernization operation. The proforma company will have a production capacity of 750,000 BOE / day and an upgrade and refining capacity of 660,000 BOE / day.

Cenovus also implemented a new five-year business plan that aims to deliver a cumulative free cash flow of approximately $ 11 billion by 2024, using mid-cycle commodity prices. The company continued to scale back investments and strategically manage its oil sands production to combat volatility in oil prices in 2020.


Cenovus Energy has been paying dividends since 2009. However, in response to the low global crude oil price environment from April to December 2020, the company announced a temporary suspension of its dividend. The dividend of $ 0.0175 / share, payable in March 2021, has resumed 65% below previous levels. The current dividend has a modest yield of 0.74%.

The combination of Cenovus and Husky has resulted in an efficient cost structure and sufficient liquidity. The transaction is expected to be an immediate success, generating $ 1.2 billion in synergies and $ 600 million in cash flow savings. The combined company will trade as Cenovus Energy and the combined assets will provide cash flow stability.

The acquisition will lead to cost savings in production and operating performance, but also to an increase in total debt. The company also announced a 2021 budget for the combined company, which will focus on maintaining capital and generating free flow of funds on the reverse side to capture transactional synergies across the company. The company is capable of generating approximately $ 400 million annual corporate and operational synergies and capital allocation synergies of an estimated $ 600 million in 2021.

Cenovus is in the process of winding down its balance sheet by selling its traditional conventional assets, which is tightening its portfolio. The company exited 2020 with net debt of $ 7.2 billion, but upon completion of the Husky deal, Cenovus had net debt of $ 13 billion.

Cenovus is focused on mid-term strategies to expand its market access for crude oil production and on new pipeline projects connecting it to new markets in the US and worldwide. In addition, new pipeline projects are being developed in Western Canada that will give new buyers access.


The Canadian and international oil industries are highly competitive. Cenovus competes with other major Canadian energy giants, including Suncor Energy, the largest oil producer in Canada, Canadian Natural Resources, a large independent natural gas and heavy crude oil exploration and production company in Canada, and Imperial Oil, another large integrated energy company.

In addition, oil companies are subject to volatile commodity prices as well as government and global regulations. There is uncertainty about the future measures of the major oil-producing countries, which can also lead to increased volatility in commodity prices.

Bottom line

Cenovus Energy’s acquisition of Husky is expected to provide a better way to reduce free cash flow volatility and accelerate debt deleveraging and returns for shareholders.

The company also expects to generate nearly $ 1 billion in synergies this year as the acquisition is expected to deliver planned annual synergies of $ 1.2 billion by the end of 2021. The budget for 2021 includes sustainable capital of ~ $ 2.1 billion for an upstream production of ~ 755,000 BOE / day and a downstream throughput of ~ 525,000 barrels / day.

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