Cenovus Energy (NYSE:CVE) saw its quarterly profit come in just shy of analysts’ expectations, but the Canadian oil and gas producer experienced a surge in its shares by as much as 7% on Thursday, buoyed by increased production and refinery throughput volumes.
In the fourth quarter, upstream production climbed to 808,600 barrels of oil equivalent per day (boepd), up from 806,900 boepd the previous year. Concurrently, downstream throughput rose to 579,100 barrels per day (bpd), compared to 473,500 bpd previously.
However, U.S. refining margins took a hit due to a non-cash write-down of refined product and crude oil inventory totaling C$430 million, coupled with unplanned outages at Cenovus’ Lima, Ohio, refinery, and Phillips 66’s Borger, Texas, plant.
Cenovus’s U.S. refining operations have faced challenges in recent years, following incidents such as a fatal fire at its Toledo, Ohio, plant in 2022 and an explosion at its Superior, Wisconsin, refinery in 2018. Both facilities resumed operations last year.
The superior refinery is currently operating at 65-70% utilization rates, with plans to ramp up throughput in the second quarter of 2024, according to Cenovus CEO Jon McKenzie. Meanwhile, the company’s other U.S. refineries are operating at utilization rates exceeding 90% in the first quarter.
McKenzie acknowledged the difficulties in resuming operations at Superior, stating, “There’s no doubt Superior has been a bit of a fistfight for us.” He noted challenges in increasing crude processing rates after the facility had been offline for five years.
Although Cenovus’s revenue dipped to C$13.1 billion from C$14.1 billion, it surpassed estimates of C$12.8 billion. The net income for the fourth quarter stood at 39 Canadian cents per share, slightly below the 40 Canadian cents per share expected by analysts, according to LSEG data.
Analysts at TPH highlighted that adjusted funds flow exceeded expectations, supported by cash conversion aided by working capital. They noted that upstream operations offset downstream financial results, resulting in shareholder returns meeting expectations.
In 2023, Cenovus returned C$2.8 billion to shareholders, down from C$3.4 billion in the previous year. The company also reduced its long-term debt to C$7.1 billion from C$8.7 billion during the same period.
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