3 Things Cenovus Energy Inc.’s CEO Wants You to Know
The CEO of Cenovus Energy Inc. (TSX:CVE)(NYSE:CVE), Brian Ferguson, recently addressed the investment community on a conference call to discuss his company’s first-quarter results. Those results were deeply impacted by weak oil prices, as evidenced by the fact that cash flow dropped 45% over last year’s first quarter. On that call the company’s management team addressed its current situation and provided investors with insights into how it plans to manage through the downturn and drive future growth. Here are three highlights from the CEO’s comments.
Ferguson led off the conference call by saying Cenovus’ “highest priority for 2015 is preserving our financial resilience without compromising our future.” He then went on to point out that the company completed several strategic initiatives to help strengthen the company’s financial flexibility and support this priority.
The first thing the company did was cut its capital spending plan by $1.2 billion over what it spent last year. Despite the cut, the company can still drive high return growth. On the cost side Cenovus also cut its contractor workforce by 15% and has aggressively undertaken cost cutting measures to help offset some of the impact of weak oil prices. Finally, the company issued some equity to bolster its cash position.
Operational results are strong
While its financial results were weakened by the drop in oil prices, Cenovus’ operational results were actually really strong in the first quarter. Ferguson noted on the call that “production continued to trend above the midpoint of guidance.” Overall, oil sands production was up 2% over the prior quarter, while costs fell 3%.
Production was particularly strong at Christina Lake as it averaged 76,000 barrels per day. One reason for this, according to COO John Brannan, is because the “reservoir continues to exceed our expectations.” Thanks to this stronger-than-expected production, the company expects full-year production at Christina Lake to be above the midpoint of its guidance range of 67-74,000 barrels per day.
Dividend is safe
Ferguson also addressed the company’s dividend in light of the fact that cash flow is down so substantially. He said, “I do not want a variable dividend,” which is to say, he doesn’t want the dividend to be cut when commodity prices are in a cyclical downturn. Instead, he wants a dividend that is set to be safe no matter where the company is in the commodity cycle. To help ensure that the dividend doesn’t get cut the company has cut costs so that its cash flow will cover both its capex and its dividend in 2015.
Cenovus Energy’s CEO had three core messages for investors on the company’s last conference call. First, its top priority is to remain financially strong. Second, its operations are thriving despite the weak price environment. Finally, the company plans to keep the current dividend rate through the downturn of the cycle.
Want more top dividend stocks?
Cenovus Energy is making its dividend a priority despite low oil prices. Here are three more top stocks as each have delivered dividends for shareholders for decades (and even centuries!). Check out our special FREE report: "3 Dividend Stocks to Buy and Hold Forever." Click here now to get the full story!
NEW! 1 TOP STOCK FOR 2016 AND BEYOND...
Let’s not beat around the bush – energy companies performed miserably in 2015. Yet, even though the carnage was widespread, not all energy-related businesses were equally affected.
We've identified an energy company we think offers one of the best growth opportunities around. While this company is largely tied to the production of natural gas, it doesn't actually produce the gas. Instead, it provides the equipment required to get natural gas from the ground to the end user. With diversified operations around the globe, we think it's a rare find in the industry.
We like it so much, we’ve named it as 1 Top Stock for 2016 and Beyond. To find out why, simply enter your email address below to claim your FREE copy of this brand new report, "1 Top Stock for 2016 and Beyond"!
Fool contributor Matt DiLallo has no position in any stocks mentioned.
The CEO of Cenovus Energy Inc. (TSX:CVE)(NYSE:CVE), Brian Ferguson, recently addressed the investment community on a conference call to discuss his company?s first-quarter results. Those results were deeply impacted by weak oil prices, as evidenced by the fact that cash flow dropped 45% over last year?s first quarter. On that call the company?s management team addressed its current situation and provided investors with insights into how it plans to manage through the downturn and drive future growth. Here are three highlights from the CEO?s comments.
Ferguson led off the conference call by saying Cenovus’ ?highest priority for 2015 is…