Mr. Jon McKenzie reports

CENOVUS ANNOUNCES 2023 THIRD-QUARTER RESULTS

Cenovus Energy Inc. delivered safe, reliable operations and strong financial performance in the third quarter of 2023. The company generated $2.7-billion in cash from operating activities, $3.4-billion in adjusted funds flow and $2.4-billion in free funds flow in the quarter. Total upstream production was 797,000 barrels of oil equivalent per day (boe/d) and downstream throughput averaged over 664,000 barrels per day (bbl/d).

"We were pleased with the improved results that our assets and integrated business produced over the quarter," said Jon McKenzie, Cenovus president and chief executive officer. "The strong operating performance at our assets, combined with a supportive commodity price environment, drove significantly higher financial results compared with the previous quarter."

Highlights:

• Delivered $1.2-billion to shareholders, including $600-million for the partial payment of the common share warrants obligation, $361-million in share buybacks and $264-million through common share dividends.
• Increased United States manufacturing crude oil throughput 26 per cent to 555,900 bbl/d from the second quarter.
• Reduced long-term debt, including current portion, by $1-billion (U.S.), to $7.2-billion and net debt to $6-billion at the end of the quarter.
• Received board of directors approval to file an application with the Toronto Stock Exchange (TSX) to renew Cenovus's normal course issuer bid (NCIB) for another year.

Operating results

Cenovus's total revenues were approximately $14.6-billion in the third quarter, up from $12.2-billion in the second quarter of 2023. Upstream revenues were about $7.6-billion, an increase from $6.6-billion in the previous quarter, and downstream revenues were approximately $9.7-billion, compared with $7.4-billion in the second quarter of 2023. Total operating margin was about $4.4-billion, compared with $2.4-billion in the second quarter. Upstream operating margin was approximately $3.4-billion, an increase from $2.3-billion in the previous quarter, primarily driven by higher Brent and West Texas Intermediate (WTI) crude oil prices, a tighter light-heavy differential, as well as higher production and sales volumes. Downstream operating margin was $922-million, compared with $143-million in the second quarter, primarily due to higher refined product volumes as the Toledo refinery achieved 90-per-cent utilization in the quarter, and an increase in refined product pricing. In addition, United States manufacturing operating margin was positively impacted by approximately $400-million due to the cost of processing crude oil purchased in prior periods at lower prices.

Total upstream production was 797,000 boe/d in the third quarter, an increase of 9 per cent from the second quarter as the company restarted production that had been offline due to Alberta wildfires and planned maintenance activity. Foster Creek volumes increased to 189,300 bbl/d, from 167,000 bbl/d in the second quarter, reflecting production from new well pads and the completion of planned maintenance in the second quarter. Christina Lake production was 237,600 bbl/d, in line with the second quarter. Sunrise output was 54,500 bbl/d, an increase of 17 per cent compared with the second quarter as the company completed its 2023 redevelopment program. At the Lloydminster thermal projects, production of 104,600 bbl/d was in line with the prior quarter, as the company continued to focus on optimization of the asset.

Production in the conventional segment increased to 127,200 boe/d in the third quarter, compared with 104,600 boe/d in the second quarter, as the company resumed normal operations after shutting in several fields and processing plants in response to wildfire activity in Alberta during May and June. Most of the conventional asset outages were resolved by the end of August.

In the offshore segment, production was 66,400 boe/d, compared with 51,500 boe/d in the previous quarter. In Asia Pacific, sales volumes increased compared with the second quarter, which was impacted by a temporary unplanned outage in China. In Indonesia, the company achieved first gas production from the MAC field in September. In the Atlantic region, production was 8,900 bbl/d compared with 5,300 bbl/d in the prior quarter, which was impacted by planned maintenance. During the third quarter, the non-operated Terra Nova floating production, storage and offloading (FPSO) vessel returned to offshore Newfoundland and Labrador, and commissioning activities are continuing with production expected to resume in the fourth quarter.

In U.S. manufacturing, crude utilization was 88 per cent in the third quarter, with throughput of 555,900 bbl/d, compared with 70 per cent and 442,500 bbl/d in the second quarter. The Toledo refinery performed well following its restart in the second quarter, and at the Superior refinery, the full and stable start up of the fluid catalytic cracking unit was achieved in early October, after operational challenges in the second quarter.

Crude utilization in the Canadian manufacturing segment was 98 per cent with throughput of 108,400 bbl/d in the third quarter, compared with crude utilization and throughput of 86 per cent and 95,300 bbl/d in the second quarter. Both the Lloydminster upgrader and Lloydminster refinery operated at or near full capacity, with utilization rates of 99 per cent and 96 per cent, respectively.

Financial results

Third quarter cash from operating activities, which includes changes in non-cash working capital, was about $2.7-billion, compared with $2-billion in the second quarter of 2023. Adjusted funds flow was approximately $3.4-billion, compared with $1.9-billion in the prior period, and free funds flow increased to about $2.4-billion from $897-million in the second quarter. Third quarter financial results improved compared with the second quarter, primarily due to higher price realizations in the oil sands segment, driven by narrower light-heavy crude oil differentials and the timing of condensate cost recognition, as well as higher refined product volumes in the downstream business and an increase in refined product pricing. These factors were partially offset by higher cash taxes and royalties, and oil sands segment sales volumes lagging production by approximately 6,000 boe/d in the quarter.

Capital investment of $1-billion in the third quarter was primarily directed toward sustaining production in the oil sands segment, drilling, completion, tie-in and infrastructure projects in the conventional business, as well as refining reliability initiatives in the U.S. manufacturing segment. In addition, the company continues to progress growth and optimization projects. These include the construction of the West White Rose project, including preparation for the asset life extension project at the SeaRose FPSO, which will commence in January, 2024, the tie-back of Narrows Lake to Christina Lake, Sunrise optimization, and Foster Creek expansion.

Net earnings in the third quarter were almost $1.9-billion, compared with $866-million in the previous quarter. The increase in net earnings was primarily due to higher operating margin and lower financing costs. These factors were partially offset by higher income taxes, an unrealized foreign exchange loss compared with an unrealized gain in the second quarter, and higher general and administrative expenses due to long-term incentive costs.

Long-term debt, including the current portion, was $7.2-billion at Sept. 30, 2023, compared with $8.5-billion at June 30, 2023. The reduction of long-term debt in the quarter was primarily due to the company's purchase of $1-billion (U.S.) of outstanding notes that were due between 2029 and 2047. Net debt was approximately $6-billion at Sept. 30, 2023, a decrease from $6.4-billion at June 30, 2023, primarily due to free funds flow of $2.4-billion in the third quarter, partially offset by a working capital build. In the third quarter, the company built working capital, primarily due to an increase in accounts receivable and inventories, and the partial payment of the common share warrants obligation. Cenovus continues to focus on making progress toward its net debt target of $4-billion.

Dividend declarations and share purchases

The board of directors has declared a quarterly base dividend of 14 cents per common share, payable on Dec. 29, 2023, to shareholders of record as of Dec. 15, 2023. In addition, the board has declared a quarterly dividend on each of the cumulative redeemable first preferred shares -- Series 1, Series 2, Series 3, Series 5 and Series 7 -- payable on Jan. 2, 2024, to shareholders of record as of Dec. 15, 2023, as shown in the associated table.

All dividends paid on Cenovus's common and preferred shares will be designated as eligible dividends for Canadian federal income tax purposes. Declaration of dividends is at the sole discretion of the board and will continue to be evaluated on a quarterly basis.

Cenovus's shareholder returns framework has a target of returning 50 per cent of excess free funds flow to shareholders for quarters where the ending net debt is between $9-billion and $4-billion. In the third quarter, the company returned $1.2-billion to shareholders, composed of $600-million for the partial payment of the common share warrants obligation, the purchase of 13.8 million shares for $361-million through its NCIB and $264-million through common share base dividends.

Since the share buyback program began in November, 2021, Cenovus has purchased approximately 162 million common shares, delivering $3.6-billion in returns to shareholders. The current NCIB will expire on Nov. 8, 2023. Cenovus has received approval from the board of directors to make an application for another NCIB program. The company will apply for approval to repurchase up to approximately 133 million of the company's common shares, representing approximately 10 per cent of its public float, as defined by the TSX.

Two thousand twenty-three planned maintenance

The associated table provides details on planned maintenance activities at Cenovus assets through the remainder of 2023 and anticipated production or throughput impacts.

Board renewal

Cenovus is pleased to announce that Michael J. Crothers and James D. Girgulis have been appointed to Cenovus's board of directors, effective immediately.

Mr. Crothers has over 37 years of operations, commercial and leadership experience in the upstream, downstream and integrated gas businesses, including 34 years with Shell PLC, most recently as president and country chair for Shell Canada Ltd. He is currently a member of the board of Keyera Corp., a publicly traded integrated energy infrastructure company.

Mr. Girgulis is currently managing director of Hutchison Whampoa Europe Investments Sarl, a private investment company, and managing director of CK Hutchison Group Telecom Finance SA, a public limited company. From April, 2021, to March, 2022, he was special adviser to the executive at Cenovus following the company's combination with Husky Energy Inc. Prior to that, he held progressively responsible positions with Husky, ultimately serving as senior vice-president, general counsel and secretary from April, 2012, to March, 2021.

In accordance with the standstill agreements entered into at the time of the Husky transaction, Mr. Girgulis was nominated to replace Canning Fok, who retired from the Cenovus board effective July 26, 2023.

"We're extremely pleased to have Michael and James, who each bring extensive oil and gas industry experience, join our board," said Alex Pourbaix, Cenovus executive chair of the board. "These appointments support the company's ongoing board renewal process, which focuses on orderly succession of directors, while maintaining an appropriate balance and diversity of skills, experience and perspectives on the board."

Conference call today -- 8 a.m. MT (10 a.m. ET)

Cenovus will host a conference call today, Nov. 2, 2023, starting at 8 a.m. MT (10 a.m. ET).

To join the conference call without operator assistance, please register on-line approximately five minutes in advance to receive an automated call back when the session begins.

Alternatively, you can dial 888-664-6383 (toll-free in North America) or 416-764-8650 to reach a live operator who will join you into the call. A live audio webcast will also be available and will be archived for approximately 90 days.

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Cenovus Energy Inc.

Cenovus Energy is an integrated energy company with oil and natural gas production operations in Canada and the Asia Pacific region, and upgrading, refining and marketing operations in Canada and the United States. The company is focused on managing its assets in a safe, innovative and cost-efficient manner, integrating environmental, social and governance considerations into its business plans. Cenovus common shares and warrants are listed on the Toronto and New York stock exchanges, and the company's preferred shares are listed on the Toronto Stock Exchange.

We seek Safe Harbor.