Cenovus ends Q1 with $3.9 billion cash, C$4 billion loan availability

By Lisa Kerner

Charlotte, N.C., April 27 – Cenovus Energy Inc. ended the first quarter with C$3.9 billion of cash and C$4 billion in undrawn capacity under its committed credit facility, despite the challenges of the commodity price environment, according to chief financial officer Ivor Ruste.

Ruste made his comments during the company’s first-quarter earnings call on Wednesday.

Along with about C$8 billion of available liquidity, Cenovus has no debt maturing until the fourth quarter of 2019 and a net debt-to-capitalization ratio of 16%, compared to 27% a year ago. Net debt-to-adjusted EBITDA was flat year over year at 1.3 times.

Recently, Cenovus secured an extension of the C$1 billion tranche of its committed credit facility, extending the maturity date to April 2019 from November 2017. And, the C$3 billion tranche of the company’s committed credit facility remains unchanged, with a November 2019 maturity date, according to the earnings news release.

Ruste also discussed Moody’s downgrade of the company’s credit rating below investment grade to Ba2. The downgrade has had no material impact on the company’s “financial resilience or operations.”

Moody’s has issued a number of downgrades across the industry, according to the CFO.

Cenovus continues to hold investment-grade credit ratings from Standard & Poor’s (BBB with a stable outlook) and DBRS (BBB (high)).

Cost reduction success

“So far 2016 has been a “brutally challenging year for our industry,” said president and chief executive officer Brian Ferguson on the call.

Cenovus entered 2016 in a strong financial position with C$4.1 billion of cash on the balance sheet and C$4 billion of undrawn credit capacity, Ferguson said.

The company is focused on maintaining “financial resilience to withstand a persistently low price environment.”

Cenovus is on track to achieve up to C$500 million of planned capital, operating and G&A cost reductions as announced earlier in the year. These reductions are in addition to the C$500 million of cost savings achieved in 2015, said Ferguson.

About two-thirds of the reductions are expected to be sustainable.

The company has largely completed its workforce reduction of 440 employee and contract roles, leaving Cenovus with 31% fewer staff than it had at the end of 2014.

Cenovus has also reduced bonus payments and will reduce allowances and benefits going forward, the CEO said.

Financial highlights

Operating cash flow for the quarter was down 74% year over year at C$144 million on lower prices and sales volumes for crude oil and natural gas.

Total cash flow was down 95% at C$26 million, the release stated.

Capital spending of about C$323 million was in line with expectations.

The Calgary, Alta.-based oil company had a net loss of C$118 million in the first quarter compared with a loss of C$668 million in the prior-year period.

© 2015 Prospect News.
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