Cenovus: Priorities for cash include dividend; company targets C$280 million cost reductions in 2015

By Lisa Kerner

Charlotte, N.C., Sept. 15 – Cenovus Energy Inc.’s sale of the Heritage Royalty LP generated proceeds of C$3.3 billion and the company ended its second quarter with pro forma cash of C$4.9 billion and a 7% net debt-to-capitalization, according to Drew Zieglgansberger, executive vice president of oil sands manufacturing.

Despite the cash, Cenovus is limiting the number of projects it will take on at any one time.

The company’s priorities for the use of cash include sustaining capital for oil sands and downstream projects; a dividend of 20% to 25% of cash flow, growth projects at Foster Creek/Christina Lake and Narrows Lake; and conventional and emerging projects, Zieglgansberger said.

Zieglgansberger made his comments during a presentation on Tuesday at the Peters & Co. Ltd. Energy Conference in Toronto.

The executive also discussed reducing Cenovus’ cost structure, with a targeted total reduction of C$280 million for 2015.

In February, the company cut about 800 positions due to spending reductions and deferred projects. Cenovus expects to cut another 400 positions by year end, primarily in Calgary.

The resulting C$100 million of annual savings from the headcount reductions would be in addition to the C$280 million cost reduction target, said Zieglgansberger.

Cenovus, a Calgary, Alta.-based oil company, is also eyeing a 20% improvement in well costs for additional, sustainable cost reductions.

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