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An Aerial Of Cenovus's Foster Creek Operation In Northern Alberta (Photo: Business Wire)

Cenovus’s hedge positions as at September 30, 2012 include:

  • approximately 30% of expected 2012 oil production hedged; 24,800 bbls/d at a WTI price of US$98.72/bbl and an additional 24,500 bbls/d at an average WTI price of C$99.47/bbl
  • approximately 65% of expected 2012 natural gas production hedged: 130 MMcf/d at an average NYMEX price of US$5.96/Mcf and 127 MMcf/d at an average AECO price of C$4.50/Mcf, plus about 125 MMcf/d of internal usage
  • 18,500 bbls/d of expected oil production hedged for 2013 at an average Brent price of US$110.36/bbl and an additional 18,500 bbls/d at an average Brent price of C$111.72/bbl
  • 166 MMcf/d of expected natural gas production hedged for 2013 at an average NYMEX price of US$4.64/Mcf, plus internal usage
  • no fixed price commodity hedges in place beyond 2013.

During the third quarter, Cenovus converted all of its existing 2013 crude oil hedges from WTI to Brent and added additional hedging contracts at Brent pricing. While WTI has historically been the dominant benchmark for North American crude oil, inland refined products have now become more strongly correlated to Brent pricing. Because of its exposure to refined products through its joint ownership in two U.S. refineries, Cenovus has decided to move its crude oil hedges to Brent pricing to better reflect its integrated structure and exposure to market risk.

Financial Highlights
  • During the third quarter, Cenovus completed a US$1.25 billion debt offering in the U.S. of 10 and 30-year senior unsecured notes and renegotiated its existing $3 billion credit facility, extending the maturity date to November 30, 2016 and slightly reducing the cost of future borrowings under the facility.
  • Cash flow in the third quarter of 2012 was more than $1.1 billion, or $1.47 per share diluted, compared with $793 million, or $1.05 per share diluted, for the same period a year earlier.
  • Operating earnings in the quarter were $432 million, or $0.57 per share diluted, compared with $303 million, or $0.40 per share diluted, for the same period last year.
  • Cenovus’s realized after-tax hedging gains were $73 million in the quarter. Cenovus received an average realized price, including hedging, of $67.40/bbl for its oil in the quarter, compared with $68.13/bbl in the third quarter of 2011. The average realized price, including hedging, for natural gas was $3.54/Mcf, compared with $4.48/Mcf in the same period a year earlier.
  • Cenovus recorded an income tax expense of $186 million in the third quarter, a $108 million decrease over the previous year. The decrease was primarily due to a deferred tax recovery associated with unrealized hedging losses offset by deferred tax on increased refining income.
  • Cenovus’s net earnings for the quarter were $289 million, compared with $510 million in the same period a year earlier. The decrease was primarily due to an unrealized after-tax risk management loss of $218 million in the third quarter compared to an unrealized after-tax risk management gain of $283 million in the same period a year earlier. Cenovus also recorded a $60 million unrealized foreign exchange gain in the third quarter of 2012, compared to an unrealized foreign exchange loss of $63 million in the third quarter of 2011.
  • Capital investment during the quarter was $830 million, as planned, a 32% increase compared with the same period a year earlier as the company continues to advance the development of its oil opportunities.
  • Over the long term, Cenovus targets a debt to capitalization ratio of between 30% and 40% and a debt to adjusted EBITDA ratio of between 1.0 and 2.0 times. At September 30, 2012, the company’s debt to capitalization ratio was 31% and debt to adjusted EBITDA, on a trailing 12-month basis, was 1.1 times.

Earnings Reconciliation Summary
(for the period ended September 30)

($ millions, except per share amounts)


  9 months

  9 months

Net earnings

Add back (losses) & deduct gains:
289 510 1,111 1,212

Per share diluted
0.38 0.67 1.46 1.60
Unrealized mark-to-market hedging gain (loss), after tax -218 283 -44 314
Non-operating foreign exchange gain (loss), after tax 76 -76 100 -11
Divestiture gain (loss), after tax -1 - - 2
Operating earnings 432 303 1,055 907

Per share diluted
0.57 0.40 1.39 1.20


Conference Call Today

9:00 a.m. Mountain Time (11:00 a.m. Eastern Time)

Cenovus will host a conference call today, October 25, 2012, starting at 9:00 a.m. MT (11:00 a.m. ET). To participate, please dial 888-231-8191 (toll-free in North America) or 647-427-7450 approximately 10 minutes prior to the conference call. An archived recording of the call will be available from approximately 12:00 p.m. MT on October 25, 2012, until midnight November 1, 2012, by dialing 855-859-2056 or 416-849-0833 and entering conference passcode 44575180. A live audio webcast of the conference call will also be available via The webcast will be archived for approximately 90 days.


Notice of Change of Transfer Agent and Registrar

Effective November 1, 2012, Computershare Investor Services Inc. will replace CIBC Mellon Trust Company as Transfer Agent and Registrar, Dividend Disbursing Agent, Dividend Reinvestment Plan Agent and Shareholder Rights Plan Agent for Cenovus Energy Inc. No action is required as a result of this transition. Additional information is available at under Invest in us, Shareholder information.


NON-GAAP MEASURESThis news release contains references to non-GAAP measures as follows:
  • Operating cash flow is defined as revenues, less purchased product, transportation and blending, operating expenses, production and mineral taxes plus realized gains, less realized losses on risk management activities and is used to provide a consistent measure of the cash generating performance of the company’s assets and improves the comparability of Cenovus’s underlying financial performance between periods.
  • Cash flow is defined as cash from operating activities excluding net change in other assets and liabilities and net change in non-cash working capital, both of which are defined on the Consolidated Statement of Cash Flows in Cenovus’s interim consolidated financial statements.
  • Operating earnings is defined as net earnings excluding non-operating items such as the after-tax impacts of a gain/loss on discontinuance, the gain on asset acquisition, the after-tax gain/loss of unrealized mark-to-market accounting for derivative instruments, the after-tax unrealized gain/loss on translation of U.S. dollar denominated notes issued from Canada and the partnership contribution receivable, the after-tax foreign exchange gain/loss on settlement of intercompany transactions, after-tax gains or losses on divestiture of assets, deferred income tax on foreign exchange related to U.S. dollar intercompany debt recognized for tax purposes only and the effect of changes in statutory income tax rates. Management views operating earnings as a better measure of performance than net earnings because the excluded items reduce the comparability of the company’s underlying financial performance between periods. The majority of the U.S. dollar debt issued from Canada has maturity dates in excess of five years.
  • Free cash flow is defined as cash flow in excess of capital investment, excluding net acquisitions and divestitures, and is used to determine the funds available for other investing and/or financing activities.
  • Debt to capitalization and debt to adjusted EBITDA are two ratios that management uses to steward the company’s overall debt position as measures of the company’s overall financial strength. Debt is defined as short-term borrowings and long-term debt, including the current portion, excluding any amounts with respect to the partnership contribution payable and receivable. Capitalization is a non-GAAP measure defined as debt plus shareholders’ equity. Adjusted EBITDA is defined as adjusted earnings before interest income, finance costs, income taxes, depreciation, depletion and amortization, exploration expense, unrealized gain or loss on risk management, foreign exchange gains or losses, gains or losses on divestiture of assets and other income and loss.

These measures have been described and presented in this news release in order to provide shareholders and potential investors with additional information regarding Cenovus’s liquidity and its ability to generate funds to finance its operations. For further information, refer to Cenovus’s most recent Management’s Discussion & Analysis (MD&A) available at

FORWARD-LOOKING INFORMATIONThis news release contains certain forward-looking statements and other information (collectively “forward-looking information”) about our current expectations, estimates and projections, made in light of our experience and perception of historical trends. Forward-looking information in this news release is identified by words such as “anticipate”, “believe”, “expect”, “plan”, “forecast”, “target”, “project”, “could”, “focus”, “vision”, “goal”, “proposed”, “scheduled”, “outlook”, “potential”, “may”, “positioned” or similar expressions and includes suggestions of future outcomes, including statements about our growth strategy and related schedules, projected future value or net asset value, forecast operating and financial results, planned capital expenditures, expected future production, including the timing, stability or growth thereof, potential dividends and dividend growth strategy, anticipated timelines for future regulatory, partner or internal approvals, forecasted commodity prices, future use and development of technology and projected increasing shareholder value. Readers are cautioned not to place undue reliance on forward-looking information as our actual results may differ materially from those expressed or implied.

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