Including expansion phases already under construction and those with regulatory approval, Cenovus is on track to add approximately 400,000 bbls/d of additional gross oil sands production (approximately 200,000 bbls/d net) over the next five years. The company expects to bring on new phases at Foster Creek and Christina Lake at a cost of $22,000 to $25,000 per flowing barrel. Cenovus is also focused on maintaining industry-leading supply costs. At Foster Creek and Christina Lake, supply costs are approximately $35 to $45 per barrel. Supply costs are calculated as the long-term average West Texas Intermediate (WTI) oil price required to achieve a 9% after-tax return after all capital, operating and maintenance costs are considered.

Solid financial performanceTotal third quarter cash flow surpassed $1.1 billion, a 41% increase from the same period a year earlier. The increase was due to higher oil production and improved operating cash flow from Cenovus’s refining business. Third quarter operating cash flow from refining more than doubled to $530 million, compared with the same period in 2011, driven by strong refining margins and increased refinery throughput. Cenovus’s third quarter operating earnings were $432 million, a 43% increase over 2011.

During the third quarter, Cenovus took advantage of attractive long-term interest rates to complete a public offering in the United States of US$1.25 billion of senior unsecured notes, consisting of US$500 million of 10-year notes with a coupon rate of 3% due August 15, 2022 and US$750 million of 30-year notes with a coupon rate of 4.45% due September 15, 2042. Combined with its existing credit facilities, the debt offering provides Cenovus with considerable additional financial flexibility as it continues to execute its growth plan.

Investing in oil growthIn the third quarter Cenovus invested $830 million in capital projects, a 32% increase from the same period a year earlier and in line with full-year guidance. Third quarter capital investment at its producing oil sands properties increased by 52% to $346 million. This included spending for construction, pre-construction and design engineering work for the next three phases at Foster Creek and facility construction, site preparation work and design engineering for the next three phases at Christina Lake.

Capital investment at Pelican Lake was $128 million in the third quarter, an 83% increase from the same period in 2011. The company plans to drill about 1,000 additional production and injection wells over the next five to seven years to expand the polymer flood. Production at Pelican Lake is expected to reach 55,000 bbls/d.

At its other conventional oil properties, Cenovus increased capital investment by 33% to $224 million during the quarter, when compared with 2011. That included investment in tight oil drilling programs in Alberta and drilling, completion and facilities work in Saskatchewan. The company’s goal is to increase production from its conventional oil properties, excluding Pelican Lake, from just over 52,000 bbls/d today to between 65,000 and 75,000 bbls/d by the end of 2016.

As part of its integrated strategy, Cenovus’s non-oil producing assets continue to provide significant ongoing financial support for the company’s oil growth plans. In the first nine months of the year, Cenovus’s natural gas and refining operations combined, generated more than $1.4 billion of operating cash flow in excess of capital invested.

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