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Cenovus Energy (CVE) Q3 Loss Wider Than Expected, Sales Beat

Zacks Equity Research
Updated

Cenovus Energy Inc. CVE reported third-quarter 2018 loss per share of 15 cents, against the Zacks Consensus Estimate of earnings of 17 cents. In the prior-year quarter, the company had reported a profit of 18 cents. Escalated transportation and blending expenses have hurt the bottom line.

Meanwhile, quarterly revenues of $4,701 million surpassed the Zacks Consensus Estimate of $4,444 million and improved from the year-ago quarter’s figure of $3,551 million. The increase in refinery utilizations along with higher oil sands production drove the top line.
 

Cenovus Energy Inc Price, Consensus and EPS Surprise

 

Cenovus Energy Inc Price, Consensus and EPS Surprise | Cenovus Energy Inc Quote

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Operational Performance

Oil Sands: Quarterly revenues in the unit surged to C$2,717 million from C$2,156 million in the third quarter, courtesy of higher production of oil sands. The company recorded daily oil sand production of 376,672 barrels in the July-to-September quarter of 2018, up 4% year over year.

However, the segment’s operating margin was C$682 million, lower than C$822 million in the year-ago quarter due to a surge in chemical expenses.

Deep Basin: Revenues in the business unit jumped to C$203 million from C$187 million. Moreover, the segment’s operating margin came in at C$73 million, up from C$64 million in the year-ago quarter.

Production from new wells primarily supported the business. However, the divestiture of the Cenovus Pipestone Partnership marred the upside in production.

Refining and Marketing: Through this segment, the company generated C$3,126 million of revenues, higher than C$2,161 million in the year-ago quarter. Also, the unit’s operating margin skyrocketed from C$211 million to C$436 million.

Increased utilizations along with the year-over-year higher crack spreads drove the results.

Expenses

Transportation and blending expenses in the reported quarter rose to C$1,494 million from C$1,083 million in the year-ago quarter.

Balance Sheet & Capital Expenditures

As of Sep 30, 2018, the Canadian energy player had cash and cash equivalents of C$1,865 million and total long-term debt of C$8,788 million. The total debt-to-capitalization ratio was approximately 32.1%. The company incurred capital expenditure of C$590 million in the quarter under review.

Dividend

Cenovus Energy paid C$183 million to shareholders as dividend over the first nine months of 2018, higher than C$164 million in the year-ago period.

Outlook

Through 2018, the company expects total oil equivalent daily production between 481 MBOE/D and 509 MBOE/D. For the upstream activities, the company is planning to spend between C$1,060 million and C$1,145 million.

For refining operations, the company is likely to invest between C$180 million and C$200 million.

Zacks Rank & Stocks to Consider

Cenovus Energy carries a Zacks Rank #3 (Hold).

A few better-ranked players in the same sector are Hess Corporation HES, Enbridge Inc ENB and Eni SpA E, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

New York-based Hess is a global integrated energy company. It delivered an average positive earnings surprise of 230.5% in the last four quarters.

Headquartered in Calgary, Alberta, Enbridge is a leading energy infrastructure company. In the trailing four quarters, the company delivered an average positive earnings surprise of 33.2%.

Based in Rome, Italy, Eni is among the leading integrated energy players in the world. The partnership witnessed a negative earnings surprise of 0.3% in the preceding four quarters.

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