Unbiased Proxy Advisory Agency Glass Lewis Joins ISS in Recommending MEG Shareholders Vote FOR the Worth-Enhancing Transaction with Cenovus

“We’re dedicated to demonstrating stronger efficiency throughout our enterprise, and reaching our $4 billion web debt goal,” mentioned Alex Pourbaix, who strikes from his function as Cenovus’s President & Chief Govt Officer to Govt Chair of the Board following at the moment’s Annual Assembly of Shareholders. “Because the 12 months progresses, we count on improved manufacturing and a completely working downstream enterprise. The rise in our base dividend underscores our confidence within the long-term success of the corporate.”

Company developments

• Achieved the secure and profitable restart of the Superior Refinery, with crude oil launched mid-March. The refinery is at the moment operating barrels in preparation for anticipated second-quarter refined product gross sales.
• Closed the Toledo Refinery transaction for roughly US$370 million and assumed operatorship.
• Oil sands manufacturing anticipated to be stronger within the second half of the 12 months because of pad timing, as the corporate continues to optimize the enterprise for future manufacturing development.
• Revised 2023 company steering to replicate up to date outlook for commodity costs, upstream manufacturing and working prices for the rest of the 12 months.
• U.S. Manufacturing throughput has been revised to 480,000 bbls/d to 500,000 bbls/d.

¹ See Advisory for manufacturing by product sort.
² Non-GAAP monetary measure or accommodates a non-GAAP monetary measure. See Advisory.

First-quarter outcomes
Working outcomes ¹
Cenovus’s whole revenues had been roughly $12.3 billion within the first quarter, a lower from $14.1 billion within the fourth quarter of 2022, primarily because of decrease benchmark commodity costs. Upstream revenues had been $6.8 billion, in contrast with $7.4 billion within the earlier quarter and downstream revenues had been about $7.4 billion, in contrast with practically $8.4 billion within the fourth quarter.

Complete working margin ³ was $2.1 billion, in contrast with about $2.8 billion within the fourth quarter. Upstream working margin ⁴ was $1.7 billion, down from $2.2 billion within the prior quarter, primarily pushed by decrease Brent and West Texas Intermediate (WTI) crude oil costs, a wider light-heavy differential, in addition to barely decrease manufacturing volumes. Downstream working margin ⁴ was $391 million, in contrast with $558 million within the fourth quarter. U.S. Manufacturing working margin was impacted by increased working prices on the Superior Refinery, related to the continued commissioning of the ability in addition to assuming full possession of the Toledo Refinery following the shut of Cenovus’s acquisition from bp. Downstream working margin was additional impacted by a unit outage on the Wooden River Refinery that occurred within the fourth quarter of 2022, which decreased utilization in addition to refining margin seize. As well as, the price of processing crude oil bought in prior durations at increased costs negatively impacted working margin in U.S. Manufacturing by roughly $255 million.

“The corporate has achieved main milestones with the secure startups of the Superior and Toledo refineries below means,” mentioned Jon McKenzie, who strikes from his function as Cenovus’s Govt Vice-President & Chief Working Officer to President & Chief Govt Officer following at the moment’s Annual Assembly of Shareholders. “Whereas the Lima Refinery continues to function properly, the U.S. Manufacturing enterprise as a complete has not carried out to our expectations. We’re actively taking steps to enhance efficiency and count on meaningfully higher outcomes by this 12 months and past as we begin demonstrating the complete working and monetary capabilities of our built-in enterprise.”

In U.S. Manufacturing, crude utilization was 67% and throughput was 359,200 bbls/d in contrast with 75% and 379,000 bbls/d within the fourth quarter, because of unplanned outages and as deliberate turnaround actions started on the non-operated Wooden River and Borger refineries. After experiencing impacts from a extreme winter storm in late December, the Lima Refinery shortly rebounded with sturdy working efficiency within the first quarter, reaching crude utilization of 94%. The Superior Refinery launched crude oil in mid-March and stays on observe to ramp as much as full operations by the second quarter of 2023. The acquisition of the remaining 50% of the Toledo Refinery closed on February 28. In April the Toledo Refinery’s smaller capability 30,000 bbls/d crude oil unit restarted and is at the moment producing refined merchandise. The bigger capability 120,000 bbls/d unit is anticipated to restart in Could and ramp as much as full charges by the second quarter.

Following an incident in December 2022 on the non-operated Wooden River Refinery in addition to extreme climate across the finish of the quarter, crude utilization returned to regular charges within the first quarter. Because of the unplanned downtime of the affected unit, the partnership incurred important price related to fulfilling contractual obligations for completed product, which impacted gross margins through the first quarter. The primary part of a deliberate turnaround was accomplished by early April and the second part, which can even affect throughput, started in mid-April and is anticipated to be accomplished within the second quarter.

First-quarter crude utilization within the Canadian Manufacturing phase elevated to 89% with throughput of 98,700 bbls/d in contrast with crude utilization and throughput of 85% and 94,300 bbls/d in This autumn 2022. The fourth quarter was impacted by extreme winter climate and an unplanned outage on the Lloydminster Upgrader. First-quarter outcomes additionally replicate sturdy working efficiency on the Lloydminster Refinery, which achieved crude utilization of 99% through the interval.

Complete upstream manufacturing was 779,000 BOE/d within the first quarter, a slight lower from the fourth quarter. Christina Lake manufacturing was 237,200 bbls/d, down from fourth-quarter manufacturing of 250,300 bbls/d because of the timing of latest sustaining properly pads. Foster Creek manufacturing of 190,000 bbls/d was largely consistent with the earlier quarter. Foster Creek and Christina Lake every have three extra properly pads coming on-line within the second half of the 12 months. Dawn manufacturing was 44,500 bbls/d, comparatively unchanged from the fourth quarter. On the Lloydminster thermal tasks, manufacturing was 99,000 bbls/d, down barely from the earlier quarter’s 102,500 bbls/d, as the corporate took some wells offline for redevelopment and upkeep exercise through the first quarter. Typical manufacturing was 123,900 BOE/d, largely consistent with the fourth quarter.

Within the Offshore phase, manufacturing was 65,600 BOE/d in contrast with 70,200 BOE/d within the earlier quarter. In Asia Pacific, manufacturing decreased barely in contrast with the fourth quarter because of decrease contracted fuel gross sales in China, partially offset by increased gross sales in Indonesia because the MBH and MDA fields proceed to ramp up. Within the Atlantic area, the non-operated Terra Nova floating manufacturing, storage and offloading vessel stays dockside in Newfoundland and Labrador, present process additional upkeep as a part of its asset life extension program. Cenovus has eliminated Terra Nova manufacturing volumes from its 2023 company steering.

³ Non-GAAP monetary measure. Complete working margin is the whole of Upstream working margin plus Downstream working margin. See Advisory.
⁴ Specified monetary measure. See Advisory.

Monetary outcomes
First-quarter money utilized in working actions, which incorporates modifications in non-cash working capital, was $286 million in contrast with virtually $3.0 billion of money from working actions within the fourth quarter of 2022, whereas adjusted funds circulate was $1.4 billion, down from $2.3 billion within the earlier interval. Free funds circulate fell to $294 million from $1.1 billion within the fourth quarter. First-quarter adjusted funds circulate, when in comparison with the fourth quarter, was impacted by decrease total commodity costs and ends in the U.S. Manufacturing phase had been decrease by roughly $255 million because of the price of processing crude oil bought in prior durations at increased costs. As well as, Oil Sands phase gross sales volumes had been decrease in comparison with manufacturing by roughly 12,500 BOE/d, as the corporate constructed stock because of the timing of gross sales, along with increased volumes of crude in transit to the U.S. Gulf Coast. Capital funding of $1.1 billion was primarily directed in direction of sustaining manufacturing within the oil sands, the Superior Refinery rebuild and refining reliability initiatives on the jointly-owned Wooden River and Borger refineries.

First-quarter web earnings had been $636 million, in contrast with $784 million within the earlier quarter. The decline in web earnings was primarily because of decrease working margin and decrease international trade beneficial properties, partially offset by decrease common and administrative prices, in addition to a deferred earnings tax restoration associated to the Toledo acquisition.

Lengthy-term debt, together with the present portion, was $8.7 billion at March 31, 2023, akin to December 31, 2022. Web debt was roughly $6.6 billion at March 31, 2023, a rise of about $2.4 billion from December 31, 2022. The rise in web debt is especially attributable to a change in non-cash working capital of $1.6 billion because of a $1.2 billion money fee for the corporate’s 2022 taxes and decrease accounts payable, $465 million primarily associated to the shut of the Toledo acquisition and the primary variable fee to bp as a part of the 2022 Dawn transaction, in addition to $240 million for shareholder returns. Assuming commodity costs stay round present ranges, the corporate expects web debt to fall beneath its $4.0 billion flooring within the fourth quarter.

2023 steering replace
Cenovus has revised its 2023 company steering to replicate the corporate’s up to date outlook for commodity costs, manufacturing, throughput and working prices for the rest of the 12 months. It’s accessible on cenovus.com below Buyers.

Adjustments to the corporate’s 2023 steering embrace:

• Complete manufacturing steering of 790,000 BOE/d to 810,000 BOE/d, which features a discount of 10,000 bbls/d from the Atlantic manufacturing vary, reflecting the elimination of Terra Nova volumes.
• U.S. Manufacturing throughput of 480,000 bbls/d to 500,000 bbls/d, reflecting decrease throughput year-to-date at Cenovus’s non-operated refineries because of unplanned outages early within the first quarter, in addition to an extended ramp up interval than initially anticipated at Toledo. Consequently, steering for U.S. Manufacturing unit working expense has elevated by $1.00/bbl.

2023 deliberate upkeep
The next desk offers particulars on deliberate upkeep actions at Cenovus belongings in 2023 and anticipated manufacturing or throughput impacts.

Dividend declarations and share purchases
The Board of Administrators has declared a quarterly base dividend of $0.14 per frequent share, a rise of 33%, payable on June 30, 2023 to shareholders of document as of June 15, 2023. On an annual foundation, the bottom dividend will enhance to $0.56 per share from $0.42 per share, and can proceed to be declared and paid quarterly, on the discretion of the Board. The bottom dividend continues to be a structural part of the monetary framework and is about at a degree Cenovus is assured will be sustainably coated at backside of the cycle pricing of about US$45 WTI, with extra capability to develop over the following 5 years.

As well as, the Board declared a quarterly dividend on every of the Cumulative Redeemable First Most popular Shares – Sequence 1, Sequence 2, Sequence 3, Sequence 5 and Sequence 7 – payable on June 30, 2023 to shareholders of document as of June 15, 2023 as follows:

All dividends paid on Cenovus’s frequent and most popular shares will likely be designated as “eligible dividends” for Canadian federal earnings tax functions. Declaration of dividends is on the sole discretion of the Board and can proceed to be evaluated on a quarterly foundation.

Cenovus’s shareholder returns framework has a goal of returning 50% of extra free funds circulate to shareholders for quarters the place the ending web debt is between $9 billion and $4 billion. Within the first quarter, the corporate purchased roughly 2 million shares below its regular course issuer bid, delivering $40 million in returns to shareholders. Subsequent to the top of the quarter, as of April 21, 2023, the corporate had purchased again roughly 2.1 million shares for an extra $51 million.

Sustainability
Within the first quarter of 2023, Cenovus and its Pathways Alliance friends continued to advance work on plans to construct one of many world’s largest carbon seize and storage (CCS) tasks, which is foundational to the web zero ambitions of Canada’s six largest oil sands firms that comprise the group. The Alliance awarded a contract to a worldwide engineering and consulting firm to develop detailed plans for the 400-kilometre CO ₂ transportation pipeline that will finally hyperlink greater than 20 oil sands services to a hub for everlasting carbon storage in Alberta’s Chilly Lake area. Engineering and area work is progressing quickly to help an anticipated regulatory software for the CCS community within the fourth quarter of this 12 months. Early engagement with greater than 20 Indigenous communities alongside the proposed CO ₂ transportation and storage community hall is underway, and formal engagement is anticipated to start within the second quarter.

Cenovus additionally continues to progress work in direction of its personal sustainability targets with additional updates scheduled to be launched mid-year within the firm’s 2022 ESG report.

Management transition replace
Along with Alex Pourbaix turning into Govt Board Chair and Jon McKenzie entering into the function of Cenovus’s President & Chief Govt Officer following the shut of the corporate’s Annual Assembly of Shareholders, Claude Mongeau will develop into Lead Unbiased Director of the Board. Jane Kinney will assume the place of Chair of the Audit Committee, a job at the moment crammed by Mongeau. Kinney, a Cenovus director since April 2019 and a member of the Audit Committee since June 2019, served in more and more senior positions with Deloitte LLP Canada till her retirement from the agency.

Convention name at the moment

9 a.m. Mountain Time (11 a.m. Japanese Time)

Cenovus will host a convention name at the moment, April 26, 2023, beginning at 9 a.m. MT (11 a.m. ET).
To affix the convention name with out operator help, please register right here roughly 5 minutes upfront to obtain an automatic call-back when the session begins.

Alternatively, you’ll be able to dial 877-400-0505 (toll-free in North America) or 647-484-0475 to succeed in a dwell operator who will be part of you into the decision. A dwell audio webcast can even be accessible and will likely be archived for roughly 90 days.

Cenovus will host its Annual Assembly of Shareholders at the moment, April 26, 2023, in a digital format starting at 11 a.m. MT (1 p.m. ET). The webcast hyperlink to the Shareholders Assembly will likely be accessible below Displays and Occasions within the Buyers part of cenovus.com .

Advisory
Foundation of Presentation
Cenovus studies monetary ends in Canadian {dollars} and presents manufacturing volumes on a web to Cenovus earlier than royalties foundation, except in any other case acknowledged. Cenovus prepares its monetary statements in accordance with Worldwide Monetary Reporting Requirements (IFRS).

Barrels of Oil Equiva lent
Pure fuel volumes have been transformed to barrels of oil equal (BOE) on the idea of six thousand cubic toes (Mcf) to at least one barrel (bbl). BOE could also be deceptive, notably if utilized in isolation. A conversion ratio of 1 bbl to 6 Mcf relies on an power equivalency conversion technique primarily relevant on the burner tip and doesn’t symbolize worth equivalency on the wellhead. Provided that the worth ratio based mostly on the present worth of crude oil in contrast with pure fuel is considerably totally different from the power equivalency conversion ratio of 6:1, using a conversion on a 6:1 foundation isn’t an correct reflection of worth.

Product varieties

Ahead‐wanting Data
This information launch accommodates sure ahead‐wanting statements and ahead‐wanting data (collectively known as “ahead‐wanting data”) throughout the which means of relevant securities laws about Cenovus’s present expectations, estimates and projections about the way forward for the corporate, based mostly on sure assumptions made in mild of the corporate’s experiences and perceptions of historic tendencies. Though Cenovus believes that the expectations represented by such ahead‐wanting data are affordable, there will be no assurance that such expectations will show to be right.

Ahead‐wanting data on this doc is recognized by phrases comparable to “anticipate”, “proceed”, “ship”, “count on”, “on observe”, “progressing”, “goal”, and “will” or related expressions and contains solutions of future outcomes, together with, however not restricted to, statements about: efficiency throughout the enterprise; reaching web debt of $4.0 billion; enhancing manufacturing; product gross sales on the Superior Refinery; stronger oil sands manufacturing and optimization for future manufacturing; meaningfully higher ends in the U.S. Manufacturing enterprise; ramp as much as full operations on the Superior Refinery and Toledo Refinery and timing of the identical; deliberate turnaround actions; ramp up of MBH and MDA fields; dividend funds; extra free funds circulate below the shareholder returns framework; working with Pathways Alliance to advance a carbon seize and storage venture towards a regulatory software and formal engagement with Indigenous communities; progressing work on the Firm’s sustainability targets and offering additional updates in 2023; managing belongings in a secure, progressive and cost-efficient method whereas integrating environmental, social and governance issues into the Firm’s enterprise plans; and revised 2023 company steering.

Growing ahead‐wanting data includes reliance on numerous assumptions and consideration of sure dangers and uncertainties, a few of that are particular to Cenovus and others that apply to the trade typically. The components or assumptions on which the ahead‐wanting data on this information launch are based mostly embrace, however usually are not restricted to: the allocation of free funds circulate to decreasing web debt; commodity costs, inflation and provide chain constraints; Cenovus’s capacity to supply on an unconstrained foundation; Cenovus’s capacity to entry ample insurance coverage protection to pursue growth plans; Cenovus’s capacity to ship secure and dependable operations and reveal sturdy governance; and the assumptions inherent in Cenovus’s revised 2023 steering accessible on cenovus.com .

The chance components and uncertainties that would trigger precise outcomes to vary materially from the ahead‐wanting data on this information launch embrace, however usually are not restricted to: the accuracy of estimates concerning commodity costs, inflation, working and capital prices and foreign money and rates of interest; dangers inherent within the operation of Cenovus’s enterprise; and dangers related to local weather change and Cenovus’s assumptions relating thereto and different dangers recognized below “Threat Administration and Threat Components” and “Advisory” in Cenovus’s Administration’s Dialogue and Evaluation (MD&A) for the 12 months ended December 31, 2022 .

Besides as required by relevant securities legal guidelines, Cenovus disclaims any intention or obligation to publicly replace or revise any ahead‐wanting statements, whether or not on account of new data, future occasions or in any other case. Readers are cautioned that the foregoing lists usually are not exhaustive and are made as on the date hereof. Occasions or circumstances might trigger precise outcomes to vary materially from these estimated or projected and expressed in, or implied by, the ahead‐wanting data. For added data concerning Cenovus’s materials threat components, the assumptions made, and dangers and uncertainties which might trigger precise outcomes to vary from the anticipated outcomes, seek advice from “Threat Administration and Threat Components” and “Advisory” in Cenovus’s MD&A for the interval ended December 31, 2022 , and to the danger components, assumptions and uncertainties described in different paperwork Cenovus information occasionally with securities regulatory authorities in Canada (accessible on SEDAR at sedar.com , on EDGAR at sec.gov and Cenovus’s web site at cenovus.com ).

Specified Monetary Measures
This information launch accommodates references to sure specified monetary measures that don’t have standardized meanings prescribed by IFRS. Readers shouldn’t contemplate these measures in isolation or as an alternative to evaluation of the corporate’s outcomes as reported below IFRS. These measures are outlined otherwise by totally different firms and, due to this fact, may not be akin to related measures introduced by different issuers. For data on the composition of those measures, in addition to an evidence of how the corporate makes use of these measures, seek advice from the Specified Monetary Measures Advisory situated in Cenovus’s MD&A for the interval ended March 31, 2023, (accessible on SEDAR at sedar.com , on EDGAR at sec.gov and on Cenovus’s web site at cenovus.com ) which is integrated by reference into this information launch.

Upstream Working Margin and Downstream Working Margin
Upstream Working Margin and Downstream Working Margin, and the person elements thereof, are included in Be aware 1 to the interim Consolidated Monetary Statements.

Complete Working Margin
Complete Working Margin is the whole of Upstream Working Margin plus Downstream Working Margin.

(1) Discovered in Be aware 1 of the March 31, 2023, or December 31, 2022, interim Consolidated Monetary Statements.

Adjusted Funds Circulate, Free Funds Circulate and Extra Free Funds Circulate
The next desk offers a reconciliation of money from (utilized in) working actions present in Cenovus’s Consolidated Monetary Statements to Adjusted Funds Circulate, Free Funds Circulate and Extra Free Funds Circulate. Adjusted Funds Circulate per Share – Fundamental and Adjusted Funds Circulate per Share – Diluted are calculated by dividing Adjusted Funds Circulate by the respective fundamental or diluted weighted common variety of frequent shares excellent through the interval and could also be helpful to judge an organization’s capacity to generate money.

(1) Discovered within the March 31, 2023, or the December 31, 2022, interim Consolidated Monetary Statements .

Cenovus Vitality Inc.
Cenovus Vitality Inc. is an built-in power firm with oil and pure fuel manufacturing operations in Canada and the Asia Pacific area, and upgrading, refining and advertising and marketing operations in Canada and the US. The corporate is concentrated on managing its belongings in a secure, progressive and cost-efficient method, integrating environmental, social and governance issues into its enterprise plans. Cenovus frequent shares and warrants are listed on the Toronto and New York inventory exchanges, and the corporate’s most popular shares are listed on the Toronto Inventory Alternate. For extra data, go to cenovus.com .

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