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Cenovus (CVE) Shares Dip 7.6% Despite Earnings Beat in Q2

·5-min read

Cenovus Energy Inc. CVE shares have declined 7.6% despite reporting strong second-quarter 2022 results on Jul 28, before the opening bell. The underperformance can be attributed to the company’s aggressive capital spending budget, in turn, concerning investors.

Cenovus reported second-quarter earnings per share of 93 cents, beating the Zacks Consensus Estimate of earnings of 89 cents. The bottom line significantly improved from the year-ago quarter’s earnings of 9 cents per share.

Total quarterly revenues of $19,165 million surpassed the Zacks Consensus Estimate of $13,159 million. The top line also increased from the year-ago quarter’s $10,637 million.

The strong quarterly earnings were driven by higher daily oil sand production.

Cenovus Energy Inc Price, Consensus and EPS Surprise

 

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

Cenovus Energy Inc price-consensus-eps-surprise-chart | Cenovus Energy Inc Quote

Operational Performance

Upstream

The quarterly operating margin from the Oil Sands unit was reported at C$2,921 million, improving from C$1,411 million reported a year ago. Higher daily oil sand production primarily aided the segment.

In the June-end quarter, the company recorded daily oil sand production of 556.7 thousand barrels, up 1.3% year over year on contributions from its Christina Lake and Foster Creek operations.

The operating margin at the Conventional unit was C$434 million, up from C$142 million in the year-ago quarter. In the second quarter, the company recorded daily liquid production of 32.2 thousand barrels, down 15.7% year over year.

The Offshore segment generated an operating margin of C$476 million, up from C$340 million in the year-ago quarter. In the reported quarter, the company recorded daily offshore liquid production of 25.3 thousand barrels.

Downstream

From the Canadian Manufacturing unit, the company reported an operating margin of C$47 million, down from C$189 million in the year-ago quarter. The company recorded Crude Oil processed volumes at 80.9 thousand barrels per day (MBbl/D).

The operating margin from the U.S. Manufacturing unit was reported at C$793 million, up from C$96 million in the prior-year quarter. Crude oil processed volumes were 376.4 MBbl/D, signifying a decline from 435.5 MBbl/D in the year-ago quarter.

For the Retail unit, the company reported an operating margin of C$7 million, up from C$6 million in the prior-year quarter.

Expenses

Transportation and blending expenses in the reported quarter increased to C$3,048 million from C$1,854 million a year ago. Expenses for purchased products rose to C$9,396 million from C$5,255 million in the prior-year quarter.

Capital Investment & Balance Sheet

The company made a total capital investment of C$823 million in the quarter under review.

As of Jun 30, 2022, the Canadian energy player had cash and cash equivalents of C$3,693 million. Total long-term debt was C$11,228 million. Its total debt-to-capitalization was 30%.

Outlook

For 2022, Cenovus expects total upstream production of 780,000-810,000 barrels of oil equivalent per day (Boe/d). It expects daily oil sand production of 574-620 thousand barrels for the year.

The company expects downstream throughput volumes of 530,000-580,000 barrels per day for 2022.

Cenovus stated its capital expenditure guidance of $3.3-$3.7 billion for the year. This marks an increase from the prior projection of $2.9-$3.3 billion.

Zacks Rank & Other Key Picks

The company currently sports a Zacks Rank #1 (Strong Buy). Investors interested in the energy sector might look at the following companies that also presently flaunt a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

BP plc BP reported second-quarter 2022 adjusted earnings of $2.61 per American Depositary Share (“ADS”) on a replacement-cost basis, excluding non-operating items. The bottom line beat the Zacks Consensus Estimate of earnings of $2.20 per share on higher production and commodity price realizations.

BP has witnessed upward earnings estimate revisions for 2022 and 2023 in the past 30 days. The company currently has a Zacks Style Score of A for Growth and Value. BP is expected to see earnings growth of 116.2% for 2022.

Exxon Mobil Corporation XOM reported second-quarter 2022 earnings per share of $4.14 (excluding identified items), beating the Zacks Consensus Estimate of $3.80. Strong earnings were driven by higher realized commodity prices and solid refinery utilization.

ExxonMobil has witnessed upward earnings estimate revisions for 2022 and 2023 in the past 30 days. The company currently has a Zacks Style Score of A for Growth and Momentum, and B for Value. XOM is expected to see earnings growth of 131% for 2022.

TotalEnergies SE TTE reported second-quarter 2022 operating earnings of $3.75 per share, meeting the Zacks Consensus Estimate. The outperformance resulted from an increase in commodity prices.

TotalEnergies has witnessed upward earnings estimate revisions for 2022 and 2023 in the past 30 days. The company currently has a Zacks Style Score of A for Value and Growth. TTE is expected to see earnings growth of 107% in 2022.


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