CALGARY, Alberta, May 01, 2024 (GLOBE NEWSWIRE) -- Cenovus Energy Inc. (TSX:CVE) (NYSE:CVE) delivered solid results across its portfolio in the first quarter of 2024. Production from its upstream assets remained strong through the quarter, and reflects scheduled maintenance in the Atlantic region. The downstream assets continued to run with high operational availability, allowing them to benefit from improved benchmark pricing in the U.S. Beginning in the second quarter of 2024, the Board of Directors approved a 29% increase in the base dividend to $0.72 per share annually, and declared a variable dividend of $0.135 per share to fulfill the company's first quarter shareholder return allocation. Consistent with Cenovus's financial framework, the base dividend is fully supported over the long term by funds flow generation at the bottom of the commodity price cycle. "We continue to focus on safe and reliable operations across our integrated business as we progress our priorities of deleveraging our balance sheet, increasing our shareholder returns, advancing work to decarbonize our production and furthering our growth projects," said Jon McKenzie, Cenovus President & Chief Executive Officer. "As we outlined at our Investor Day, our high-quality assets with long reserve life, together with our integrated strategy and strong operating performance, position Cenovus for success not only today but well into the future." First-quarter highlights Upstream production of almost 801,000 barrels of oil equivalent per day (BOE/d)1, including 114,100 barrels per day (bbls/d) at the Lloydminster thermals. Downstream throughput of more than 655,000 bbls/d, representing 94% utilization in Canadian Refining and 87% in U.S. Refining. Attained targeted mid-BBB credit ratings from all rating agencies, with S&P Global Ratings upgrading Cenovus to BBB with a stable outlook. Pathways Alliance began filing regulatory applications to the Alberta Energy Regulator for the proposed carbon capture and storage project. Progressed our growth projects at West White Rose, Foster Creek, Christina Lake and Sunrise. Financial, production & throughput summary For the period ended March 31 2024 Q1 2023 Q4 2023 Q1 Financial ($ millions, except per share amounts) Cash from (used in) operating activities 1,925 2,946 (286) Adjusted funds flow2 2,242 2,062 1,395 Per share (diluted)2 1.19 1.09 0.71 Capital investment 1,036 1,170 1,101 Free funds flow2 1,206 892 294 Excess free funds flow2 832 471 (499) Net earnings (loss) 1,176 743 636 Per share (diluted) 0.62 0.39 0.32 Long-term debt, including current portion 7,227 7,108 8,681 Net debt 4,827 5,060 6,632 Production and throughput (before royalties, net to Cenovus) Oil and NGLs (bbls/d)1 658,200 662,600 636,200 Conventional natural gas (MMcf/d) 855.8 876.3 857.0 Total upstream production (BOE/d)1 800,900 808,600 779,000 Total downstream throughput (bbls/d) 655,200 579,100 457,900 1 See Advisory for production by product type.2 Non-GAAP financial measure or contains a non-GAAP financial measure. See Advisory. First-quarter resultsOperating results1 Cenovus's total revenues were approximately $13.4 billion in the first quarter of 2024, up slightly from $13.1 billion in the fourth quarter, driven primarily by strong operating results. Upstream revenues were about $7.1 billion, an increase from $6.9 billion in the prior quarter, while downstream revenues were approximately $8.6 billion, an increase from the fourth quarter of 2023. Total operating margin3 was about $3.2 billion, compared with $2.2 billion in the previous quarter. Upstream operating margin4 was approximately $2.6 billion, in line with the fourth quarter. Downstream operating margin4 was $560 million in the first quarter, compared with an operating margin shortfall of $304 million in the previous quarter. In the first quarter, operating margin in U.S. Refining benefited from approximately $195 million of first-in, first-out (FIFO) gains. Total upstream production was 800,900 BOE/d in the first quarter, a slight decrease from the fourth quarter as the SeaRose floating production, storage and offloading (FPSO) vessel suspended production in late December in preparation for its planned off-station. Foster Creek volumes were 196,000 bbls/d compared with 198,800 bbls/d in the fourth quarter and Christina Lake production was 236,500 bbls/d, in line with the previous quarter. Sunrise production of 48,800 bbls/d was also in line with the fourth quarter. At the Lloydminster thermal projects, production increased to 114,100 bbls/d from 106,600 bbls/d in the prior quarter, which reflects higher reliability from the optimization of the asset and the implementation of Cenovus operating practices. Production in the Conventional segment was 120,700 BOE/d in the first quarter, in line with the fourth quarter. In the Offshore segment, production was 64,900 BOE/d compared with approximately 70,200 BOE/d in the fourth quarter. Asia Pacific sales volumes in the first quarter were in line with the prior quarter. In the Atlantic region, production was 7,200 bbls/d compared with 9,700 bbls/d in the prior quarter due to the SeaRose FPSO vessel beginning its planned drydock. Maintenance work is underway and the company anticipates the return of White Rose field production late in the third quarter of this year. The quarter-over-quarter offshore production decrease was partially offset by the non-operated Terra Nova FPSO vessel resuming operations offshore Newfoundland and Labrador. Light crude oil production from the White Rose and Terra Nova fields is stored at an onshore terminal before shipment to buyers, which can result in a timing difference between production and sales. Sales volumes in the Atlantic region in the first quarter were 3,900 bbls/d, compared with 15,000 bbls/d in the fourth quarter of 2023. Refining throughput in the quarter of 655,200 bbls/d was a record volume as Cenovus continues to improve its downstream reliability. Crude throughput in the Canadian Refining segment was 104,100 bbls/d in the first quarter, compared with 100,300 bbls/d in the fourth quarter, with the increase primarily due to higher reliability in the first quarter. In the coming weeks, the Upgrader will commence a planned seven-week turnaround, which will impact throughput and utilization in the second quarter. In U.S. Refining, crude throughput was 551,100 bbls/d in the first quarter, compared with 478,800 bbls/d in the fourth quarter. Throughput in the quarter increased primarily due to improved operating performance and availability across the company's operated and non-operated refining assets, in addition to lower levels of planned maintenance when compared with the prior quarter. 3 Non-GAAP financial measure. Total operating margin is the total of Upstream operating margin plus Downstream operating margin. See Advisory.4 Specified financial measure. See Advisory. Financial results First-quarter cash from operating activities, which includes changes in non-cash working capital, was about $1.9 billion, compared with $2.9 billion in the fourth quarter of 2023. Adjusted funds flow was approximately $2.2 billion, compared with $2.1 billion in the prior period and free funds flow was $1.2 billion, an increase from $892 million in the fourth quarter. First-quarter financial results were positively impacted by higher refining benchmark prices and a FIFO gain in the U.S. Refining segment, partially offset by approximately $250 million related to stock-based compensation paid in the first quarter of 2024. Net earnings in the first quarter were $1.2 billion, compared with $743 million in the previous quarter, with the increase primarily due to higher operating margin and a gain on asset divestitures in the first quarter of 2024. This was partially offset by higher income taxes, general and administrative expenses and a foreign exchange loss in the first quarter compared with a gain in the fourth quarter of 2023. Long-term debt, including the current portion, was $7.2 billion at March 31, 2024, in line with year-end 2023. Net debt was approximately $4.8 billion at March 31, 2024, a decrease from $5.1 billion at December 31, 2023, primarily due to free funds flow of $1.2 billion, partially offset by shareholder returns of $436 million and a build in non-cash working capital. In the first quarter, the company achieved its targeted mid-BBB credit ratings from all rating agencies. S&P Global Ratings upgraded Cenovus to BBB with a stable outlook, citing the company's debt reduction. Capital investment of $1.0 billion in the first quarter was primarily directed towards sustaining production in the Oil Sands segment, drilling, completions and infrastructure projects in the Conventional business, and sustaining activities in the Downstream segments. Additionally, the company continues to progress growth and optimization projects in its upstream business. Work on the West White Rose project is progressing and the company anticipates first production from the field in 2026. Construction of the tie-back of Narrows Lake to Christina Lake remains on track to start up in the first half of 2025. At Sunrise, the company will bring two additional well pads on line later this year, which will support sustaining current production levels. In addition, the Foster Creek optimization project is well underway, and expected to add 30,000 bbls/d once fully ramped up by the end of 2027. Financial framework Maintaining a strong balance sheet with the resilience to withstand price volatility and capitalize on opportunities throughout the commodity price cycle is a key element of Cenovus's capital allocation framework. In 2022 Cenovus established a net debt target of ~1.0x adjusted funds flow at the bottom of the commodity price cycle, or US$45 West Texas Intermediate (WTI), which translates into approximately $4.0 billion in net debt. Currently, Cenovus's shareholder returns framework has a target of returning 50% of Excess Free Funds Flow (EFFF) to shareholders for quarters where the ending net debt is between $9.0 billion and $4.0 billion, and 100% of EFFF to shareholders where the ending net debt is below $4.0 billion. The company has made a modification to the shareholder returns framework, specifically to address a scenario following the achievement of the target where net debt rises above $4.0 billion in any given quarter. Under the adjusted framework, should net debt rise above the $4.0 billion target in a given quarter, instead of reverting to a 50% payout ratio, the company will deduct the amount by which the previous quarter's net debt exceeded $4.0 billion from the 100% EFFF payout. If the previous quarter net debt is below $4.0 billion, Cenovus will target to return 100% of EFFF to shareholders with no adjustment. In order to efficiently manage working capital and cash, the allocation of EFFF to shareholder returns in any of the scenarios described above may be accelerated, deferred or reallocated between quarters, while maintaining our target to, over time, allocate 100% of EFFF to shareholder returns and sustain net debt at $4.0 billion. Dividend declarations and share purchases The Board of Directors has declared a quarterly base dividend of $0.180 per common share, payable on June 28, 2024 to shareholders of record as of June 14, 2024. The Board also declared a variable dividend of $0.135 per common share to shareholders of record on May 17, 2024, payable on May 31, 2024. In addition, the Board has declared a quarterly dividend on each of the Cumulative Redeemable First Preferred Shares – Series 1, Series 2, Series 3, Series 5 and Series 7 – payable on July 2, 2024 to shareholders of record as of June 14, 2024 as follows: Preferred shares dividend summary Share series Rate (%) Amount ($/share) Series 1 2.577 0.16106 Series 2 6.711 0.41715 Series 3 4.689 0.29306 Series 5 4.591 0.28694 Series 7 3.935 0.24594       All dividends paid on Cenovus's common and preferred shares will be designated as "eligible dividends" for Canadian federal income tax purposes. Declaration of dividends is at the sole discretion of the Board and will continue to be evaluated on a quarterly basis. In the first quarter, the company returned $436 million to shareholders, composed of $165 million through its normal course issuer bid and $271 million through common and preferred share dividends. In addition, the variable dividend will deliver $251 million to shareholders in the second quarter. 2024 planned maintenance The following table provides details on planned maintenance activities at Cenovus assets through 2024 and anticipated production or throughput impacts. 2024 planned maintenance Potential quarterly production/throughput impact (Mbbls/d)   Q2 Q3 Q4