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

Cenovus Energy Inc. (TO: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.

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 (NYSE:E) , Enbridge Inc (NYSE:E) and Eni SpA (NYSE: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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