Cenovus Energy NYSE: CVE highlighted record production, improving costs and progress on major projects during its fourth-quarter and full-year 2025 earnings call, while also outlining early integration work following the acquisition of MEG Energy and the company’s approach to capital allocation and Canadian crude egress.
Operational performance and safety highlights
Chief Executive Officer Jon McKenzie opened the call by pointing to safety performance as a foundational priority. At the Sunrise oil sands asset, Cenovus reported two full calendar years and more than 1.8 million hours worked without a reportable incident, including nearly 950,000 hours worked in 2025 during a high-activity period that included two turnarounds and work on a growth program.
McKenzie said 2025 upstream production averaged 834,000 barrels of oil equivalent per day (BOE/d), the highest annual level in the company’s history and up 3% from 2024 excluding the impact of the MEG acquisition. Cenovus also reduced total upstream non-fuel operating costs by about 4% year over year. In the downstream, the company’s refineries averaged 95% combined utilization across Canadian and U.S. segments, including a 59-day turnaround at Toledo that was completed 11 days ahead of schedule. Cenovus reported lower downstream costs, including reductions of roughly $4 per barrel in Canadian refining operating costs and $2 per barrel in U.S.-operated refineries.
Major milestones: MEG acquisition, WRB divestiture, and project updates
Cenovus closed its acquisition of MEG Energy on November 13, adding more than 100,000 barrels per day of production tied to the Christina Lake area. McKenzie said the deal consolidated what the company views as a high-quality resource and synergy opportunity in its largest producing SAGD asset area.
The company also sold its interest in the WRB Refining joint venture effective September 30, giving Cenovus full operational and commercial control of its remaining downstream portfolio, which management described as a critical component of its heavy oil value chain.
On capital projects, Cenovus cited several 2025 milestones, including the Narrows Lake tieback to Christina Lake, facilities work on the Foster Creek optimization project, and construction and installation of tie-ins on the West White Rose platform.
For West White Rose, management said systems integration testing and commissioning were in the final phase. McKenzie said the company still expects first oil in the second quarter, though weather disruptions could make that timeline “tight.” Cenovus described severe winter storms in the North Atlantic, but noted progress including completed welding and coding of platform legs, full commissioning of main power generators, and the opening of living quarters to transition staff off a flotel.
Q4 production records and oil sands performance
Cenovus reported fourth-quarter upstream production of 918,000 BOE/d, including record oil sands production of 727,000 BOE/d. With the addition of MEG’s production, management said the company exited the year producing more than 970,000 BOE/d in December, including nearly 786,000 BOE/d from oil sands assets.
At Christina Lake, production averaged 309,000 barrels per day in the fourth quarter, including roughly six weeks of output from the acquired Christina Lake North asset. Management said Christina Lake North achieved its highest-ever quarterly production rates above 110,000 barrels per day. Cenovus said systems and people integration is largely complete and that it has already delivered the majority of expected corporate synergies, with operational synergy work ongoing.
The company reiterated its synergy targets tied to the MEG transaction, stating it was comfortable delivering:
- CAD 150 million of annual synergies in 2026 and 2027
- More than CAD 400 million of annual synergies by the end of 2028
Management said it has begun reservoir delineation and seismic work at Christina Lake North and has started a redevelopment drilling program. In the Q&A, Cenovus said it plans to drill about 40 redevelopment wells targeting a heated bitumen zone below current production wells, with initial redevelopment production expected in the second quarter. It also discussed implementing wider well spacing and longer wells as part of its development methodology.
At Foster Creek, Cenovus posted a quarterly production record of 220,000 barrels per day, reflecting the Foster Creek Optimization Project. Management said it has delivered about 30,000 barrels per day of growth ahead of schedule and is progressing an enhanced sulfur recovery project expected to reduce operating costs by about 50 to 75 cents per barrel once online mid-year.
At Sunrise, production rose to more than 60,000 barrels per day in the fourth quarter following turnarounds in the second and third quarters. Cenovus said the first of new well pads from the east development area is currently steaming and is expected to start up in early 2026. The company expects three well pads online in 2026 and at least one more in 2027, supporting a plan to increase Sunrise production above 70,000 barrels per day by 2028. Cenovus also said it extended the turnaround cycle at Sunrise from four to five years, with no major cycle-ending turnaround until 2030.
Lloydminster thermal assets averaged more than 107,000 barrels per day in the fourth quarter, more than 10,000 barrels per day higher than the prior quarter, which management attributed partly to a redevelopment well program that exceeded expectations and base well optimization. Cenovus said it plans a larger redevelopment program in 2026. The company also discussed a solvent-assisted project at Spruce Lake North, noting a final investment decision and an estimated CAD 250 million spend through 2026 and 2027, with the project expected to come online in 2027.
Financial results, downstream market capture, and capital allocation
Chief Financial Officer Kam Sandhar reported fourth-quarter operating margin of approximately CAD 2.8 billion and adjusted funds flow of CAD 2.7 billion. Upstream operating margin was more than CAD 2.6 billion, as record oil sands production offset lower benchmark oil prices. Oil sands non-fuel operating costs decreased to CAD 8.39 per barrel in the fourth quarter, down more than CAD 1.25 per barrel from the prior quarter, driven by higher volumes and reduced maintenance.
Downstream operating margin was CAD 149 million, including $138 million of inventory holding losses and $15 million of turnaround expenses, partially offset by a one-time pipeline settlement receipt. Excluding those factors, Cenovus said downstream operating margin would have been about $235 million. U.S. refining operating costs (excluding turnaround expenses) were reported at $11.57 per barrel, reflecting higher fuel and power prices, planned maintenance, and modestly lower throughput.
Management discussed improved U.S. downstream market capture in the quarter. McKenzie and downstream leaders attributed results to reliability, commercial optimization between Lima and Toledo, the ability to access markets via Toledo’s dock, and seasonal factors. Cenovus said adjusted market capture was around 95% in the quarter excluding the one-time pipeline settlement receipt, while maintaining its longer-term guidance of about 70% adjusted market capture at a $14 WCS heavy oil differential.
Capital investment was nearly CAD 1.4 billion in the fourth quarter and CAD 4.9 billion for the full year. Looking ahead, Sandhar said 2026 growth spending is expected to be about CAD 300 million lower at the midpoint than the prior year, and includes commencing drilling at West White Rose and advancing the Christina Lake North expansion project to support growth of Christina Lake to around 400,000 barrels per day.
Net debt ended the fourth quarter at about CAD 8.3 billion, up roughly CAD 3 billion due to the MEG transaction, partially offset by CAD 1.9 billion in cash proceeds from the WRB sale. Cenovus returned CAD 1.1 billion to shareholders in the quarter, including CAD 714 million in share buybacks and CAD 380 million in dividends. Management said it adjusted its framework following the MEG close to balance deleveraging and shareholder returns while targeting long-term net debt of CAD 4 billion, and said that when net debt reaches CAD 6 billion it would aim to return about 75% of excess free funds flow to shareholders.
Sandhar also noted a current tax recovery of CAD 189 million in the quarter tied primarily to MEG integration, and said full-year 2025 current taxes were about CAD 780 million, below the original guidance of CAD 1.2 billion to CAD 1.3 billion. Cenovus maintained its 2026 cash tax guidance of CAD 1.0 billion to CAD 1.3 billion at around $60 WTI.
Egress strategy and contracted gas sales extensions
On questions about Canadian crude egress and exposure to WCS volatility, Cenovus executives said the company has expanded its ability to sell crude outside Alberta. Executive Vice President of Commercial Jeff Murray said Cenovus has moved from selling about 80% of Alberta production within Alberta in 2018 to roughly 40% today. He also referenced Trans Mountain performance and said Cenovus has discussed opportunities for 150,000 barrels per day of export over the next two years under contract, while remaining supportive of multiple additional egress projects and emphasizing the importance of long-term contracting.
Cenovus also discussed offshore gas sales agreements in China. McKenzie said the company extended gas sales agreements for Liwan 34-2 and Liwan 29-1 after the quarter, enabling sales through the end of the fields’ production periods in 2034 and 2040, respectively. Management said the extensions increase sales volumes within its five-year plan and add nearly CAD 2 billion of incremental free cash flow over the life of the fields.
About Cenovus Energy NYSE: CVE
Cenovus Energy Inc is a Canadian integrated energy company engaged in the exploration, development and production of crude oil, natural gas liquids and natural gas, together with downstream refining and marketing activities. Headquartered in Calgary, Alberta, Cenovus operates a mix of oil sands thermal and dilbit assets, conventional oil and gas properties, and owns refining and midstream assets designed to move and process hydrocarbons into finished petroleum products for commercial markets.
The company was originally formed as a spin‑off from Encana Corporation in 2009 and has grown through organic development and strategic acquisitions.
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