- This quarter, Cenovus Energy (CVE) generated a net earnings loss of C$1.8 billion, compared to $110 million profit in 2019’s same quarter
- The significant loss was the result of the recent oil price decline, which the COVID-19 pandemic exacerbated
- Consequently, revenue has fallen by 71 per cent, to just $125 million in the first quarter
- To help weather the current industry environment, Cenovus has secured a further $1.1 billion in credit through its Canadian lenders
- Cenovus Energy (CVE) is up 9.13 per cent, with shares trading for $4.78 and a market cap of $5.87 billion
Cenovus Energy’s (TSX:CVE) first quarter financials have been hit hard by the COVID-19 pandemic and a simultaneous oil price decline.
Cash from Cenovus’s operations has fallen 71 per cent to just C$125 million, in the three months ending March 31.
This has had a devastating effect on the company’s operating margin. Cenovus generated a net earnings loss of almost $1.8 billion, versus a net profit of $110 million in 2019’s same quarter.
The significant loss resulted from the recent oil price decline, caused by a trade war between Russia and OPEC+ countries. The COVID-19 pandemic has only further exacerbated the situation.
Consequently, the company reduced its 2020 capital spending budget by more than $600 million. It also implemented a general and administrative cost reduction plan throughout its business.
Production at Cenovus’ oil sands facilities has decreased by approximately 6,000 barrels a day. The company said that it may consider further reductions, but has not yet announced any.
Turning to the company’s balance sheet, Cenovus has a $4.5 billion undrawn credit facility and no debt maturities until late 2022. Furthermore, the company secured another $1.1 billion through alternate Canadian lenders.
Cenovus’ CEO, Alex Pourbaix, believes this balance sheet will provide the company with sufficient cash reserves during an unprecedented market.
“The strength of our balance sheet, the quality of our long-life oil sands reserves, and the flexibility of our business to respond quickly to the changing external environment have positioned us well to withstand an extended period of low oil prices.
“When global economic conditions improve, we’ll be ready to contribute to Canada’s economic recovery in a meaningful way,” he said.
Cenovus Energy (CVE) is up 9.13 per cent, with shares trading for $4.78 at 11:21am EST.
