Cenovus (split from Encana after Ernst lawsuit papers served on the company) continues hoarding with $3.7B cash

Cenovus aims to conserve $3.7B cash hoard amid calls for dividend hike by Geoffrey Morgan, The Canadian Press, February 16, 2017, Calgary Herald
CALGARY – Oilsands producer Cenovus Energy Inc. learned tough lessons through the oil price collapse and is now resisting investor pressure to spend the cash it worked hard to save during the downturn.

Cenovus president and CEO Brian Ferguson told analysts during an earnings call Thursday that the company would consider a dividend hike or a share buyback program later in the year but cautioned, “When we look to increase the dividend, we want to make sure that it is something that is very sustainable even at the bottom of the price cycle.”

Cenovus had to slash its dividend, lay off staff, pause growth projects and cut costs during the oil price collapse in an attempt to save money. The company is now sitting on $3.7 billion in cash but is resisting pressures to immediately allocate that money dividend hikes or share buybacks.

“We took some very decisive actions to strengthen our balance sheet,” Ferguson said in an interview. He added, “I want to make sure that if we see volatility over the next three years, we’re not in any way jeopardizing our financial strength and we can continue to be countercyclical.”

“I think they have learned,” Edward Jones’ senior analyst Lanny Pendill said, adding that he was “happy to see the conservatism.”

“Nine times out of 10, when management teams start doing what Wall Street wants them to do, they typically end up in trouble. I am not a fan of taking this great liquidity that they worked very hard for and just spending it all through share buybacks or higher dividends,” Pendill said.

Ferguson said the company would attempt to be “prudent” during what he called “a choppy recovery.”

He said the company would have enough cash on hand to complete expansion projects at its two oilsands facilities, which were paused during the downturn to conserve cash.

“I don’t want to be in the position where you would have to suspend it for a second time, that would be very, very inefficient,” Ferguson said.

Cenovus reported Thursday that it had reversed earlier losses and pulled in $91 million in the fourth quarter, compared with a $641 million net loss in the same quarter a year earlier.

The company also announced it had grown its oilsands production, continued to cut its costs and locked in relatively low rates from oilfield service providers for the next three years, which should help Cenovus resist inflationary pressures if oil prices continue to climb.

Green shoots of recovery was also evident in Encana Corp.’s results. Doug Suttles, the North American oil and gas producer’s president and CEO, said the company expected “to hold year-over-year drilling and completion costs flat despite cost inflation for some services.”

Encana reported a US$281 million net loss for the fourth quarter Thursday, which is smaller than the US$612 million net loss it recorded at the same time a year earlier.

Citi Research analyst Robert Morris said in a note that Encana had beat analysts’ financial expectations for the quarter because the company had been able to lower its costs and realized higher prices for its oil and liquids production.

[Refer also to:

2016 03 16: Will Albertans ever learn? Canada’s biggest oil producers, including Cenovus, hoarding near-record pile of cash

2016 03 14: Greedy Sods in Alberta Beg Trudeau for Half a Billion Dollars to Clean Up Oil’s Dirty Underware but Not One Penny to Help Frac’d Families & Fix Frac’d Aquifers

2015 06 30: Cenovus Energy sells royalty lands for $3.3 billion in cash after illegally fracturing Rosebud’s drinking water aquifers (then Encana), and getting away with it ]

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