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Cenovus (CVE) Q3 Earnings Beat Estimates, Revenues Miss

Zacks Equity Research

Cenovus Energy Inc. CVE reported third-quarter 2019 earnings per share of 18 cents, beating the Zacks Consensus Estimate of 16 cents. In the prior-year quarter, the company had incurred a loss of 15 cents.

Meanwhile, quarterly revenues of $3,839 million missed the Zacks Consensus Estimate of $4,218 million and declined from the year-ago figure of $4,701million.

The leading integrated energy firm’s strong quarterly earnings were primarily backed by higher realized crude price from oil sands operations. This was however partially offset by planned and unplanned turnaround activities in the refining business. 

Operational Performance

Quarterly gross revenues from the Oil Sands unit declined to C$2,722 million from C$2,992 million in third-quarter 2018, courtesy of lower production of oil sands as the Alberta government has authorized the production curbing program. In the September quarter of 2019, the company recorded daily oil sand production of 354,59 5barrels, down 6% year over year.

However, operating margin at the segment surged to C$917million from the year-ago quarter’s C$682 million, thanks to higher realized crude sales price from oil sands operations.

Gross revenues from the Deep Basin unit fell to C$131 million from C$214 million in the year-ago quarter. Moreover, the segment’s operating margin came in at C$37 million, down from C$73 million in the year-ago quarter. A significant drop in daily oil equivalent barrels affected the segment.

At the Refining and Marketing segment, the company generated gross revenues worth C$2,420 million, down from C$3,126 million a year ago. The unit’s operating margin was recorded at C$126 million compared with the year-ago level of C$436 million, primarily due to both planned and unplanned turnaround activities.

Expenses

Transportation and blending expenses in the reported quarter contracted to C$1,255 million from C$1,494 million in the year-ago period. Moreover, expenses for purchased products dropped to C$1,878 million from C$2,336 million in third-quarter 2018.

Capital Expenditures & Balance Sheet

The company incurred net capital expenditure of C$294 million in the quarter under review.

Notably, Cenovus generated $622 million in free funds flow. As of Sep 30, 2019, the Canadian energy player had cash and cash equivalents of C$437 million, and total long-term debt of C$7,239 million. Its total debt-to-capitalization ratio was approximately 27.4%.

Guidance

For 2019, the company expects total oil sands daily production within 345-361 thousand barrels.

Zacks Rank & Stocks to Consider

Cenovus currently carries a Zacks Rank #3 (Hold). Meanwhile, a few better-ranked players in the energy space are Pembina Pipeline Corporation PBA, Crescent Point Energy Corp. CPG and Matrix Service Company MTRX. While Pembina Pipeline sports a Zacks Rank #1 (Strong Buy), Crescent and Matrix Service carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.     

Pembina Pipeline has an average positive earnings surprise of 28.1% for the past four quarters.

Crescent beat the Zacks Consensus Estimate in three of the prior four quarters, the average positive earnings surprise being 235.1%.

Matrix Service has managed to beat the Zacks Consensus Estimate for earnings in three of the past four quarters.

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