Cenovus Energy Inc. (NYSE:CVE) Q4 2022 Earnings Call Transcript

Keith Chiasson: Dennis, it’s Keith. Thanks for the question. It was a pretty interesting time in December, obviously, with the weather impacts, but that also coupled with our third-party pipeline going down. I actually think the teams responded pretty aggressively and pretty well. We were actually able to ramp up our rail program in the matter of a couple of weeks and start shipping crude by rail to alleviate some of the concerns that we’re starting to see in Alberta. We were able to store some barrels, that’s why you saw some of the inventory growth in the fourth quarter and resell those later on at a higher market. So I think from a marketing and commercial capability standpoint, really happy with what the team was able to do.

When I think about the future, and think about Superior and think about Toledo coming online, they’re served by the mainline system, which is going to be really interesting for us to get our crude out of Alberta and into an integrated refinery set of assets that consume the molecules that we produce. So we see that integration as being beneficial for a heavy oil producer. And we’re also pretty excited about what we’re seeing even at our Lloyd refinery and Lloyd Upgrader and being able to integrate our oil sands production into those 2 assets. So that integrated value chain is pretty valuable for us, and we’ll utilize both the conversion assets, but also our marketing activities to maximize that value.

Jonathan McKenzie: Dennis, this is John. I’ll just add a couple of things to what Keith said. And I completely agree with Keith that those downstream assets really give us the flexibility and optionality to perform differently in times like we saw in December when the Keystone pipeline went down and more broadly with the wider differentials. Those assets, particularly our operated assets, and performed really well. I think one of the reinforcing thoughts that we would have going through December, and we’ve talked about this before, is that we still have a strong desire to own and operate those assets that we’re participating in. So we see the U.S. downstream is absolutely core to our strategy. And we really look forward to putting Superior and Toledo into our stable of refineries and bringing those up over the next few weeks.

Alexander Pourbaix: Dennis, it’s Alex. And now I’m going to sound like I’m really gilding the Lily here by being the third person to comment on your question. But the one other observation I would make is, I think the ability that Keith talked about to mitigate the impacts of those challenges, if we had not done the Husky transaction, we would not be remotely in the position to manage these kind of circumstances. Cenovus just did not have all of those storage resources, the other pipeline takeaway opportunities. So I — the whole — when we did that deal, as I said, the goal was creating a much more resilient company. And I think the response to the company during what was really a pretty significant incident was really good.

Dennis Fong: Great. Great. I appreciate that color and context from all 3 of you. My second question, maybe you followed along the lines a little bit of what Greg was asking as well. I think I kind of know the answer to this in terms of your current portfolio. But just given, as we look forward, there is, over the next few years, a ramp-up of potentially volumes out of the variety of your oil sands asset, really from kind of low cost optimization, narrows like tieback and debottlenecking. How should we think about, or how are you guys thinking about the balance of upstream exposure versus downstream exposure on an ongoing basis, especially given the multiple shifting macro environment throughout North America?