Mr. Jon McKenzie reports

CENOVUS ANNOUNCES FIRST-QUARTER 2024 RESULTS

Cenovus Energy Inc. delivered solid results across its portfolio in the first quarter of 2024. Production from its upstream assets remained strong through the quarter, and reflects scheduled maintenance in the Atlantic region. The downstream assets continued to run with high operational availability, allowing them to benefit from improved benchmark pricing in the United States. Beginning in the second quarter of 2024, the board of directors approved a 29-per-cent increase in the base dividend to 72 cents per share annually, and declared a variable dividend of 13.5 cents per share to fulfill the company's first-quarter shareholder return allocation. Consistent with Cenovus's financial framework, the base dividend is fully supported over the long term by funds flow generation at the bottom of the commodity price cycle.

"We continue to focus on safe and reliable operations across our integrated business as we progress our priorities of deleveraging our balance sheet, increasing our shareholder returns, advancing work to decarbonize our production and furthering our growth projects," said Jon McKenzie, Cenovus's president and chief executive officer. "As we outlined at our investor day, our high-quality assets with long reserve life, together with our integrated strategy and strong operating performance, position Cenovus for success not only today but well into the future."

First-quarter highlights:

• Upstream production of almost 801,000 barrels of oil equivalent per day (boe/d), including 114,100 barrels per day (bbl/d) at the Lloydminster thermals.
• Downstream throughput of more than 655,000 bbl/d, representing 94-per-cent utilization in Canadian refining and 87 per cent in U.S. refining.
• Attained targeted mid-BBB credit ratings from all rating agencies, with S&P Global Ratings upgrading Cenovus to BBB with a stable outlook.
• Pathways Alliance began filing regulatory applications to the Alberta Energy Regulator for the proposed carbon capture and storage project.
• Progressed the company's growth projects at West White Rose, Foster Creek, Christina Lake and Sunrise.

First-quarter results

Operating results

Cenovus's total revenues were approximately $13.4-billion in the first quarter of 2024, up slightly from $13.1-billion in the fourth quarter, driven primarily by strong operating results. Upstream revenues were about $7.1-billion, an increase from $6.9-billion in the prior quarter, while downstream revenues were approximately $8.6-billion, an increase from the fourth quarter of 2023. Total operating margin was about $3.2-billion, compared with $2.2-billion in the previous quarter. Upstream operating margin was approximately $2.6-billion, in line with the fourth quarter. Downstream operating margin was $560-million in the first quarter, compared with an operating margin shortfall of $304-million in the previous quarter. In the first quarter, operating margin in United States refining benefited from approximately $195-million of first-in, first-out (FIFO) gains.

Total upstream production was 800,900 boe/d in the first quarter, a slight decrease from the fourth quarter as the SeaRose floating production, storage and offloading (FPSO) vessel suspended production in late December in preparation for its planned off-station. Foster Creek volumes were 196,000 bbl/d compared with 198,800 bbl/d in the fourth quarter, and Christina Lake production was 236,500 bbl/d, in line with the previous quarter. Sunrise production of 48,800 bbl/d was also in line with the fourth quarter. At the Lloydminster thermal projects, production increased to 114,100 bbl/d from 106,600 bbl/d in the prior quarter, which reflects higher reliability from the optimization of the asset and the implementation of Cenovus operating practices.

Production in the conventional segment was 120,700 boe/d in the first quarter, in line with the fourth quarter.

In the offshore segment, production was 64,900 boe/d compared with approximately 70,200 boe/d in the fourth quarter. Asia Pacific sales volumes in the first quarter were in line with the prior quarter. In the Atlantic region, production was 7,200 bbl/d compared with 9,700 bbl/d in the prior quarter, due to the SeaRose FPSO vessel beginning its planned drydock. Maintenance work is under way and the company anticipates the return of White Rose field production late in the third quarter of this year. The quarter-over-quarter offshore production decrease was partially offset by the non-operated Terra Nova FPSO vessel resuming operations offshore Newfoundland and Labrador. Light crude oil production from the White Rose and Terra Nova fields is stored at an onshore terminal before shipment to buyers, which can result in a timing difference between production and sales. Sales volumes in the Atlantic region in the first quarter were 3,900 bbl/d, compared with 15,000 bbl/d in the fourth quarter of 2023.

Refining throughput in the quarter of 655,200 bbl/d was a record volume as Cenovus continues to improve its downstream reliability. Crude throughput in the Canadian refining segment was 104,100 bbl/d in the first quarter, compared with 100,300 bbl/d in the fourth quarter, with the increase primarily due to higher reliability in the first quarter. In the coming weeks, the upgrader will commence a planned seven-week turnaround, which will impact throughput and utilization in the second quarter.

In U.S. refining, crude throughput was 551,100 bbl/d in the first quarter, compared with 478,800 bbl/d in the fourth quarter. Throughput in the quarter increased primarily due to improved operating performance and availability across the company's operated and non-operated refining assets, in addition to lower levels of planned maintenance when compared with the prior quarter.

Financial results

First-quarter cash from operating activities, which includes changes in non-cash working capital, was about $1.9-billion, compared with $2.9-billion in the fourth quarter of 2023. Adjusted funds flow was approximately $2.2-billion, compared with $2.1-billion in the prior period, and free funds flow was $1.2-billion, an increase from $892-million in the fourth quarter. First-quarter financial results were positively impacted by higher refining benchmark prices and a FIFO gain in the U.S. refining segment, partially offset by approximately $250-million related to stock-based compensation paid in the first quarter of 2024.

Net earnings in the first quarter were $1.2-billion, compared with $743-million in the previous quarter, with the increase primarily due to higher operating margin and a gain on asset divestitures in the first quarter of 2024. This was partially offset by higher income taxes, general and administrative expenses, and a foreign exchange loss in the first quarter compared with a gain in the fourth quarter of 2023.

Long-term debt, including the current portion, was $7.2-billion at March 31, 2024, in line with year-end 2023. Net debt was approximately $4.8-billion at March 31, 2024, a decrease from $5.1-billion at Dec. 31, 2023, primarily due to free funds flow of $1.2-billion, partially offset by shareholder returns of $436-million and a build in non-cash working capital. In the first quarter, the company achieved its targeted mid-BBB credit ratings from all rating agencies. S&P Global Ratings upgraded Cenovus to BBB with a stable outlook, citing the company's debt reduction.

Capital investment of $1-billion in the first quarter was primarily directed toward sustaining production in the oil sands segment, drilling, completions and infrastructure projects in the conventional business, and sustaining activities in the downstream segments. Additionally, the company continues to progress growth and optimization projects in its upstream business. Work on the West White Rose project is progressing and the company anticipates first production from the field in 2026. Construction of the tie-back of Narrows Lake to Christina Lake remains on target to start up in the first half of 2025. At Sunrise, the company will bring two additional well pads on-line later this year, which will support sustaining current production levels. In addition, the Foster Creek optimization project is well under way, and expected to add 30,000 bbl/d once fully ramped up by the end of 2027.

Financial framework

Maintaining a strong balance sheet with the resilience to withstand price volatility and capitalize on opportunities throughout the commodity price cycle is a key element of Cenovus's capital allocation framework. In 2022, Cenovus established a net debt target of approximately 1.0 times adjusted funds flow at the bottom of the commodity price cycle, or $45 (U.S.) West Texas Intermediate (WTI), which translates into approximately $4-billion in net debt. Currently, Cenovus's shareholder returns framework has a target of returning 50 per cent of excess free funds flow (EFFF) to shareholders for quarters where the ending net debt is between $9-billion and $4-billion, and 100 per cent of EFFF to shareholders where the ending net debt is below $4-billion.

The company has made a modification to the shareholder returns framework, specifically to address a scenario following the achievement of the target where net debt rises above $4-billion in any given quarter. Under the adjusted framework, should net debt rise above the $4-billion target in a given quarter, instead of reverting to a 50-per-cent payout ratio, the company will deduct the amount by which the previous quarter's net debt exceeded $4-billion from the 100-per-cent EFFF payout. If the previous quarter net debt is below $4-billion, Cenovus will target to return 100 per cent of EFFF to shareholders with no adjustment. In order to efficiently manage working capital and cash, the allocation of EFFF to shareholder returns in any of the scenarios described above may be accelerated, deferred or reallocated between quarters, while maintaining the company's target to, over time, allocate 100 per cent of EFFF to shareholder returns and sustain net debt at $4-billion.

Dividend declarations and share purchases

The board of directors has declared a quarterly base dividend of 18 cents per common share, payable on June 28, 2024, to shareholders of record as of June 14, 2024.

The board also declared a variable dividend of 13.5 cents per common share to shareholders of record on May 17, 2024, payable on May 31, 2024.

In addition, the board has declared a quarterly dividend on each of the cumulative redeemable first preferred shares -- Series 1, Series 2, Series 3, Series 5 and Series 7 -- payable on July 2, 2024, to shareholders of record as of June 14, 2024, as shown in the table entitled "Preferred shares dividend summary."

All dividends paid on Cenovus's common and preferred shares will be designated as eligible dividends for Canadian federal income tax purposes. Declaration of dividends is at the sole discretion of the board and will continue to be evaluated on a quarterly basis.

In the first quarter, the company returned $436-million to shareholders, composed of $165-million through its normal course issuer bid, and $271-million through common and preferred share dividends. In addition, the variable dividend will deliver $251-million to shareholders in the second quarter.

Two thousand twenty-four planned maintenance

The table entitled "2024 planned maintenance" provides details on planned maintenance activities at Cenovus assets through 2024, and anticipated production or throughput impacts.

Organizational updates

Geoff Murray, currently senior vice-president, commercial, has been promoted to executive vice-president, commercial, and will continue to report to the chief commercial officer.

Jeff Hart, executive vice-president, corporate and operations services, has chosen to leave the organization to pursue personal and other professional opportunities. Logan Popko, currently vice-president, well delivery, is being promoted to senior vice-president, corporate and operations services, reporting to the chief operating officer.

Sustainability

During the first quarter, Pathways Alliance began filing regulatory applications to the Alberta Energy Regulator for the proposed carbon capture and storage (CCS) project. The proposed CCS project would be one of the world's largest carbon sequestration networks. Discussions with the federal and Alberta governments on the co-investment mechanisms to support advancement of the CCS project are continuing.

Cenovus is a founding member of Pathways, a collaboration of companies representing approximately 95 per cent of Canadian oil sands production. Members Cenovus, Canadian Natural, ConocoPhillips Canada, Imperial, MEG Energy and Suncor share the goal of reducing emissions from oil sands production in phases, on the path to reaching net-zero emissions from production by 2050.

Conference call today:

Cenovus will host a conference call today, May 1, 2024, starting at 9 a.m. Mountain Time (11 a.m. Eastern Time).

To join the conference call without operator assistance, please register on-line approximately five minutes in advance to receive an automated call-back when the session begins. Alternatively, you can dial 888-664-6383 (toll-free in North America) or 416-764-8650 to reach a live operator who will join you into the call. A live audio webcast will also be available and archived for approximately 90 days.

Cenovus will host its annual meeting of shareholders today, May 1, 2024, in a virtual format beginning at 11 a.m. MT (1 p.m. ET). The webcast link to the shareholders meeting is available under presentations and events in the investors section of the company's website.

Total operating margin

Total operating margin is the total of upstream operating margin plus downstream operating margin.

Cenovus Energy Inc.

Cenovus Energy is an integrated energy company with oil and natural gas production operations in Canada and the Asia Pacific region, and upgrading, refining and marketing operations in Canada and the United States. The company is focused on managing its assets in a safe, innovative and cost-efficient manner, integrating environmental, social and governance considerations into its business plans. Cenovus common shares and warrants are listed on the Toronto and New York stock exchanges, and the company's preferred shares are listed on the Toronto Stock Exchange.

We seek Safe Harbor.