Q2 2026 Cenovus Energy Inc Earnings Call

July 29, 2026

Operator: Good morning, everyone. Thank you for standing by, welcome to Cenovus Energy's Q2 2026 results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your touchtone telephone. As a reminder, this call is being recorded. I would now like to turn the meeting over to Mr. Patrick Read, Vice President, Investor Relations and Internal Audit. Please go ahead, Mr. Read.

Speaker #2: Good morning, everyone. Thank you for standing by, and welcome to Cenovus Energy's second quarter 2026 results conference call. At this time, all participants are in a listen-only mode.

Speaker #2: After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press *11 on your touchstone telephone.

Speaker #2: As a reminder, this call is being recorded. I would now like to turn the meeting over to Mr. Patrick Read, Vice President, Investor Relations and Internal Audit. Please go ahead, Mr. Read.

Speaker #3: Thank you, operator. Good morning, everyone, and welcome to CENOVUS's 2026 second quarter results conference call. On the call this morning, our CEO, Jon McKenzie, and CFO, Kam Sandhar, will take you through our results.

Patrick Read: Thank you, operator. Good morning, everyone, welcome to Cenovus' 2026 Q2 results conference call. On the call this morning, our CEO, Jon McKenzie, and CFO, Kam Sandhar, will take you through our results. We'll open the line for Jon, Kam, and other members of the Cenovus management team to take your questions. Before getting started, I'll refer you to our advisories located at the end of today's news release. These describe the forward-looking information, non-GAAP measures, and oil and gas terms referred to today. They also outline the risk factors and assumptions relevant to this discussion. Additional information is available in Cenovus' annual MD&A and our most recent AIF and Form 40-F. As a reminder, all figures we reference on the call today will be in Canadian dollars unless otherwise indicated.

Speaker #3: Then we'll open the line for Jon, Kam, and other members of the CENOVUS management team to take your questions. Before getting started, I'll refer you to our advisories located at the end of today's news release.

Speaker #3: These describe the forward-looking information, non-gap measures, and oil and gas terms referred to today. They also outline the risk factors and assumptions relevant to this discussion.

Speaker #3: Additional information is available in Cenovus's annual MD&A, our most recent AIF, and Form 40-F. As a reminder, all figures we reference on the call today will be in Canadian dollars unless otherwise indicated.

Speaker #3: For the question-and-answer portion of the call, please keep to one question with a maximum of one follow-up. You're welcome to rejoin the queue for any other follow-up questions you may have.

Patrick Read: For the question and answer portion of the call, please keep to one question with a maximum of one follow-up. You're welcome to rejoin the queue for any other follow-up questions you may have. For detailed modeling questions, please follow up directly with our investor relations team after the call. I will now turn the call over to Jon. Jon, please go ahead.

Speaker #3: For detailed modeling questions, please follow up directly with our investor relations team after the call. I will now turn the call over to Jon.

Speaker #3: Jon, please go ahead.

Speaker #4: Great, and thank you, Patrick. Good morning, everyone. As always, I'd like to begin by recognizing our safety performance and those who protect our people and our assets each and every day.

Jon McKenzie: Great. Thank you, Patrick, and good morning, everyone. As always, I'd like to begin by recognizing our safety performance and those who protect our people and our assets each and every day. On 19 May, we safely completed the Foster Creek enhanced sulphur recovery project ahead of schedule and on budget. This is the fourth major project our projects group has safely and economically delivered over the last 14 months. After 24 months and 600,000 hours of work, the Amine Claus Unit was put into service, marking our first application of this technology in SAGD operations. The project improves how we manage sulfur at Foster Creek. It lowers chemical operating costs by CAD 0.50 to 0.75 a barrel, supports regulatory compliance, and removes about 700 trucks per year from the road at site.

Speaker #4: On May 19, we safely completed the Foster Creek and Hantsall for recovery project ahead of schedule and on budget. This is the fourth major project our projects group has safely and economically delivered over the last 14 months.

Speaker #4: After 24 months and 600,000 hours of work, the aiming cost unit was put into service, marking our first application of this technology in SAG-D operations.

Speaker #4: The project improves how we manage sulfur at Foster Creek. It lowers chemical operating costs by $0.50 to $0.75 per barrel, supports regulatory compliance, and removes about 700 trucks per year from the road at site.

Speaker #4: Most importantly, though, with an established track record of consistently bringing projects online on time and on budget, without standing safety performance, we continue to see our projects organization as a competitive advantage for CENOVUS.

Jon McKenzie: Most importantly, though, with an established track record of consistently bringing projects online on time and on budget with outstanding safety performance, we continue to see our projects organization as a competitive advantage for Cenovus. Now turning to our results. This was another strong quarter for Cenovus, and we're well-positioned for continued performance and growth through the remainder of 2026 and into 2027. Market conditions were supportive, and our people ran our assets very well through the quarter. The outcome was our best quarterly financial result ever. In our Upstream business, production averaged more than 970,000 BOE per day this quarter. This included oil sands production of over 786,000 barrels per day, exceeding the production record we set in Q1. We've continued that momentum into Q3 with July monthly production for the company well on track to average over 1 million BOE per day.

Speaker #4: So now turning to our results. This was another strong quarter for CENOVUS, and we're well positioned for continued performance and growth through the remainder of 2026 and into 2027.

Speaker #4: Market conditions were supportive, and our people ran our assets very well through the quarter. The outcome was our best quarterly financial result ever. In our upstream business, production averaged more than 970,000 BOE per day this quarter, this included oil sands production of over 786,000 barrels per day, exceeding the production record we set in the first quarter.

Speaker #4: We've continued that momentum into the third quarter, with July monthly production for the company well on track to average over 1 million BOE per day.

Speaker #4: This will be the first month the company has achieved this milestone, which is a testament to the quality of our people and assets, as well as our resilient culture.

Jon McKenzie: This will be the first month the company has achieved this milestone, which is a testament to the quality of our people and assets, as well as our resilient culture. Our largest oil sand asset, Christina Lake, continues to be the most material contributor to our strong production performance. Production in Q2 reached a new all-time high of 372,000 barrels per day, supported by the ramp-up of Narrows Lake and the initiation of the redevelopment well program at Christina Lake North. Narrows Lake continues to exceed expectations and is now producing over 80,000 barrels per day, much earlier than planned. This is contributing to Christina Lake averaging about 400,000 barrels a day for the month of July. The Narrows Lake asset is one of the highest quality SAGD assets in the basin, and the growth we expected from Narrows Lake is coming much sooner than forecast.

Speaker #4: Our largest oil sand asset, Christina Lake, continues to be the most material contributor to our strong production performance. Production in the second quarter reached a new all-time high of 372,000 barrels per day, supported by the ramp-up of Narrows Lake and the initiation of the redevelopment well program at Christina Lake North.

Speaker #4: Narrows Lake continues to exceed its expectations and is now producing over 80,000 barrels per day, much earlier than planned. This is contributing to Christina Lake averaging about 400,000 barrels a day for the month of July.

Speaker #4: The Narrows Lake asset is one of the highest-quality SAGD assets in the basin, and the growth we expected from Narrows Lake is coming much sooner than forecast.

Speaker #4: Notably, we reached the production rate we expected to get from the first five well pads with only the first four well pads. And we expect to bring on the next Narrows well pad later this year.

Jon McKenzie: Notably, we reached that production rate we expected to get from the first five well pads from only the first four well pads, and we expect to bring on the next Narrows well pad later this year. At Christina North, the integration work is progressing seamlessly. We have delivered on all the upfront commercial and corporate synergies and remain on track to increase production to 150,000 barrels a day by 2028. We're seeing production volumes from Christina Lake North respond well, with current rates reaching above rated capacity of 110,000 barrels per day. As our redevelopment program progresses, and with our first new pad since the acquisition now online and performing well, and with the commissioning of the fifth OTSG later this year, we expect production from this field to increase in H2 of the year.

Speaker #4: At Christina North, the integration work is progressing seamlessly. We have delivered on all the upfront commercial and corporate synergies, and remain on track to increase production to 150,000 barrels a day by 2028.

Speaker #4: We're seeing production volumes from Christina Lake North respond well, with current rates reaching above the rated capacity of 110,000 barrels per day. As our redevelopment program progresses, and with our first new pad since the acquisition now online and performing well, along with the commissioning of the fifth OTSG later this year, we expect production from this field to increase in the second half of the year.

Speaker #4: In the third quarter, we'll conduct a plant turnaround on phases F and G at Christina Lake. As always, we continue to optimize the scope and execution of these major maintenance events to reduce the duration, cost, and production loss.

Jon McKenzie: In Q3, we'll conduct a plant turnaround on phases F and G at Christina Lake. As always, we continue to optimize the scope and execution of these major maintenance events to reduce the duration, cost, and production lost. As a result, we've shortened the planned duration of the turnaround by 9 days and reduced the expected production loss by over 700,000 barrels, representing more than 20,000 barrels per day of increased production over the turnaround duration. The efficiency of our turnarounds in the oil sands has become a real competitive advantage for Cenovus. The redundancy, interconnectedness, and isolation we've built into our plants over the past 2 decades allows us to reduce the scope of scheduled turnarounds and optimize production inside the turnaround windows, as well as under normal operating conditions.

Speaker #4: As a result, we've shortened the planned duration of the turnaround by 9 days and reduced the expected production loss by over 700,000 barrels, representing more than 20,000 barrels per day of increased production over the turnaround duration.

Speaker #4: The efficiency of our turnarounds in the oil sands has become a real competitive advantage for Cenovus. The redundancy, interconnectedness, and isolation we've built into our plants over the past two decades allows us to reduce the scope of scheduled turnarounds and optimize production inside the turnaround windows, as well as under normal operating conditions.

Speaker #4: Combined with the optimization of the Foster Creek turnaround earlier this year, we are now on track to produce over 1.2 million more barrels than we budgeted during the turnarounds this year.

Jon McKenzie: Combined with the optimization of the Foster Creek turnaround earlier this year, we are now on track to produce over 1.2 million more barrels than were budgeted during the turnarounds this year. This has been reflected in our revised annual guidance. At Foster Creek, production in the quarter was approximately 215,000 barrels per day. The asset exited the quarter at record production levels of 245,000 to 250,000 barrels per day, which continued through July. As mentioned earlier, we also brought on a sulfur recovery unit well ahead of schedule, which is expected to reduce operating costs at Foster Creek by CAD 0.50 to CAD 0.75 per barrel. Moving to Sunrise, production was nearly 66,000 barrels per day during the quarter, following the start-up of the first well pad in the East Development area.

Speaker #4: This has been reflected in our revised annual guidance. At Foster Creek, production in the quarter was approximately 250,000 barrels a day. The asset exited the quarter at record production levels of 245 to 250,000 barrels a day, which continued through July.

Speaker #4: As mentioned earlier, we also brought on the sulfur recovery unit well ahead of schedule, which is expected to reduce operating costs at Foster Creek by $0.50 to $0.75 per barrel.

Speaker #4: Moving to Sunrise, production was nearly 66,000 barrels a day during the quarter. Following the startup of the first well pad in the east development area, with continued strong performance at Sunrise, we're now regularly exceeding 70,000 barrels a day of production, a target originally planned for 2027.

Jon McKenzie: With continued strong performance at Sunrise, we're now regularly exceeding 70,000 barrels per day of production, a target originally planned for 2027. We're also seeing consistent contribution from our Lloydminster thermal assets, where production averaged 103,000 barrels per day for the quarter. Strong results from the redevelopment program continues to deliver production ahead of our expectations at Spruce Lake, Pikes Peak, and Dee Valley. With the increased productivity we are delivering at each of Christina Lake, Foster Creek, and Sunrise, we are increasing our full-year production guidance for the company to the range of 970,000 BOE to 1,010,000 BOE per day, with no change to our capital investment guidance. We're also reducing unit cost guidance, reflecting higher production, increased utilization rates, and continued cost discipline. At West White Rose, drilling of the first production well remains on track, and we expect to reach first oil in late Q3.

Speaker #4: We're also seeing consistent contribution from our Lloydminster thermal assets, where production averaged 103,000 barrels a day for the quarter. Strong results from the redevelopment program continue to deliver production ahead of our expectations at Spruce Lake, Pikes Peak, and Dee Valley.

Speaker #4: With the continued with the increased productivity, we are delivering at each of Christina Lake, Foster Creek, and Sunrise; we are increasing our full-year production guidance for the company to the range of to 1 million 10,000 BOE per day, with no change to our capital investment guidance.

Speaker #4: We're also reducing unit cost guidance, reflecting higher production, increased utilization rates, and continued cost discipline. At West White Rose, drilling of the first production well remains on track, and we expect to reach first oil in late Q3.

Speaker #4: At this point, we expect the increase in contributions from the East Coast to meaningfully support production growth and the cash flow profile. Now, moving to the downstream business, strong operational availability across our assets SAWS capitalized on a supportive pricing environment in the second quarter.

Jon McKenzie: At this point, we expect the increase in contributions from the East Coast to meaningfully support production growth and the cash flow profile. Now moving to the Downstream business, strong operational availability across our assets saw us capitalize on a supportive pricing environment in Q2. The Canadian refining business delivered crude throughput of 102,000 barrels per day, or a utilization rate of roughly 94%. Operations in the quarter included scheduled maintenance on the second train of the hydrocracker at the Lloyd Upgrader, which was delivered under budget, setting the stage for consistent operations in H2 of this year and all the way through 2027. In the US refining business, market conditions were highly favorable in Q2, supported by low Midwest inventories, robust crack spreads, and wider heavy oil differentials. Crude throughput averaged 350,000 barrels per day, or approximately 96% utilization.

In the US refining. Business market conditions were highly favorable in the second quarter supported by low Midwest, inventories, robust, crack spreads and wider heavy oil differentials.

Jon McKenzie: The business continues to run well, generating material-adjusted cash flow for the company, and we are well-prepared to execute the turnaround of the Lima integrated unit in September or October this fall. All in all, Cenovus had a very strong quarter and we expect that trend to continue as we continue to execute against our business plans. Now I will turn it over to Kam to walk through our financial results.

Crude throughput averaged 350,000 barrels per day, or approximately 96% utilization. The business continues to run well, generating material adjusted cash flow for the company. We are well prepared to execute the turnaround of the Aligned Integrated Unit in September and October this fall.

All in all. So all of us had a very strong quarter and we expect that Trend to continue as we continue to execute against our business plans.

Kam Sandhar: Thanks, Jon. Good morning, everyone. In Q2, we generated approximately CAD 5.9 billion of operating margin and CAD 5 billion of adjusted funds flow, both all-time highs for Cenovus. Upstream operating margin was over CAD 4.9 billion, increasing from the prior quarter due to higher benchmark oil prices and increased oil sands production. As Jon mentioned, with stronger production volumes and cost performance across the business, we have updated our full-year operating cost guidance with reductions to each of our oil sands, conventional, and Asia Pacific costs. Our oil sands and on-fuel operating costs were CAD 8.28 a barrel, a reduction of almost CAD 0.65 a barrel from the prior quarter. In our conventional gas business, costs declined by nearly CAD 0.50 per BOE quarter over quarter to CAD 9.13 per BOE, reflecting an ongoing focus on cost control.

Now, I'll turn it over to Cam to walk through our financial results.

Thanks, Sean. Good morning, everyone.

In the second quarter, we generated approximately $5.9 billion of operating margin and $5 billion of adjusted funds flow, both all-time highs for Cenovus.

Upstream operating margin was over $4.9 billion, increasing from the prior quarter due to higher benchmark oil prices and increased oil sands production.

This is John. As mentioned, with stronger production volumes and cost performance across the business, we've updated our full-year operating cost guidance, with reductions to each of our Oil Sands, Conventional, and Asia-Pacific costs.

Our oil sands and non-fuel operating costs were $8.28 a barrel, a reduction of almost $0.65 a barrel from the prior quarter.

Kam Sandhar: In the Downstream, strong refined product pricing, widening heavy oil differentials supported a favorable margin environment. Operating margin was approximately CAD 1 billion in the quarter. This included a CAD 144 million inventory holding gain between our Canadian and US refining segments. That performance was supported by disciplined cost control and strong operational availability across our refining network. In the Canadian refining business, full-year operating cost guidance was lowered by CAD 1 per barrel to CAD 11 per barrel at the midpoint, reflecting increased throughput guidance and lower repairs and maintenance. US refining operating costs were CAD 10.55 per barrel, almost CAD 1.20 per barrel lower than the previous quarter, reflecting higher throughput volumes combined with lower energy and electricity prices. Adjusted market capture, as Jon mentioned, was 67%, decreasing from the prior quarter with the rise in Midwest gasoline pricing and the lag in asphalt and secondary product prices.

And our conventional gas business cost decline by nearly 50 cents. Per Boe quarter over quarter to 913 per HBU reflecting an ongoing focus on cost control.

In the downstream.

Strong refined, product pricing, widening, heavy oil, differentials supported a favorable margin environment.

Operating margin was approximately 1 billion in the quarter. This included, 144 million inventory holding gain between our Canadian and US refining segments.

That performance was supported by discipline cost control and strong operational availability across our refining Network.

In the Canadian refining business fully or operating cost. Guidance was lowered by a dollar per barrel to $11 per barrel at the midpoint reflecting increased, throughput guidance and lower repairs and maintenance.

Us refining operating costs were 10555 per barrel, almost a dollar 20 per barrel lower than the previous quarter, reflecting higher throughput volumes combined with lower energy and electricity prices.

Kam Sandhar: Capture is also impacted by temporary dislocations in domestic light crudes, including Bakken, Midland WTI, which increased feedstock costs during the quarter. Capital investment in Q2 was approximately CAD 1.2 billion, supporting sustaining activity across the business alongside our in-flight growth projects at Christina Lake North, Sunrise, Foster Creek, and West White Rose. We expect capital spend to be higher in H2 of the year as we continue to execute our program and maintenance activity increases with the planned turnaround at our Lima refinery. Capital guidance for 2026 remains unchanged at CAD 5 to CAD 5.3 billion. With record adjusted funds flow and a nearly CAD 700 million reduction in non-cash working capital, net debt decreased to CAD 5.4 billion at quarter end, representing a CAD 2.7 billion reduction in one quarter.

Adjusted Market capture, as John mentioned was 67% decreasing from the prior quarter with the rise in Midwest gasoline pricing and the lag in Asheville and secondary product prices.

Capture is also impacted by temporary dislocations in domestic Lake. Crews, including bachan, Midland WTI. Which increased weed stock costs during the quarter.

Capital investment in the second quarter was approximately 1.2 billion, supporting sustaining activity across the business. Alongside our, in-flight growth projects at Christina Lake North Sunrise, Foster Creek, and West, White Rose.

We expect capital spend to be higher in the second half of the year as we continue to execute our program, and maintenance activity increases with the planned turnaround at our Lima refinery.

Capital guidance for the 2026 remains unchanged at 5 to 5.3 billion dollars.

Kam Sandhar: The reduction in working capital was partly driven by a CAD 690 million increase in income tax payable due to our strong financial results. If commodity prices remain elevated, we expect income taxes payable to continue to increase in H2 2026 before unwinding in Q1 2027. With our revised guidance, we expect cash taxes to be CAD 2.3 to 2.6 billion, of which a significant portion will be paid in February 2027. During the quarter, we fully repaid the remaining CAD 2.2 billion outstanding on the term loan that was obtained as part of the MEG acquisition in November. Reflecting the strength of the quarter, total royalty and tax payments rose to CAD 2.7 billion. Shareholder returns in Q2 were CAD 1.4 billion, including CAD 1 billion in common share purchases through the NCIB and CAD 411 million through common share dividends.

With record adjusted funds flow and nearly 7, nearly 700 million reduction in non-cash working capital, net, debt decreased to 5.4 billion. At the at quarter end, representing a 2.7 billion dollar reduction in 1 quarter.

The reduction in working capital was partly driven by a $690 million increase in income tax payable, due to our strong financial results.

If commodity prices remain elevated. We expect income taxes payable to contain increasing the second half of 26. For unwinding in the first quarter of 27, with our revised guidance, we expect cash taxes to be 2.3 to 2.6 billion of, which a significant portion will be paid in February of 2027.

Repaid. The remaining 2.2 billion outstanding on the term loan that was obtained as part of the Meg acquisition in November

Reflecting the strength of the quarter, total royalty and tax payments rose to $2.7 billion.

Kam Sandhar: These outcomes highlight the significant value created for all of our stakeholders, including meaningful contributions to the province and the government of Canada via royalties, taxes, returns to shareholders, and ongoing debt reduction. As our net debt is now below CAD 6 billion, as per our revised financial framework we set out when we announced MEG, we'll be increasing targeted shareholder returns to 75% of excess free fund flow over time while continuing to progress towards our long-term net debt target of CAD 4 billion. Our shareholder returns target should continue to be viewed as guidelines, and we will continue to exercise judgment, maintain flexibility in where we allocate capital any particular quarter to maximize value and focus on returns for our shareholders. I'll now turn the call back to Jon for some closing remarks.

Shareholder returns in the second quarter were 1.4 billion including a billion dollars in common share purchases through the ncib and 411 million through common share dividends

These outcomes highlight, the significant value created, for all of our stakeholders, including meaningful contributions to the province, and the government in Canada via royalties taxes, returns to shareholders and ongoing debt reduction.

As our net debt, is now below 6 billion as per our revised Financial framework. We set out. When we announced Meg will be increasing, targeted shareholder returns to 75% of excess free funds flow over time while continuing to progress towards our long-term. Net debt, Target of 4 billion.

Our shareholder returns targets should continue to be viewed as guidelines. We will continue to exercise judgment and maintain flexibility in where we allocate capital in a particular quarter, to maximize value and focus on returns for our shareholders.

Jon McKenzie: Great. Thank you, Kam. As I reflect on the quarter, what stands out is the consistency of our execution and the opportunities which our people continue to find to get more out of our assets. We would never apologize nor take credit for a higher commodity price environment, but the key is to run well while it lasts and capitalize on the opportunity. Across the business, we delivered on our commitments, outperformed our plans, and built momentum for what will be a strong H2 2026. We're now seeing the payoff from years of disciplined investment and operational and technical focus. All of our growth projects in the oil sands are nearing or have exceeded full rates, while we continue to find ways to optimize performance. At the same time, our integrated business model continues to be an advantage.

I'll now turn the call back to John for some closing remarks, great, and thank you Cam.

So is our reflect on the quarter which stands out is the consistency of our execution, and the opportunities which are people continue to find to get more out of our assets.

We would never apologized nor take credit for higher commodity uh price environment, but the key is to run. Well, well At Last and capitalize on the opportunity.

We delivered on our commitments, outperformed our plans and built momentum for what will be a strong second half of 2026?

We're now seeing the payoff from years of discipline investment and operational and Technical Focus. All of our growth projects in the oil, sands are nearing or have exceeded full rates, but we continue to find ways to optimize performance.

Jon McKenzie: Our strong refinery availability provides a reliable destination for our growing production, allowing us to capture the benefits of a robust downstream environment while minimizing our transportation costs and commitments. Now, I'd be remiss if I did not also briefly address the trilateral agreement which members of the Oil Sands Alliance have entered into with the federal and Alberta governments earlier this month. While the MOU is only a first step, the agreement represents meaningful progress towards creating a competitive investment environment for Canada's vast oil sands resource base. Although the MOU still provides provisions for an uncompetitive carbon tax that uniquely burdens Canadian industry, it creates a framework for governments and industry to work together on production growth, emissions reduction, and expanded market access.

At the same time, our integrated business model continues to be an advantage. Our strong Refinery availability provides reliable, reliable destination for our growing production, allowing us to capture the benefits of a robust Downstream environment while minimizing our transportation costs and commitments.

Now, I'd be remiss if I did not also briefly address the trilateral agreement, which members of the Oil Sands Alliance have entered into with the federal and Alberta governments earlier this month.

Well, the mou was only a first step.

The agreement represents meaningful progress towards creating a competitive investment environment for Canada’s best oil sands resource base.

Jon McKenzie: Most importantly, by acknowledging and committing to the need to put a competitive policy and regulation in place to support meaningful growth in Canadian oil sands, as well as appropriate fiscal frameworks to support political priorities on carbon capture, the agreement establishes an important foundation for future investment and development. Cenovus is committed to working with our partners, and both the Canadian and Alberta governments to work towards definitive agreements to make this a reality. What matters most is this agreement signals a willingness to work together to grow the oil and gas sector for the benefit of all Canadians. This is an important step to getting our economy moving forward again, creating high-paying jobs for Canadians, and generating tax and royalty revenue to support Canada's quality of life and standard of living. While the opportunity set for industry is expanding, our approach will be unchanged.

Although the mou still provides Provisions for an uncompetitive carbon tax, that uniquely burdens Canadian industry. It creates a framework for governments and Industry to work together, on production growth. Emissions reduction and expanded Market access.

Most importantly by acknowledging and committing to the need to put a competitive policy and regulation in place to support, meaningful growth. In Canadian oil sands as well as appropriate fiscal Frameworks to support political priorities on carbon capture. The agreement establishes, an important foundation for future investments in development.

Cenovus is committed to working with our partners, and both the Canadian and Alberta governments, to work towards definitive agreements to make this a reality.

What matters most is this agreement signals a willingness to work together to grow the oil and gas sector for the benefit of all Canadians. This is an important step to getting our economy moving forward. Again,

Creating high-paying jobs for Canadians and generating tax and royalty revenue to support Canada's quality of life and standard of living.

Jon McKenzie: We'll continue to responsibly develop resources, support our communities in which we do business, be disciplined allocators of capital, and run our business to the long-term benefit of our shareholders and stakeholders. With that, I'll open it up to questions.

Operator: Thank you. If you have a question at this time, please press the star one one on your touchtone telephone. We ask that you please limit yourself to one question and one follow-up. One moment for our questions. The first question is from Greg Pardy with RBC Capital Markets. Please go ahead.

And while the opportunity set for industry is expanding, our approach will be unchanged. We'll continue to responsibly develop resources. Support our communities in which we do business, be disciplined allocators of capital, and run our business to the long-term benefit of our shareholders and stakeholders. And with that, I'll open it up to questions.

Thank you.

If you have a question at this time, please press the star 1, 1 on your touchtone telephone. We ask that you please limit yourself to 1 question and 1 follow-up 1 moment for our questions.

The first question is from Greg party with

Greg Pardy: Yeah, thanks. Good morning, another really, really strong quarter. Good to see. Jon, within the release, what jumped out a little bit is just the sanctioning of the solvent-aided SAGD project. I know it's not nothing, right? It's 10,000, 15,000 barrels a day. What's your thinking about broader implementation of SAGD over time?

RBC Capital markets, please go ahead.

Jon McKenzie: Greg, we believe that solvents-assisted SAGD has targeted application in some of the areas that we have within our portfolio. This will be the first commercial application of that inside our portfolio. You're quite right. Earlier in this year, we sanctioned a project in Spruce Lake to bring on kind of 10,000 barrels a day in the 2028 timeframe. What we expect from that is there may be broader application within the Narrows Lake portfolio and some of the other parts of our business. As we've always been really clear about, in this business, SOR is king, and this is a way to get the SOR down, get more volume for less steam. There's some application, as I mentioned, across some of our portfolio. Andrew, maybe you want to address a little bit there too.

Projects. I know it's it's I mean it's not nothing right? It's 10 15000 bills, a day. What's your thinking about? Broader implementation of saggy over time?

Yeah. So you know, Greg we we believe that, you know, solvents, assisted, you know, saggy, you know, has targeted application in some of the areas um, that we have within our portfolio. So this will be the first commercial, um, application of that, um, inside our portfolio. So you're quite right earlier in this year.

Um,

We sanctioned the project and Spruce Lake to bring on, you know, kind of 10,000 barrels a day in 2028.

Andrew Dahlin: Morning, Greg. Indeed. As Jon said, this is a targeted application of solvents, and we're doing it in a high-quality reservoir in Saskatchewan at an area called Spruce Lake. What we're really hoping to achieve here is actually a production increment of about 40% to 50% and an SOR reduction of about 30%. We see similar applications in high-quality reservoirs across our portfolio. I think where our subsurface team is particularly excited is we also think that solvents could be a good fit for lower quality resources. For example, resources where you have thinner pay. We're going in with this in a high-confidence area, and then we're looking at how we can take that technology further into the next decade in more challenging reservoirs.

Um time frame. You know what we expect from that is there may be broader application um within the Narrows Lake portfolio and and some of the other um parts of our business. But you know, as we've always been really clear about, you know, in this business soar is King and and this is a way to get the sore down, get more volume for Less steam. Uh and there's you know, some applications as I mentioned across some of our portfolio but Andrew maybe you want to address a little bit there too. Yeah. I'll help you too morning. Greg? Yeah indeed. Uh as John said uh this is a targeted application of solvents and we're doing it in a high quality Reservoir in in in Saskatchewan at an area called Spruce Lake. And what we're really hoping to achieve here is actually a production increment of about 40 to 50% and an Sor reduction of about

About 30%.

Uh, we see similar applications in high-quality reservoirs across our portfolio.

Greg Pardy: Understood. Thanks for that. Maybe just switching. You mentioned that the shorter duration on your currents now is becoming a big advantage. The natural question is, how have you done that? Perhaps, what are you doing now that you weren't doing before? Is it as simple as really planning or, what's the special sauce behind that?

Jon McKenzie: I think when people see the results, everybody looks for a special sauce. What you have to remember is this is probably two decades worth of work. In some of these plants now we're getting into the fourth and fifth turnaround cycle. The way these plants were designed, in the phased application that we built them, we've had the opportunity to create interconnectedness, bypasses, isolation, and the like. The first key to any turnaround is getting as much work as you can out of the turnaround window and limiting scope that comes through isolation. Then with the jump overs and the interconnectedness of the plants, we're able to reroute process streams to minimize the loss of production during the turnaround window. This is not something that you do overnight. It's not something that happens overnight.

But I think we're our subsurface team is particularly excited as we also think that solvents could be a good fit for lower quality resources. So for example, resources where you have thinner pay, um, so we're going in with this in a high confidence area and then we're looking at how we can take that technology further into next decade in, in more challenging reservoirs. Okay, I understand. Now thanks, thanks for that. And maybe just Switching, gears staying on the op side is, is you mentioned that the um, shortage duration on your currents now is becoming a big Advantage. So the national question is, is you know, how have you done that? Perhaps, what are you doing now that you weren't doing before and as it as simple as really planning or, you know, it's like what's the special sauce behind that?

Yeah, you know, I think when people see the results, everybody looks for a special sauce. But you know what you have to remember is, this is probably two decades' worth of work.

And some of these plants, now that we're getting into the fourth and fifth turnaround cycle and the way these plants were designed, you know, in the phased application that we built them, we've had the opportunity to create interconnectedness and bypasses.

Isolation. Um, and the likes of, you know, the first key to any turnaround is getting as much work as you can out of the turnaround window and and limiting scope that comes through isolation. And then with the jump overs, and the interconnectedness of the plants, we're able to reroute process streams, um, to minimize the, uh, loss of, uh, production during the

Jon McKenzie: One of the things that we think about, for example, is as we move to the Christina phase F, phase G turnaround, we start thinking about what that's going to look like in five years, and what are we going to do in this window, to minimize the production impact, in the, I guess it'll be 2031 turnaround, when that scheduled turnaround comes up again. This is something that happens through time. It's something you design into your plants when you build it, and then you optimize it through time. I don't know if you have anything else you want to add on that.

Um, turnaround window, but this is not something that you do overnight. It's not something that happens overnight. One of the things that we think about, for example, is, as we move to the Christina, you know, uh, phase F, phase G turnaround, we start thinking about what that's going to look like in five years. And what are we going to do in this window to minimize the production impact, you know, in the 2020s?

I guess it would be 2031, turn around um, when that when that scheduled turn around comes up again. But this is, this is something that happens through time. It's something you design into your plants when you build it and then you optimize it through time.

Andrew Dahlin: Yeah, no, happy to. It's Andrew again. Yeah, Jon, Sonya and I were talking about that the other day. I really think, just to build on what Jon said, it really comes in sort of four waves of things we've done. It starts off with the design of the plants, the scale of the plants, and how we have multiple phases that we can leverage. Second thing is the cycle time of our turnarounds. We've done a lot of integrity management and condition-based monitoring over the years. We now go cycle time at five-plus years of each of the turnarounds, so that's an important step, Greg.

I don't know if you have anything else. You want to add on that? Yeah, I'm happy to its Andrew again. Yeah, John Sonia and I were talking about that the other day and I I really think it just to build on what John said, it, it really comes in sort of 4, waves of things, we done. It starts off with the design of the plants, the scale of the plants and how we have multiple phases that we can Leverage

Andrew Dahlin: On the terms of the scope, the third leg would be kind of the scope of the work that we execute inside of the turnarounds, and we've really been able to reduce that by actually taking the work and spreading it over 365 days. Basically sprinkling it in during the operational time rather than in a turnaround. Finally, and here some kudos goes to our operations team. Our operations team is doing a phenomenal job during the execution of the turnarounds themselves, leveraging what Jon just spoke to. Quite a bit of confidence in that now. We obviously saw it at Foster Creek, where we had minimal production impact. We just guided you to reduced impact of the turnaround coming up at Christina Lake.

Second thing is the cycle time of our turnarounds, you know, we've done a lot of Integrity management and condition based monitoring over the years. So we now go to cycle time at 5 plus years of each of the turnarounds. So that's an important step Greg.

Andrew Dahlin: The other thing I'd just remind you, Greg, and everyone, that we've got a pretty light turnaround cycle in the upstream business over the next few years. Just the way we've now been able to spread them out, you'll see sort of one or two lighter turnarounds each year.

Greg Pardy: That's right. That's very thorough. Thanks very much.

Up at Christina Lake. And then the other thing I just remind you Greg and everyone that we've got a pretty light turnaround cycle in the Upstream business over the next few years just the way we've now been able to spread them out, you you'll see sort of 1 or 2 light a turnarounds um each year

Jon McKenzie: Thanks, Greg.

That's really, that's very—so, thanks very much.

Thanks Greg.

Operator: Thank you. Next question is from Dennis Fong with CIBC. Please go ahead.

Thank you.

next question is from Dennis Fong with CIBC

Dennis Fong: Good morning.

Jon McKenzie: Morning, Dennis.

Please go ahead.

Dennis Fong: Good morning, Jon. Thanks for taking my questions, and congrats as well on a strong quarter.

Jon McKenzie: Thank you.

Dennis Fong: As well as the continued momentum you're showcasing in ops. My first question here maybe continues on from Greg's question. Christina Lake on the back of Narrows Lake success as well as the work that you're doing, Christina Lake North. You previously talked potentially about interconnecting the two processing facilities. Can you talk towards, one, maybe the strategy and how that's maybe evolved just on the back that you've seen at Narrows, as well as, where you're seeing facility limits at either Christina Lake North or Christina Lake South, and how does that also optimize maybe the well development or how that shifted the well development and the next well pad locations that you're thinking about drilling between the two assets?

Good morning and, uh, thanks. Good morning, John. Thanks for taking my questions and, and congrats as well on a on a strong quarter. Um, as well as the continued momentum, you're showcasing in, in opiates.

Um, my first question here maybe continues on from Greg's question. So, Christina Lake, on the back of Narrows Lake success, as well as the work that you're doing at Christina Lake North. You've previously talked potentially about interconnecting the two processing facilities,

Jon McKenzie: It's kind of funny you're asking us to front run our Investor Day in January. We're actually working on the interconnectedness of Christina Lake North and our Christina plant today. Andrew, maybe you're the best person to answer Dennis's question.

Can you talk towards 1, maybe the strategy, and how? That's maybe evolved just on the back that you've seen it Narrows, um, as well as, uh, where you're seeing, uh, facility limits at either. Christina Lake North or Christina Lake South. And how does that also optimize maybe the well development or how that shifted the well development. And, and like the next well pad location that you're thinking about drilling, uh, between the 2 assets.

It's kind of funny. You're asking us to give to front run our investor day and in January, but we are we're actually working on the interconnectedness of Christina Lake North and um our Christina plant today.

Um, and maybe you're the best person to answer Dennis's question.

Andrew Dahlin: Yeah. I'll have a go. Maybe I'll take a giant step back and kind of talk to the evolution of both Christina Lake and Christina Lake North, and then how we're going to connect them. The evolution of Christina Lake, you'll recall, Dennis, a couple of years ago, we were at 230,000 to 235,000 barrels a day. We sanctioned the expansion and as well the tieback to Narrows Lake, and we've now taken Christina Lake production to close to 265,000, 270,000 barrels a day with Narrows Lake at 80,000 barrels a day plus. We're seeing good performance there. Christina Lake, still treating them separately. At Q1, Q2 performance was in that sort of 105,000, 110,000 barrels a day.

Yeah, I'll have a go. Maybe I'll take a giant step back and then kind of talk to the evolution of both Christina Lake and Christina Lake North, and then how we're going to connect them, and the evolution of Christina Lake. You'll recall, Dennis, a couple of years ago we were at...

Andrew Dahlin: We're seeing that ramp up to probably towards 125,000 barrels a day by year-end, and that's a function of the redevelopment wells, and as well the fifth OTSG coming on stream in Q4. We'll continue to grow Christina Lake up towards 150,000 barrels a day and beyond in 2028. Now, that's kind of the status. Now, when we did the deal, we spoke to our investors and yourselves about the opportunity we had to optimize the subsurface and even between the two areas. Where we're really going now, not wanting to front run too much, Dennis, we're really looking at how can we also physically connect the plants.

230, 235 thousand, barrels a day. We sanctioned the expansion. And as well, the tie back to Narrows Lake and we've now taken Christina Lake production. Um, yeah, to close at 265, 270,000, barrels a day with Narrows lake at 80,000 barrels a day plus. So we're seeing good performance there, Christina Lake, still treating them separately. Uh, at q1 Q2 performance was in that sort of 105 and 110,000 barrels a day we're seeing that ramp up to probably towards 125,000 barrels a day by year end. And that's a function of the Redevelopment Wells, uh, and as well. The 5th OSG coming on stream in Q4 and then we'll continue to grow. Christina Lake up towards 150,000 barrels, a day and Beyond in 2028.

Now, that's kind of the status. Now, when we did the deal, we spoke um, to our investors and yourselves about the opportunity, we had to optimize the subsurface and even between the 2. Uh, the 2, the 2 areas,

Andrew Dahlin: Back to my answer earlier to Greg on the turnaround performance and how we're utilizing the scale and the phases of the plant, we actually see an opportunity here to optimize and get more juice out of the surface facility by actually connecting all the various pieces between the two plants. Again, I complimented the ops group earlier. Here, it's the projects group and the technical expertise that just amazes me every day. Quite frankly, the plan, Dennis, is Investor Day in January. That's when we're really going to showcase not only what we're going to do to drive further value in the subsurface, but also utilizing the surface infrastructure better.

Where we're really going now, not wanting to front run too much. Uh, Dennis, but we're really looking at how can we also physically connect the plants. So back to my answer earlier to Greg on the turnaround performance and how we utilizing the scale and the phases of the plant, we actually see an opportunity here to, um,

Jon McKenzie: Yeah. Dennis, your question on plant constraints is kind of interesting as well because when we look at Christina Lake North, we've been field limited for so long. Now with Narrows Lake coming on at these elevated rates, we've actually seen production rates this month at Christina Lake, not Christina Lake North, but just Christina Lake, over 300,000 barrels a day. What you will see is much higher Christina Lake production in July, and we expect for that to continue. We're really just kind of evaluating right now what are the plant limitations that we have inside these facilities.

Optimize and get more juice out of the surface Facility by actually connecting all the various pieces between the 2 plants. So again you know I complimented the Ops group earlier here. It's the projects group and the technical expertise that just just amazes me every day and quite frankly, the plan, um, Dennis is, is invested in in January. That's, that's where we're really going to Showcase. Not only what we're going to do to try further value in the subsurface. But but also utilizing the surface infrastructure better

Yeah, Dennis, your question on plant constraints is kind of interesting as well, because...

um when we kind of look at Christine in the north we've been we've been feel limited for so long. And now with um,

Narrows like coming on at these elevated rates. We we've actually seen

You know, production rates. Um this month that Christina Lake not Christina Lake North but just Christina Lake over. 300,000 barrels a day.

Jon McKenzie: I think we're going to be surprised to the upside of it, and that's going to form part of our thinking as we start to integrate these plants and work towards one Christina Lake that has two interconnected plants, as we work through the latter part of this decade.

So you know what you will see is is much higher, Christina Lake production in July and we expect for that to continue but we're really just kind of evaluating right now. What are the um plant limitations that we have um inside these facilities?

Dennis Fong: Definitely. I really appreciate that context from both of you. I wanted to shift to Sunrise and maybe carrying along with that thought around facility constraints. From last quarter, you had kind of suggested that one of the two trains was able to run at a very high capacity at Sunrise during some planned maintenance there. How do you think about, we'll call it the go-forward development strategy around Sunrise? It seems like the facility, again, has a fair amount of ample capacity. Is it just how do you kind of maybe drive a cadence well drilling to kind of further ramp that beyond the 70,000 barrel a day level, which you highlighted you just hit ahead of schedule?

And, you know, I think we're going to be surprised to the upside of it. And that's going to, you know, form part of our thinking as we start to integrate these plants and work towards, you know, one Christina in a lake that has two interconnected plants. You know, as we work through the latter part of this, uh, this decade.

Thought around facility constraints uh from the last uh quarter. You'd kind of suggested that uh 1 of the 2 trains was able to run at a at a very high capacity at Sunrise, um, during some planned uh, planned maintenance there.

How do you think about—we'll call it the go-forward development strategy—around Sunrise? It seems like the facility, again, has a fair amount of ample capacity. Is it just—how do you kind of, um...?

Jon McKenzie: Yeah. We've done a lot of work on the Sunrise facility since we acquired 100% of it back in 2022. The original design basis was two trains, A and B, each 30,000 barrels a day of capacity. We've had one train, during turnaround conditions, up to 52,000, 53,000 barrels a day, and we've done a lot of capacity testing through the last four years and a lot of debottlenecking and creating sort of that interconnectedness between the two to facilitate higher production rates. We haven't really found the facility constraints there, because we are, again, production constrained or field constrained. The challenge for us is to continue to work that up. As I mentioned in my notes, we're regularly over 70,000 barrels a day today. With the first of the eastern well pads now online, we expect to bring on the second later this year.

Maybe drive a cadence, well, drilling to kind of further ramp that beyond the 70,000 barrel-a-day level, which you highlighted you just hit ahead of schedule.

Yeah, so we we've done a lot of work on the, on the sunrise facility. Since we acquired 100% of it back in 2022 and the original design basis, was 2 trains, uh A and B each 30,000 barrels, a day of capacity.

Um, we've had 1 Train uh, during turnaround conditions up to 52 53,000. Barrels a day and we've we've um done a lot of capacity testing uh through the last 4 years and a lot of Dem bodle necking.

And creating sort of that uh, interconnectedness between the 2 um, to facilitate higher production rates but we we haven't really found the facility constraints there.

Jon McKenzie: That is something that we are going to continue to work through, continue to debottleneck, and continue to kind of push the limits of where those constraints might manifest themselves today. I think the short answer to your question is it's something higher than where we are today, but we're not really sure exactly where that's going to line out.

Um, because we are again, um, production constrained or feel constraint. So the, the on the challenge for us is to continue to work that up. As, as I mentioned in my notes, we're, we're regularly over 70,000 barrels a day today, uh, with the first of the, um, Eastern. Well pads. Now online, we, we expect to bring on the second later this year, but that is something that we are, you know, going to continue to work through continued to debottlenecking higher than where we are today. But we're not really sure exactly where that's going to line up.

Andrew Dahlin: Yeah, I could probably-

Dennis Fong: Great. Thanks for the color.

Andrew Dahlin: Dennis, I could probably add just one more-

Dennis Fong: Oh, sorry. Go ahead.

Andrew Dahlin: I could add one more color commentary, too. Indeed, we haven't pushed the boundary yet. Proud of the team for how they pushed the boundaries at FCCL. There's more to come here at Sunrise. The subsurface team are doing it now by going out east and looking to develop a reservoir that's up to 50 meters thick. What we're looking at in the facility is how can we expand it, and how can we expand it relatively efficiently from a capital point of view? It looks to us at this stage that we have enough water treatment and oil treatment. What we need is more steam. Again, at Investor Day, we'll talk a bit more to kind of what our plans are there.

Yeah I could probably thanks for the Dennis. I could I could probably add just 1 more. I could add 1 more color. Commentary too is so indeed we haven't pushed the boundary yet like so proud of the team for how they pushed the boundaries that fccl. Uh this more to come here. It's it's Sunrise. So the subsurface team are doing it now by going out east and and looking to develop a reservoir, that's up to 50 meters thick.

Um, what we're looking at in the facility is, how can we, how can we expand it? And how can we expand it relatively? Um,

Jon McKenzie: Yeah. Again, in all these things, it's about getting the SOR down and getting your production up and finding out where those debottleneck opportunities might land. We've got room to go there.

Um, efficiently from a capital point of view. And it looks to us at this stage that we have enough water treatment and oil treatment. And so what we need is More Steam. Um, so again at investor day, we'll talk a bit more to kind of what our plans are are there.

yeah, so you again, in all these things it's about getting the sore down and getting your production up and finding out where those

Dennis Fong: Great. Really appreciate the color from both of you. I'll turn it back. Congrats again on a strong quarter.

Uh, development opportunities might land but we we've got room to go there.

Jon McKenzie: Great. Thanks, Dennis.

Great, really appreciate the color from both of you. I'll turn it back and congrats again on a strong quarter.

Great, thanks. Dennis

Operator: Thank you. Next question is from Menno Hulshof with TD Cowen. Please go ahead.

Thank you.

Menno Hulshof: Thanks. Good morning, everyone.

Next question, is from Menno HOSA with TD Cowen. Please go ahead

Jon McKenzie: Morning, Menno.

Thanks and uh, good morning everyone.

Menno Hulshof: Good morning, Jon. I'll start with a question on the new production guidance range of 970 to just over 1 million BOED. Given that we're halfway through the year, what's the scenario where you hit the top end of the range or even eclipse it? Similarly, what would need to happen to only hit the bottom, given you averaged 970 in Q2?

Jon McKenzie: Yeah. Maybe I'll start this, somebody else can kind of fill in some of my thinking on this. What we try and give you, Menno, is a view to where we think P50 lies in terms of the future production guidance that we're giving you. What's really clear to us is through a combination of the redevelopment programs, better reservoir performance, and better production coming from the well pads that we are bringing on. Production took a pretty significant jump in the month of July, in particular at Christina Lake, in particular at Foster Creek. We would expect to be somewhere around 245 at Foster Creek and somewhere around 285 at Christina Lake. As I mentioned, we've had days at Christina Lake where we're over 300.

I'll start with the good morning John. Uh I'll start with a, a question on the, the new production guidance range of 970 to just over 1 million bed, given that we're halfway through the year. What's the scenario where you hit the top end of the range or even eclipsed it. And similarly, what would need to happen to only hit the bottom, given you averaged, uh, 970 of a second quarter.

Yeah, so maybe I'll start this, and somebody else can kind of fill in some of my thinking on this. But what we try and give you, Manna...

This is a view to where we think, you know, P50 lies in terms of the future production guidance that we're giving you.

and what's really clear to us is you know through a combination of the Redevelopment programs better Reservoir performance and better production coming from the well pads that we are bringing on you know, production took a pretty significant jump in the month of um

Jon McKenzie: We think that the kind of 50,000 barrels a day increment that we've given you is largely attributable to those two assets. Over and above that, we still expect to have increasing production from Sunrise. We mentioned that's up over 70,000 barrels a day pretty regularly right now, and we still expect to have increased production from the East Coast as we get to first oil, as well as incremental production from Lloydminster and conventional. In thinking through this, we want to give you sort of that P50 number where we've got sort of that equal chance of being above or below it gives you, I think, a balanced view of where we are inside the portfolio today and a balanced view of what we expect for the rest of this year and moving into 2027.

July, and in particular at Christina Lake, and in particular at Foster Creek. So, you know, we would expect to be somewhere around 245 at Foster Creek and somewhere around 285 at, um, Christina Lake. And as I mentioned, we've had, you know, days at Christina Lake where we're over 300.

So we think that, you know, the kind of 50,000 barrels a day increment that we've given you is largely attributable to those two assets.

From Sunrise, we mentioned that's up over 70,000 barrels a day pretty regularly right now and we still expect to have increased production from the East Coast as we get to first oil as well as incremental uh, production from, uh, Lloyd menster in conventional. So, you know, in thinking through this, you know, we want to give you sort of that p50 number where, you know, we've got sort of that equal chance of being above or below it. But it gives you, I think a balanced view of where we are inside the portfolio today in a balanced view of what we expect for the rest of this year and moving into 2027.

Menno Hulshof: Thanks, Jon. That all sounds very promising. I'll follow up with a question on basin condensate supply, given how topical it's become with the recent positive messaging on thermal growth from pretty much everybody. Can you remind us of how much conde you currently produce versus consume? Then more broadly, does future conde supply concern you at all? Are you hearing of any industry initiatives to boost it over the next, call it three to five years?

Thanks, John. That that also sounds very promising. I I'll follow up with

Jon McKenzie: Yeah. Maybe I'll start this and then Jeff can finish it. We consume far more than we produce. Well, not including the Lloyd Upgrader, I guess, in our conventional business, we're about 20,000 barrels a day, and we would consume about 240,000 barrels a day, much of which we bring from the US. Condensate supply is something that we think about a lot, and we think about where does it come from. We have to remember as well is, pricing really determines a lot of the availability of condensate. There are other light hydrocarbons we can use, over and above the formal condensate supply. Going forward, as we grow, our condensate strategy actually figures into everything that we do in terms of allocating more capital to our heavy oil business. Jeff?

A question on Basin condensate Supply, giving out topical, it's become with the recent positive messaging on thermal growth from from pretty much everybody, uh, C. Can you remind us of how much Conde you can really produce versus consume and then more broadly does, uh, future Conde Supply concern you at all. And are you hearing of any industry initiatives to, to boost it over the next uh call it 3 to 5 years?

Yeah, so maybe I'll start this and then, you know, Jeff can finish it. But you know, we consume far more than we produce and like we, well not including the Lloyd upgrade or I guess, you know in the in our conventional business we're about 20,000 barrels a day and we would consume about 240.

Jeff Lawson: Menno, I think it's a great question, particularly with some of the things Jon touched on around the MoU and the future potential growth. If I take your question in sort of two parts. In sort of the short and medium term, there's lots of shock absorbers in the system to be able to bring diluent to bear. That's through blending, bringing light into the condensate pool, at upgraders throughout the province, choosing to bring a product that is diluent rather than having it blended into synthetics. There's a number of ways that this just resolves itself on short-term basis, month to month and week to week. I think you're speaking more to a longer-term structural thing. The first on that is if growth is orderly and measured, I think we would expect to see price to drive the choice to produce condensate in Alberta.

240,000 barrels a day, uh, much of which we bring from the US. So you know, condensate Supply is something that we think about a lot and we think about where does it come from? But we we have to remember as well is you know, pricing really determines a lot of the availability of condensate. There are other light hydrocarbons we can use um, over and above the, the, you know, the formal condensate Supply. Um, but going forward as as we grow, um, our condensate strategy actually figures into everything that we we do, in terms of allocating more Capital, uh, to our heavy oil business. But

Jeff. So I think it's a, a great question, particularly with, uh, some of the things John touched on around, um, the mou and the the future potential growth. Uh, so we have to take your question and sort of 2 parts, uh, in sort of the short and medium term, there is, there's lots of shock absorbers in the system to be able to bring diluent to bear. That's, uh, through blending bringing light into the condensate pool, uh, at upgraders throughout the province, choosing to bring, uh, product that is diluent rather than having it blended into synthetics. And there's a number of ways that this just resolves itself on short-term basis month-to-month and week to week, I think you're speaking more to a longer term, structural thing uh and the First on that is if growth is orderly and measured, you know, I think we would expect to see price to drive.

Jeff Lawson: We've seen that over time with both ourselves and many other producers throughout the province being very price responsive and targeting rich gas when it's the right time to, and targeting dry gas when it's the right time to. We'd see that being a price-based response. There has been pipeline creep through time where import pipelines have found new capacity, and that is an opportunity for the future. In the past, we've seen things like the development of a DRU, which recycles condensate in Alberta, and that's a potential for the future. Deeper into the past, we've seen things like structural rail bringing condensate in, and I don't know that we'll need to get there. I think we would try to see the market to resolve itself in advance.

Jeff Lawson: However, as we point out, if there is pretty significant growth in a more expedited basis, you'll see those sorts of projects be brought to bear sooner to be able to meet the demand.

Uh, the choice to produce condensate in Alberta. We've seen that over time with uh, both ourselves and uh, many other producers throughout the province being very price responsive and targeting Rich grass when it's the right time too and targeting dry gas, when it's the right time to. So we would see that being a price-based response. Uh, and then, you know, there has been pipeline creep through time where, uh, import pipelines have found new capacity. And, uh, that is an opportunity for the future, uh, in the past we've seen things like the development of a Dru, which, uh, recycles, uh, condensate in Alberta and that's, uh, potential for the future and deeper into the past. We've seen things like structural rail bringing, uh, condensate in. And I, I don't know that we'll need to get there. I think we would try to see the market to resolve itself in advance. Uh, however, as we point out, if there is pretty significant growth in a more expedited basis, you know, you'll see those sorts of projects, be brought to bear sooner to be able.

To meet the demand.

Menno Hulshof: Thanks to you both. That was super helpful. I'll turn it back.

Jon McKenzie: Great. Thanks, Menno.

Thanks to you both. That was super helpful. I will, uh, I'll turn it back.

Great. Thanks mano.

Operator: Thank you. Next question is from Neil Mehta with Goldman Sachs. Please go ahead.

Thank you.

Neil Mehta: Yeah, thanks so much. Jon, just love your perspective on this trilateral memorandum of understanding. When I think about some of your comments earlier this year to the comments on the call today, it definitely feels like you feel like you've made a lot of progress on this. Just practically from a Cenovus perspective, if you blue sky this thing, what could it mean for the business in the early 2030s?

Next question is from Neil, Mehta with Goldman Sachs. Please go ahead.

Jon McKenzie: Well, I think one of the things that we've argued, Neil, is that we have to have a competitive regulatory and policy environment to attract capital into this industry going forward. I think with some of the impediments that came through policy and regulation, it became really difficult to attract capital into the oil sands business. I think that where we are today and what's been discussed and agreed on unlocks this business in terms of its investability, and I think that's something that's pretty exciting for Canada. This is probably the largest investment opportunity that we have as a country, and to make it investable again and start to attract capital into this business, without getting into specifics, because I'm not at liberty for that, but it is pretty exciting for this industry.

Yeah, thanks so much. Uh John. Um, just love your perspective on this trilateral me memorandum of understanding. Um, you know, I think when I think about some of your comments, uh, earlier this year to the comments on the call today definitely feels like, you feel like you've made a lot of progress on this and so, just practically from a snowstorm. If You Blue Sky, this thing, what could it mean for the business in the early 2030s?

Forward. You know, I think with some of the impediments that came uh, through policy and regulation. It became really difficult to attract Capital into the oil sands business. I think that, you know, where we are today and and what's been discussed, and agreed on unlocks this business, in terms of its investability. And I think that's something that's uh, you know, pretty exciting for Canada. This is, you know, probably you know the largest investment opportunity that we have is as a country. And to me, you know, make it investable again and start to attract Capital into this business.

Um, without getting into specifics because I'm not a liberty for that but it does. Um, it is pretty exciting for this industry.

Neil Mehta: We'll look for more information. West White Rose, it's finally here. It's been a journey.

Jon McKenzie: Yeah.

Jon McKenzie: Obviously, getting the top side on was a big deal last year, but it sounds like you're tracking for first oil by the end of Q3. What's left?

Neil Mehta: Obviously, getting the top side on was a big deal last year, but it sounds like you're tracking for first oil by the end of Q3. What's left?

Jon McKenzie: That's it. We're drilling the first production well now. That well needs to be drilled and completed and get to first oil. What you'll see from us, in the first well package, is a series of six other wells that we'll drill. We're really excited about this, too. You're quite right, it's been a journey that predates us even buying Husky Energy. It goes back a number of years before that. To get this completely de-risked and be on the cusp of first production is something that we're pretty excited about, and we've been waiting for it for quite a while.

We'll look for more information, and then West White Rose—it's finally here. It's been a journey. Um, yeah, obviously, again, the topside on was a big deal last year, but it sounds like you're tracking for first oil by the end of the third quarter. What's left?

You know, that's it, we're drilling, you know the first production well now so um that well needs to be drilled and completed and and get to first oil, um and then what you'll see from us, you know, in the first well packages, a series of 6 other Wells that will drill but you know we're really excited about this too. You're quite right. It's been a journey that you know, predates us even buying husky, it goes back a number

Neil Mehta: Thanks, Jon. Congrats.

Number of years before that. So to get this completely dearest and Beyond the, you know, the cusp of first production is something that we're pretty excited about and we've been waiting for for quite a while.

Jon McKenzie: Thanks, Neil.

Thanks Jen. Congrats.

Operator: Thank you. Next question is from Patrick O'Rourke with ATB Cormark Capital Markets. Please go ahead.

Thanks Neil.

Thank you.

Patrick O'Rourke: Hey. Good morning, guys. Thanks for taking my questions, and congratulations on the record quarter here. Just wondering, with respect to the downstream and the Lima turnaround that's going to happen in the H2 here, maybe if you could outline the sort of key activities and scopes there. I'm just curious with where cracks have been, and are today, and it sounds like the plan is to go forward as initially designed, but would there be any thought to a reduction in scope or timing there?

Next question is from Patrick Read with ATB Capital Markets. Please go ahead.

Hey, good morning guys, thanks for taking my questions and, uh, congratulations on the record quarter here. Uh, just wondering, uh, with respect to the, uh, Downstream and the line of turnaround that's going to happen in the second half here. Maybe if you could outline that sort of Key activities and Scopes there. And I'm just curious with where cracks have been, uh, and are today. Um, and it sounds like the plan is to go forward as initially, uh, design. But would there be any thought to a reduction in, in scope, uh, or timing there?

[Company Representative] (Cenovus Energy): Yeah. Thanks, Patrick. This is Eric. Yeah, appreciate the question. I think, just thinking about the Lima turnaround. It is something we've been focused quite a bit on. The team has worked very hard to be prepared for it. It really is getting after the crude unit, the vac unit, the hydrocracker reformer, and then a couple other units. It's a big chunk of work. As I said, the team has been working really hard at it. I think even just building on some of the themes around getting after reliability and getting after isolation and making the facility and the units more accessible online to get after certain things, is part of the scope.

Eric Zimpfer: Yeah. Thanks, Patrick. This is Eric. Yeah, appreciate the question. I think, just thinking about the Lima turnaround. It is something we've been focused quite a bit on. The team has worked very hard to be prepared for it. It really is getting after the crude unit, the vac unit, the hydrocracker reformer, and then a couple other units. It's a big chunk of work. As I said, the team has been working really hard at it. I think even just building on some of the themes around getting after reliability and getting after isolation and making the facility and the units more accessible online to get after certain things, is part of the scope.

Yeah, thanks Patrick. This is Eric, uh, you know, appreciate the question.

I think, yeah, just thinking about the line of turnaround. Um,

you know, it is it is something we've been focused quite a bit on the team is uh, worked very hard to be prepared for it. You know, it really is getting after the crude unit, the back unit. Uh, the iso cracker, uh, is the hydrocracker, uh, reformer and then a couple of other units. So it's it's a big chunk of work. Uh, and as I said, the team has been working really hard at it. I think, you know, even just building on

[Company Representative] (Cenovus Energy): There's quite a bit inside the back tower that we're going to do and really look to make sure that we can maximize heavy crude through Lima, by getting that back tower cleaned up, turned around, and ready to go. I think, as you said, it's obviously a very strong crack environment. We've done a good job, I think, across the downstream, really in Q2, around trying to be as flexible as we can with some of our non-cycle ending outages, and moving them where we can to really support the supply disruption and get our products to the market when the market needs it. It's something we'll continue to look at for Lima. I see it. It's a big turnaround. We're ready for it, and our focus is on executing it safely, and executing it well. That's really where we are right now.

Eric Zimpfer: There's quite a bit inside the back tower that we're going to do and really look to make sure that we can maximize heavy crude through Lima, by getting that back tower cleaned up, turned around, and ready to go. I think, as you said, it's obviously a very strong crack environment. We've done a good job, I think, across the downstream, really in Q2, around trying to be as flexible as we can with some of our non-cycle ending outages, and moving them where we can to really support the supply disruption and get our products to the market when the market needs it. It's something we'll continue to look at for Lima. I see it. It's a big turnaround. We're ready for it, and our focus is on executing it safely, and executing it well. That's really where we are right now.

Some of the themes around, you know, getting after reliability and getting after isolation and and making the, you know, the facility and the units, you know, more accessible online to get after certain things. Uh, is, is part of the scope. There's there's quite a bit inside the back tower that we're going to do and, you know, really look to, you know, make sure that uh, we can maximize heavy crude through Lima, uh, by by getting that back to our cleaned up turned around and, and and ready to go. You know, I think, as you said, uh, you know, it's obviously a very strong crack environment, you know, we've done a good job. I think a cross Downstream really in 2 Q around trying to be as flexible as we can with some of our, uh, non-cyclical ending outages, uh, and moving them, uh, where we can to, to Really support the supply disruption and, uh, you know, get our products to the market, when the market needs it,

Patrick O'Rourke: Okay, great. We all sort of saw the license activity that came through in the Montney in the quarter here. Just curious about the strategy there. Could it become a bigger piece of the puzzle in the conventional unit, or is this more so about filling up sort of unused facility capacity that you have right now?

Yeah, it's it's something we'll continue to look at for limo but I, you know, I see it. It's it's a big turnaround. We're ready for it. And you our focus is on executing, it safely and executing it. Well and and that, that's really where we are right now.

Jon McKenzie: Yeah, I think the way to think about it, Patrick, is more of our capital this year has been directed towards our Montney positions, vis-à-vis the Deep Basin. We have some areas there that we're investing in. It's largely in the liquids-rich portion, as well as up in the Tupper area. I think that's a progression that you'll see through time, is continue to invest more, or direct more of our conventional capital into the Montney area, vis-à-vis the Deep Basin. That's really just driven by economics and strategy.

Okay, great. And then uh we all sort of saw the the licensed activity that came through in the montney uh, in the quarter here. Uh, just curious about the strategy, there could have become a bigger piece of, uh, the puzzle in the conventional unit or is this, you know, more so about filling up sort of uh unused facility capacity that you have right now.

Yeah, I think um, the way to think about it Patrick is, you know, more of our Capital this year has been directed towards, um, our Monte positions. Um, these would be the Deep Basin. So we are, you know, we have some

Um, areas there that we're, um, investing in largely in the in the liquids, Rich portion, um, as well as up in, in the top rare, but I think that's a progression that you'll see through a sport through time is, is continue to invest more.

Patrick O'Rourke: Okay. Thank you very much.

Of our conventional capital into the, um, money area vis-à-vis the, um, the patient, and that's really just driven by economics and strategy.

Okay, thank you very much.

Operator: Thank you. I would like to remind you that if you are on the phone and wish to ask a question, please press star one one. Next question is from Manav Gupta with UBS. Please go ahead.

Thank you. I would like to remind you that if you are on the phone and wish to ask a question, please press star one one.

Manav Gupta: Good morning. I wanted to ask a broader question. With the Strait of Hormuz, we don't exactly know the status of when it will open and whether it will be a perpetual block there or some kind of de-risking over there. Do you think there is a need for US refining system to pull a little harder from the Canadian upstream operations? I mean, we are seeing US utilizations of 97% right now, and globally, utilizations are much lower because they are unable to source that crude. What's making this happen is the crude coming down from Canada. I understand there are some political tensions right now between the two countries. Going ahead, do you see US refining system even more dependent on the Canadian crude, given what we are seeing in the geopolitical tensions out there?

Next question is from Manav Gupta with UBS. Please go ahead.

Good morning. I wanted to ask a broader question. Um, with the state of Hermos—and we don't exactly know the status of when it will open and whether it will be a perpetual block there, or some kind of de-risking over there—do you think there is a need for the US refining system to pull a little harder from the Canadian upstream operations? I mean, we are seeing US utilizations of 97% right now, and globally utilizations are much lower because they are unable to source that crude. And what's making this happen is the crude coming down from Canada, and I understand there are some political tensions right now between the two countries. But going ahead, do you see the US refining system even more dependent on the Canadian crude, given what we are seeing in the geopolitical tensions out there?

Jon McKenzie: I'm going to turn that question over to Jeff to answer.

Jeff Lawson: Manav, that's pretty broad. What I would say is that Canadian crude has a really natural home in the US, and it's been finding its way there. There's the pipelines, there's the physical constraints that are what they are. We see those pipelines running full, and that pull continues to be there. Prices have been really interesting in the US Gulf Coast. We've seen a high degree of variability as the Strait has impacted it. I mean, we all watch benchmarks in WTI and Brent. Something that's less observable is where the physical barrel price is. Where we see that is in the WCS differential at the Gulf. That has been really variable as of late. In the quarter, it was between -2 and -12. The reason I go to prices is that's the market telling us what the pull is.

You know, I'm going to turn that question over to Jeff to answer.

Jeff Lawson: When you see times of belief where there's more constraint in the Strait, you see prices get stronger, -2. When it seems to be that maybe tensions are easing, that comes off -12. That is just the market telling us what to do. Through all of those times, however, we have seen a very similar locational differential between Canada and the Gulf Coast. That just means there's been a steady, constant pull. I'd actually go to a different place to answer your question, which is more around the structural egress opportunities that continue to come to market, because that's going to be the governor on exactly how much Canadian crude goes to the south. We've seen a number of pipeline proposals come. A number of open seasons continue to be run.

But if it's that's pretty broad. Um, what I would say is that uh, the Canadian crew has a really natural home in the US and it's been finding its way there. Uh, there's the pipelines, there's a physical constraints that are what they are and we see those pipelines running full, and that pull continues to be there. Uh, prices have been really interesting uh, in the US Gulf Coast. We've seen a high degree of variability, uh as the strait is impacted it. I mean we all watch benchmarks and WTI and Brent something. That's less observable is the, uh, where the physical Barrel prices and, uh, where we see that is in the WCS, differential at the gulf, and that has been really variable, as of late in the quarter, it was between minus 2 and minus 12. The reason I go to prices is that's the market telling us what the pull is. And, uh, when you see times of, uh, belief where there's more constraint in the straight, you see prices get stronger.

Stronger minus 2, uh, when it seems to be that maybe tensions are easing, uh, that comes off minus 12. And, uh, that is just the market telling us what to do through all of those times. However, we have seen a very similar location differential between Canada and the U.S. and the Gulf Coast, and that just means—

There's been a steady constant, pull, I'd actually go to a different place to answer your question, which is more around the structural egress opportunities that continue to come to Market because that's going to be the governor on exactly how much Canadian crude goes. Goes to the South we've seen. Uh,

Jeff Lawson: That just is really what's telling me more about the interconnectivity between the two countries rather than purely something out of the Strait. I'm not sure if I dodged your question or answered it. I do think it has a lot more to do with physical interconnections. We continue to see that opportunity expand looking into the future.

Manav Gupta: Thank you, Farhan. My quick follow-up here is, I think last year you did a very good trip to Toledo Refinery and you laid out certain goals in terms of for the downstream business. We are seeing much stronger utilization. I'm just trying to understand from the point where you had set those goals for a further improvement in downstream, how are you tracking against your own goals, and where else could we see further improvement in your downstream business? Thank you.

A number of pipeline proposals, and a number of open seasons, continue to be run. And, uh, that really is what's telling me more about the interconnectivity between the two countries, rather than purely something out of the Strait. So I'm not sure if I dodged your question or answered it, but I do think it has a lot more to do with physical interconnections, and we continue to see that opportunity expand looking into the future.

[Company Representative] (Cenovus Energy): Yeah, thanks for the question. I think, as you said, the discussion we had last year at Toledo outlined where we saw the business moving to. I think we've made really, really good progress. Really proud of what the team has done. Safety performance is really strong. I think reliability has really started to improve, you're starting to see some of that optimization come through with a more reliable kit. I think we're just really starting to get into some really exciting opportunities as we look at some of the growth potential of the portfolio. Those are things like really getting after Great Lakes expansion in terms of moving products to different markets and out of PADD II, which is really seasonally congested.

Eric Zimpfer: Yeah, thanks for the question. I think, as you said, the discussion we had last year at Toledo outlined where we saw the business moving to. I think we've made really, really good progress. Really proud of what the team has done. Safety performance is really strong. I think reliability has really started to improve, you're starting to see some of that optimization come through with a more reliable kit. I think we're just really starting to get into some really exciting opportunities as we look at some of the growth potential of the portfolio. Those are things like really getting after Great Lakes expansion in terms of moving products to different markets and out of PADD II, which is really seasonally congested.

Well, thank you for that. My quick follow-up here is: I think last year you did a very good trip to Toledo Refinery and you laid out certain goals in terms of the downstream business. We are seeing a much stronger utilization. I'm just trying to understand, from the point where you had set those goals for further improvement in downstream, how are you tracking against your own goals and where else could we see further improvement in your downstream business? Thank you.

[Company Representative] (Cenovus Energy): We're looking at how do you further optimize the value chain. I'm talking both the heavy oil value chain as well as the Ohio Valley system. Getting the right crude blends into our refineries and really making sure that we're fully optimized on the upgrader. Looking at the Ohio Valley and figuring out where are there opportunities within our naphtha systems to really get after the right cuts and really monetize that system the way we can. Seeing just low capital constraint opportunities, constraint-busting opportunities really across the portfolio as we're identifying some of these reliability improvements. The team has done really, really well at placing more jet into the market. We're seeing strength in jet. How do we pull more jet? How do we place more jet into the market? How do we find new market opportunities for that jet fuel?

Eric Zimpfer: We're looking at how do you further optimize the value chain. I'm talking both the heavy oil value chain as well as the Ohio Valley system. Getting the right crude blends into our refineries and really making sure that we're fully optimized on the upgrader. Looking at the Ohio Valley and figuring out where are there opportunities within our naphtha systems to really get after the right cuts and really monetize that system the way we can. Seeing just low capital constraint opportunities, constraint-busting opportunities really across the portfolio as we're identifying some of these reliability improvements. The team has done really, really well at placing more jet into the market. We're seeing strength in jet. How do we pull more jet? How do we place more jet into the market? How do we find new market opportunities for that jet fuel?

[Company Representative] (Cenovus Energy): I can go on and on. I would say there's just a number of opportunities that once you start to unlock the reliability, it really unleashes what I believe is a really outstanding commercial team that has quite a bit of savviness that can find more and more opportunities to get additional CAD per barrel as we continue to take this kit forward.

Eric Zimpfer: I can go on and on. I would say there's just a number of opportunities that once you start to unlock the reliability, it really unleashes what I believe is a really outstanding commercial team that has quite a bit of savviness that can find more and more opportunities to get additional CAD per barrel as we continue to take this kit forward.

Valley uh system and so, you know, you know, getting the right crude Blends into our refineries and you know, really making sure that you know, we're fully optimized on the upgrader. Uh, looking at the Ohio Valley and figuring out, you know, where are their opportunities within our NAFTA systems, uh, to really get after the right cuts and and, and really monetize that system the way we can seeing, you know, just low Capital, uh, constraint opportunities, constraint, busing opportunities really across the portfolio. Is we're identifying some of these reliability improvements. The team is done, really, really, uh, well at at placing more jet into the markets that we're seeing strength and Jet. So how do we pull more jet? How do we place more jet into the market? How do we find New Market opportunities for that jet fuel? Uh, you know, I can go on and on, but I would say, there's just a number of opportunities that, you know, once you start to unlock the reliability, it it really unleashes. What, what I believe is a really outstanding commercial team that, uh, has quite a bit of savviness that can, uh, you know, find more and more opportunities to get additional dollars per barrel.

Manav Gupta: Thank you so much.

as we uh, as we continue to take this kit forward,

[Company Representative] (Cenovus Energy): Great. Thanks, Manav.

Eric Zimpfer: Great. Thanks, Manav.

thank you so much.

Operator: Thank you. I would now like to turn the meeting over to Mr. Jon McKenzie.

Great. Thanks manav.

Jon McKenzie: Great, thank you, operator. This concludes our conference call. I'd just like to thank everybody for joining us. We obviously appreciate your interest in the company. Thank you very much and have a great day.

Thank you. I would now like to turn the meeting over to Mr. Jonathan McKenzie.

Great. And thank you, operator. So this, this concludes our conference call. I just like to thank everybody for joining us. We obviously appreciate your interest in the company.

So thank you very much and have a great day.

Operator: Thank you. This concludes today's program. You may all disconnect. Thank you for participating in today's conference, and have a great day.

Thank you. This concludes today's program. You may all disconnect. Thank you for participating in today's conference, and have a great day.

Q2 2026 Cenovus Energy Inc Earnings Call

Request DemoDemo

Cenovus Energy

Earnings