Cenovus triples its dividend after profit soars sevenfold on high oil prices

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Cenovus Energy Inc. said Wednesday that it will triple its dividend after high crude prices helped the oil major post a sevenfold increase in profit.

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The Calgary-based company reported net earnings of $1.6 billion for the first quarter, a sevenfold increase from $220 million in the same period last year.

The company announced that its base dividend will increase from $0.14 per share to $0.42 per share annually, beginning in the second quarter of this year.

In addition to the dividend boost, the company announced it will target to return 50 per cent of quarterly excess free funds flow to shareholders when net debt is below $9 billion through a new share buyback plan.

“We have consistently delivered on our commitments to our shareholders,” said CEO Alex Pourbaix in a release Wednesday. “After rapidly deleveraging our balance sheet, we are now able to provide a much clearer picture of how we will position Cenovus for the longer term – as a leader in delivering total shareholder returns.”

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Russia’s invasion of Ukraine in February has exacerbated already tight global energy supplies, sending prices soaring to their highest levels in more than a decade. West Texas Intermediate was trading above US$100 per barrel on Wednesday.

Cenovus has become the country’s third-largest oil and gas producer since its acquisition of Husky Energy in 2021.

Upstream production rose to 798,600 barrels of oil equivalent per day (boepd) in the first quarter, from 769,254 boepd a year earlier.

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Long-term debt was $11.7 billion at the end of the first quarter of 2022, down by $640 million from the end of 2021. Net debt was $8.4 billion. The company said Wednesday that it has adopted an ultimate net debt target of $4 billion.

Cenovus announced earlier this month that it was suspending its practice of oil price hedging and estimated the cost of exiting its hedges at $1.38 billion over the first two quarters of 2022.

Hedging allows companies to lock in future prices for a portion of production, shielding them from downturns — but Cenovus’ “risk management” program also prevented the firm from fully benefiting from the upswing in energy prices. The Calgary-based company was alone among its peers in hedging oil production.

With additional reporting from Reuters