A Brief Description of Cenovus Energy, its history, business Operations & Oil Sands mining.

1. By:
Abhijit_BISWAS
Tieto India Private Limited

2. CENOVUS: BRIEF OVERVIEW & TIMELINE
 Resumed independent operations from december1, 2009, but company’s assets &
expertise in Oil & Gas dates back over 100 years.
Pan Energy corporation Alberta Energy Corporation
(Est: 1883) (Est: 1970’s)
(Merger) ENCANA
(Est: 2002)
(Split) Cenovus Encana
(Est: 2009,oil company) (Est: 2009,natural gas)

3. Cenovus (Business Area)
Oil Sands Conventional NG/Crude oil
Refinery
Northern Alberta Alberta & Saskatchewan 50% ownership
in 2 refineries
wood river(Illinois,US)
Borger (Texas,US)
Combined capacity :
4,60,000 bbl/day
Heavy crude pro. Capacity :
2,55,000 bbl/day
Note: Phillips 66 is the other company in the 50-50 joint venture in the refinery business

4. CENOVUS: OPERATIONS
1. Oil Sands:
 More than two decades of Oil sands drilling
 Ongoing projects: (a) Foster Creek
(b) Christina Lake
 Upcoming projects: (a) Narrow Lake
(In collaboration with (b) Telephone lake
Conocco Phillips ) (c) Grand Rapids

5. 2. MINING OF OIL SANDS

6. 3. SAGD (DRILLING OF OIL SANDS; STEAM ASSISTED
GRAVITY DRAINAGES)

7. 4. CONVENTIONAL OIL & GAS RESOURCES:
 60 years in conventional oil & gas
 2015 : 66,000 barrels of oil per day from all conventional resources
: 440 million cubic meter per day of natural gas
5. Transport & Marketing of oil
Oil Large industrial customers
Wholesaler
Distributers
Refineries
Note: Around 80 % of the oil transportations takes place using company owned pipelines,
though shipments & tankers are also used which is generally a third party

8. WHY CANADIAN OIL SANDS MATTER SO MUCH ?
 Canada : 3rd largest proven oil reserves (next to only Saudi and Venezuela).
 97% of which is Oil sands, equivalent to 10.5% of world oil reserves, 80 trillion dollars of oil.
 1.9 millions of barrels of oil per day (2012), estimated production 3 million barrels per day by
2018, thus bridging the supply demand gap in the world energy sector.
 Generation of billions of dollars of taxes for Canadian government, which can be utilized in
road, infrastructure, schools & hospitals
 Addition of $2 trillion in Canadian economy
 Oil sands employed 2,90,000 people; number expected to grow to 4,50,000 by 2038.
Note 1: Total proven reserves 178 billion barrels, out of which 173 billion barrels belongs to oil
sands.
Note 2: Half of the total oil Canadian oil production goes to the U.S, supporting U.S economy as
well.

9. CENOVUS: OIL SANDS CHALLENGES
 Extreme temperature swings; summers are very hot & winters are very cold; which leads to equipment
failures.
 Huge investments required; 19 billion dollars of investment is required each year for the next 6 years.
 High expertise; mining of oil sands requires monstrous ploughing rigs and some of the biggest trucks to
carry the oil sands & some of the complex machineries in SAGD processes
 Environmental issues: Removal of hundreds of hectares of forest for the mining purpose
Huge amount of dust release during the process of mining
Tailings- mixer of sand clay & water , which is left after the oil is
extracted, seepage in to ground water; contaminating land/water
 Business Rivalry: Trans Canada
Sync Crude

10. CENOVUS: OIL SANDS DISADVANTAGES
 3 times more air pollution as compared to conventional oil/gas production.
 600 million cubic feet of gas will be used every to tap the potential of oil sands beneath the earth
surface. Methane is a green house gas ad will contribute massively to global warming.
 10 times more costly than conventional resources.
 2 tones of oil sands produce just one barrel of oil.
 Everyday removal of 4,35,000 tones of offset of sands.
 Tailing ponds affects the natural flora and fauna of the environment. Strict penalties which
environmental rules and norms are violated. Companies in the past have been penalized heavily wen
found non-compliance with the environmental norms.
Note: If the exploitation of oil sands takes place with the same pace, it is estimated that toxic river block
(tailings) will form of the size of New York City, 11 feet deep.

11. CENOVUS: FINANCIAL ASPECTS AND TERMINOLOGIES
 Revenue: Gross income generated by the company by selling its products. ( Total Quantity *
price)
 Royalty: A kind of rent paid to the govt. (or owner) for carrying out the E & P activities in their
land.
 Operating Expenses: Includes COGS, labor transport etc.
 Depreciation: Reduce in the value of the tangible assets.
 Amortization: Reduce in the value of the intangible assets like goodwill, brand image etc.
 Interest: Interest paid to the banks and long term debts.
 Taxes: Part of income taxes, paid to the government
 NET PROFIT/MARGIN : Revenue- Royalty-Operating Expenses-amortization-depreciation-
interest-taxes
 Profit margin = Net profit/ revenue * 100
 Assets: Any tangible intangible economic resource (Fixed & Current asset)
 Debt: Loan that a company owes in the form of debenture or to the banks.

12. CENOVUS: FINANCIAL STATUS AT A GLANCE
INCOME STATEMENT & BALANCE SHEET (LAST 5 YEARS; FIG IN MILLION
CAD)

13. INCOME STATEMENT & BALANCE SHEET (LAST 5 QUARTERS; FIG IN
MILLION CAD)

14. FINDINGS FROM ASSESSMENT OF BALANCE SHEETS AND INCOME
STATEMENT:
YEAR 2016, QUARTER 1
 Current ratio (current asset/ current liabilities) = 3.25 (Ideally should be 2)
Implication: A high current ratio indicates idle funds , piled up stocks, locked amount in debtors
 Debt Equity ratio= 0.51 ( Ideally Less than 1 in oil industry)
Implication: A low debt equity ratio reflects more security to long term creditors
 Total asset to Debt ratio=4.01 (Ideally should be around 3)
Implication: The higher ratio indicated that assets have been mainly financed by owners’ funds , and the
long- tem debt is adequately covered by assets.
 Fixed asset turnover ratio= sales/fixed asset= 0.122 (Ideally higher value is desirable)
Implication: A high ratio indicates more efficient utilization of fixed assets.
 Net profit margin= -5.2 % (minus sign indicates loss)
 Earning per share = -0.14 CAD (minus sign indicates loss)
 Cenovus DID NOT paid any royalty this quarter in the oil sands.