Canada-based Cenovus Energy Inc. outlined a five-year plan Oct. 2 to generate C$11 billion in cumulative free funds flow through 2024 and funnel more cash to shareholders.
As part of the announcement, the oil sands producer cut its 2019 capital budget and increased its fourth-quarter dividend.
The latest plan contemplates annual production growth of 2% to 3% to reach roughly 550,000 barrels of oil equivalent per day by the end of 2024 and assumes West Texas Intermediate crude oil prices will average between US$57 and US$60 per barrel.
Subject to improved market access, Cenovus said the plan may allow for $9 billion in remaining free funds flow to fund share repurchases, dividend increases, debt reduction and "disciplined investments," after the company achieves its C$5 billion net debt target, which it believes that it can achieve over the next 12 to 18 months at midcycle commodity prices.
"Share repurchases would be considered when Cenovus's shares are trading below intrinsic value at mid-cycle commodity prices," the company said. "Potential share repurchases could include the option to participate in a monetization of Cenovus shares currently owned by ConocoPhillips."
ConocoPhillips owns 16.93% of Cenovus.
Cenovus lowered its 2019 capital budget to between C$1.1 billion and C$1.2 billion, down by C$150 million from the midpoint of the company's April capital expenditure guidance, and boosted its fourth-quarter dividend by 25% to C$0.0625 per share. That dividend is payable Dec. 31 to shareholders of record as of Dec. 13.
Cenovus said it may have the capacity to grow its dividend between 5% and 10% annually at West Texas Intermediate crude oil prices of at least US$45/bbl.
