Cenovus Energy (NYSE: CVE) reported Q1 EPS of $0.09, $0.11 better than the analyst estimate of ($0.02).

“These results emphasize the true potential of our company,” said Alex Pourbaix, Cenovus President & Chief Executive Officer. “All of the positive momentum we’ve been building over the past few years through focusing on safe and reliable operations, deleveraging our balance sheet, maintaining capital discipline and firmly establishing our position as an in-situ cost leader is translating into strong cash flow generation and shareholder value. At current commodity price levels, I’m optimistic we will generate material free funds flow over the remainder of the year.”

“It should now be crystal clear that the government’s temporary curtailment program is doing what it was intended to do and has had an immediate, positive impact not only for our industry, but for all Albertans, in the form of improved royalty revenue,” said Pourbaix. “To put it in context, when price differentials reached record highs in the fourth quarter of 2018 due to a lack of takeaway capacity, our company was in a royalty credit position with the provincial government. Over the last three months, we paid nearly $200 million, and we only account for about 10% of Alberta’s total oil production. This has been a big win for Alberta.”

Guidance

The significant improvement in WCS pricing resulting from the government’s mandatory curtailment program more than offset the impact of reduced oil production and increased oil sands operating costs during the first quarter.

Based on production levels and operating costs experienced during the quarter, Cenovus has adjusted its 2019 Guidance to reflect the anticipated impact of curtailment across the full year. The company now expects total oil sands production to average between 350,000 bbls/d and 370,000 bbls/d in 2019, a 7% reduction at the midpoint of the range compared with the company’s December 10, 2018 Guidance. Cenovus has increased its guidance for the fuel portion of its per-barrel oil sands operating costs to reflect its decision to maintain normal steam levels while reducing production volumes. Fuel costs are now expected to range between $1.75/bbl and $2.25/bbl in 2019 at both Foster Creek and Christina Lake, compared with $1.50/bbl to $2.00/bbl in the December 10, 2018 Guidance. The company expects operating costs to return to more normalized levels once mandatory curtailment has been lifted. Cenovus’s guidance for 2019 capital investment remains unchanged.

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