Fitch Ratings has assigned a ’BBB’ ratingto CenovusEnergy Inc.’s proposed senior unsecured notes, which will be issued in bothCanadian and U.S. dollars.
The proceeds will be used to pay off MEG’s $600million 5.875% 2029 notes, refinance various legacy Cenovus notes, and fund
general corporate purposes.
Cenovus completed its CA$8.5 billionacquisition of MEGEnergy on November 13, adding approximately 110,000 barrels of oilequivalent per day (boepd) of high-netback oil sands production from the
adjacent Christina Lake area. This acquisition boosts Cenovus’s totaloutput to over 900,000 boepd and provides a clear path to exceeding 1 million
boepd in the coming years as organic growth projects come online.
The MEG acquisition adds around 1.2 billionbarrels of oil equivalent in proved reserves and is expected to generate
long-term run-rate synergies of approximately CA$400 million annually. About
CA$120 million of these synergies are projected to be achievable in the first
year, excluding tax benefits.
While the transaction increases Cenovus’sgross debt by around CA$3.8 billion, Fitch views these higher debt levels as
manageable given the company’s pre-existing rating headroom (2024 leverage
around 0.8x), strong visibility on debt repayment, and benefits from higher
production volumes.
Cenovus is advancing 150,000 boepd inorganic expansion projects, primarily low-cost brownfield Oil Sands expansions.
These include Foster Creek (30,000 boepd), Narrows Lake tieback (20,000-30,000
boepd), and Sunrise (15,000-20,000 boepd). Additional expansions include
conventional heavy oil (20,000 boepd) and West White Rose in Atlantic Canada
(45,000 boepd), with first oil expected in 2026.
The company’s third-quarter 2025 productionreached a record 832,900 boepd. Its downstream segment reported an operating
margin gain of CA$364 million in Q3 2025, a significant improvement from the
CA$323 million operating margin loss in Q3 2024. This turnaround was attributed
to decent crack spreads, a lighter planned maintenance schedule, and cost
improvements.
After the third quarter closed, Cenovussold its 50% interest in WRB refining for proceeds of CA$1.8 billion. Fitch
expects Cenovus’s exposure to Western Canada Select pricing will increase over
the next few years due to uncovered MEG volumes, organic growth, and the
effects of the WRB refining assets sale.