S&P adjusts Cenovus Energy outlook to stable due to debt reduction

Investing.com - S&P Global Ratings has adjusted the outlook for Cenovus Energy (NYSE:CVE) from negative to stable, while confirming its BBB credit rating, citing improvements in the company’s financial metrics and progress on growth projects. The rating agency stated today that it expects the company’s operating funds to debt ratio to reach 70%-80% over the next two years.

Cenovus has launched three of its five key growth projects and continues to advance the remaining two, one of which is on the recently acquired MEG Energy assets. The company anticipates adding 150,000 barrels per day of production by the end of 2028, representing a 15%-20% increase over the average production levels of 2024. Starting in 2027, total production before royalties is expected to exceed 1 million barrels of oil equivalent per day.

The company sold its 50% non-operating interest in the Wood River and Borger refineries for CAD 1.9 billion in mid-2025, with proceeds used to reduce net debt and fund share buybacks. Refinery utilization rates improved last year, exceeding 100% for Canadian assets and reaching about 95% for U.S. refineries. S&P Global Ratings expects future utilization rates to stay within the 90%-95% range.

Cenovus completed its cash and stock acquisition of MEG Energy valued at CAD 8.4 billion in November 2025, reporting net debt of CAD 8.3 billion by year-end. The company has reduced the share buyback allocation to 50% of excess free cash flow until net debt reaches CAD 6 billion, then plans to allocate 75% until net debt reaches its long-term target of CAD 4 billion. S&P Global Ratings expects the company to reach a net debt level of CAD 6 billion by the end of 2027 or early 2028.

As projects are completed, growth capital expenditures are expected to decrease by CAD 300 million year-over-year in 2026. The five growth projects include Narrows Lake Reconnect, Foster Creek Optimization, Sunrise Optimization, Christina Lake North Expansion, and West White Rose, with first production dates ranging from 2025 to mid-2026 and full production expected by 2028.

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