Cenovus stock soars after surprise earnings beat one day after layoffs

What’s the difference between ‘discipline and dogma?’

At Cenovus Energy, it depends whether you’re a shareholder or an employee.

That’s because shares of the embattled company surged more than 10% Thursday after the oil sands heavyweight posted stronger-than-expected first-quarter earnings — just 24 hours after slashing an undisclosed number of jobs across its operations.

Cenovus is a successor company to Encana, which in turn was the successor to PanCanadian and Alberta Energy Company (AEC) in a corporate lineage that traces back to the Canadian Pacific Railroad (CPR) and holds millions of acres of mineral titles that pre-date Alberta itself.

While overall profit was lower than the same period last year, the Calgary-based company exceeded analyst forecasts by generating $1.3 billion from operations, or $2.2 billion in adjusted cash flow, along with a hefty $983 million in free funds — not to mention $859 million in net earnings compared to just $146 million in the prior quarter.

The upbeat financials prompted Cenovus’s board to approve an 11% increase to its base dividend, now set at 80 cents per share per year.

Operating performance was also robust. Upstream production climbed to 818,900 barrels of oil equivalent per day (BOE/d), maintaining near-record output, while downstream (refining) throughput hit 665,400 bpd, for an overall utilization rate of 92%. Canadian refining utilization even reached a record 104%.

The company returned $595 million to shareholders during the quarter through share buybacks, dividends, and preferred share redemptions. That includes repurchasing 10.9 million of its own shares worth $178 million between April 1 and May 5.

“Discipline — not dogma — is what’s driving our results,” said CEO Jon McKenzie during the earnings call, underscoring the company’s focus on shareholder returns amid continued market volatility.

Cenovus’ shares, after falling nearly 30% since the start of the year, shot up nearly 10% in New York and Toronto even as its annual meeting was being held in Calgary.

But the timing of the windfall is raising eyebrows. 

Just one day earlier, Cenovus confirmed layoffs, saying that “a number of employees and contractors” had been let go as part of a structural review. At least 50 people were cut from a single Alberta site, prompting a mandatory provincial disclosure.

Critics argue the optics of increasing dividends while slashing jobs highlight a deeper tension in Alberta’s energy economy. 

Though Cenovus is a major player in the province’s oil sands and one of Calgary’s largest employers, the bulk of its shareholder base resides outside Alberta, particularly in New York and Toronto.

“Dividends may thrill Bay Street, but they don’t pay rent in Fort McMurray,” said one industry analyst. “Alberta communities are still waiting for the kind of reinvestment that matches the billions being extracted from the region.”

This disparity has fuelled growing frustration among Albertans over federal energy policy and corporate priorities — resentments that are increasingly manifesting in sovereigntist rumblings. 

With Alberta preparing a referendum on provincial autonomy reminiscent of Quebec’s past separation votes, and Ottawa’s environmental regulations seen as hostile to the oil patch, Cenovus’s results land in a politically charged climate.

Whether Thursday’s market rally reflects a true turnaround or just a reprieve remains to be seen. But as Cenovus celebrates its latest quarter on Wall Street, the pressure is mounting back home to ensure Alberta shares in the success.