Publically Traded Companies - Cenovus Energy Inc.

Publically Traded Companies:

Cenovus Energy, Incorporated
Group Assignment
Memorial University

The oil and gas industry has become a major part of Canadian business, and has
contributed about $17 billion in government revenues, and more than 440,000 jobs across the

Publically Traded Companies - Cenovus Energy Inc.

2

country (CAPP, 2015). This major economic sector has drawn a lot of attention from within
Canada and around the world, inviting considerable public sector scrutiny. Because of its high
economic and environmental impact, it is particularly important that petroleum sector companies
demonstrate exceptional corporate responsibility. Cenovus Energy is one such company: a
major player in the Canadian petroleum industry. Reflecting its economic importance and
ecological impact, Cenovus demonstrates a high degree of corporate responsibility.
Cenovus Energy is a Canadian oil company formed in 2009. Although Cenovus Energy
became a company in 2009, their history goes back to 1883. This is when a railroad company
drilled into Albertas first natural gas discovery while looking for water. PanCanadian Energy
Corp. emerged from this discovery, who then merged with another oil company, Encana Corp.,
in 2002. In 2009, Encana Corp. split into two companies. Cenovus Energy took the oil business
and Encana took the gas business (Cenovus Energy Inc., 2016). This report looks at Cenovus
Energys internal organization and external environment, and evaluates based on its strengths,
weaknesses, opportunities and threats (SWOT).
According to their website, Cenovus purpose is to fuel world progress. Cenovus does
their best to minimize any impact they have on the environment while providing necessary
resources. They plan to develop not only their company, but the broader community, by taking
responsibility for the well-being of their employees, maintaining relationships with people who
may be affected by their work, and supporting economic development in Aboriginal
communities that are near their worksite. The Cenovus website allows access to their Corporate
Responsibility Report, which outlines their corporate policy, code of business conduct and ethics,
operations management, environmental impact and management policy, economic, community,

Publically Traded Companies - Cenovus Energy Inc.

3

and stakeholder engagement. They seem to be a proactive company that takes social
responsibility very seriously.
As part of their strategy, they make sure they have a strong, reliable board of directors to
be sure they keep their word to run a legal, ethical, and profitable business.They also have a
business code of ethics and conduct. The code includes whistleblower protection, conflict of
interest, complying to laws and regulations, fraud, confidentiality,and observation of the code of
ethics just to name a few. All employees of Cenovus are asked to read the code of ethics, let the
company know that they understand it, and follow the code of ethics in the workplace. Another
part of their strategy is to only do services with suppliers who have the same commitments and
outlook as Cenovus, to be sure that everything is done legally, responsibly, and safely.. They also
work with suppliers and choose suppliers by: Using the health and safety intelligence reporting
tool to store contractor safety information and score them based on their performance. The tool
uses financials, our internal health and safety contractor data, plus information thats been selfreported by contractors, focusing our work and efforts with key suppliers to identify initiatives
that benefit the entire company, and centralizing our buying to better leverage our operations
spend and sustainably manage costs (Cenovus, 2014). Overall, Cenovus mission and purpose
is trying to be the best company it can be while minimizing negative impacts on the
environment, being sure the work environment is safe, and being sure all work is done legally,
and ethically.
Cenovus corporate vision ensures a long-term success with a maximum shareholder
value. Moreover, the operational and production processes follow a commitment and
responsibility towards the development and production of oil and conventional gas in Alberta
and Saskatchewan.. Cenovus handles their companys mission very seriously with more than

Publically Traded Companies - Cenovus Energy Inc.

4

3,500 staff members for the operational activities, the company is committed towards the
deliverance of high-quality services. Whereas the company is involved in the production of high
energy resources for the world, they are also focused on the use of latest technology and
implementation of progressive thinking in order to minimize the impact on the environment. The
production processes of the company utilize the vast oil sands assets in northern Alberta. This
process requires the drilling of oil to the surface with specialized pumps and other equipment.
The produced energy is utilized by transportation services, as well as electricity generation and
home heating. Everyday items such as detergent, smartphones, and sports equipment are also
made through the use of these energy resources.
Cenovus follows a conventional hierarchy with a President and a Chief Executive Officer
(CEO) at the top and under the CEO there are eight Executive Vice-Presidents that handle the
different operational activities within eight different departments. These departments operate the
Oil Sands Development, Business Innovation, Upstream Oil & Gas, Safety & Organization
Effectiveness, Corporate Strategy & President, Downstream, Environment, Corporate Affairs,
Legal & General Counsel, Finance Department, and Oil Sands Manufacturing. Whereas, the
company board consists of twelve board members followed by one Chair of the Board and the
rest are the members. Moreover, with the adaptation of Board Diversity Policy on February 10,
2015, and the alliance with the Nominating and Corporate Governance (NCG), new Board
members can be identified, recommended and nominated. This allows the appointment of new
Board members with a sufficient range of skills, expertise, and experiences. This resource of
experienced, educated administrative staff ensures the company has access to a broad pool of
talents and insights, allowing them to maximize profitability while prioritizing other goals, like
legal compliance social responsibility, and the creation of a safe, competitive workplace.

Publically Traded Companies - Cenovus Energy Inc.

5

The marketing strategies of Cenovus are designed in a way which develops and maintains
a positive relationship with society at large, with particular emphasis placed on the communities
in which they operate. Their marketing strategies are quite effective in terms of the designing of
multiple advertisements that promotes the advanced technology they are using for the production
of oil and gas. The advertisements also depict the corporate social responsibility (CSR) that
Cenovus keeps in view while using machinery and equipment, emphasizing the reduction of
environmental impact through the management of environmental risks, and engagement with the
citizens who might get affected because of the operational activities. Cenovus marketing
strategies are notable also for their commitment to transparency, they are timely and respectful
in informing all interested parties including the broader population.
External environment is very important when maintaining a strong social and
environment reputation. It can have considerable effect on the company's overall standings in the
competitive market. If a strong external environment is not established a company is bound to
have poor reputation, hindering its success.. Cenovus Energy Inc. has a strong external
environment; their product and services are indispensable in the current economic and industrial
climate, they strive to maintain a proactive stance of social responsibility and are working to use
new technology to limit the amount of environmental destruction caused by operations.
Environmental awareness is extremely important for oil companies, considering the potential for
dramatic environmental impact . Cenovus recently stated that they are "planning a $32-million
project that aims to restore habitat for dwindling caribou population around its oilsands sites"
(CBC,2016). The company is proactive by developing plans to ensure minimal destruction to
animals habitats and to repair damage that has already occurred. Cenovus conducted research
that concluded that most Canadians are not proud of the oil sands and want to significantly

Publically Traded Companies - Cenovus Energy Inc.

6

reduce the use of oil in the new two decades. (The Globe and Mail, 2016). In May 2016, the
CEO of Cenovus spoke about the companies plan to limit or even diminish the amount of carbon
and greenhouse emissions into the air. Using phrases such as, "We will find solutions. I
absolutely believe that," to describe their confidence in their future (The Globe and Mail, 2016).
Technology can have a huge impact on how a company operates, internally and also in the
behavior of consumers. On their website, under their Technology tab, they have a section called
Cenovus Environmental Opportunity Fund, where they list companies they support who are
developing technologies to minimize environmental impact. The company has a positive outlook
when they say, "Many technologies we're working on or support may benefit not just Cenovus
and the energy industry but all Canadians." Cenovus are determined to meet social expectations
to the best of their abilities. Cenovus understands their responsibility to the environment and
strives to reduce the amount of pollution and destruction their company creates.
SWOT Analysis - Cenovus Energy Inc.

Strengths

Strong balance sheet ending Q1 of

Weaknesses
High transportation costs increase in

2016 with ~$8 billion in liquidity ($3.9

pipeline and U.S. Market sales tariffs.

billion in cash & equivalents) and net

(Cenovus, 2016).

debt to capitalization of 16% (Cenovus,

2016)
Resilient in the volatile price

Loss in employee morale. Based upon a

popular Company review site,
Glassdoor.com, Cenovus is ranked 2.0/5

environment able to reduce Q1 crude

by both current and past employees.

oil per-unit operating cost by 14% to

Cenovus has ranked the lowest overall

$11.08 per barrel (bbl) compared with

against their industry peers.

Q1 2015. This was done by reducing

(Glassdoor.ca, 2016)

capital spending and operating cost.

Multiple levels of management with an

Publically Traded Companies - Cenovus Energy Inc.

7

(Cenovus, 2016)

undefined functional model.

Leader in Corporate Social

Employees feel there is a lack of

Responsibility. Ranked in the 2015 Top

direction from the Executive Team, as

50 Socially Responsible Corporations in

expressed on Glassdoor.ca.

Canada by MacLeans Magazine. Only

Canadian Oil and Gas producer to make
the top 10 in that list. (MacLeans,
2015)
Opportunities
Access to new markets. Co-owner of

Threats
Low crude oil and natural gas sales

two refineries with Phillips 66 in the

prices prompted a decline throughout the

U.S. This allows Cenovus access to the

Oil & Gas industry. This contributed to a

refinery aspect of downstream

74% decrease in operating cash flow

production.

from Q1 2015. (Cenovus, 2016)

Global Oil Consumption is continuing

Cenovus continued to hold investment

to grow. The EIA is predicting an

grade credit ratings from 2/3 agencies

increase to 96.78 barrels per day in 2017

that rate the company. Q1 2016 Moody

from 93.85 barrels per day in 2015.

downgraded Cenovus to a Ba2,

(EIA, 2016)

prompted by the agencies long-term

New acquisitions - i.e.: Acquisition of

Bruderheim Energy Terminal. This

outlook for oil prices. (Cenovus, 2016)

Lack of available pipelines. Cenovus

allows Cenovus additional

supports the proposed Energy East as

transportation avenues for shipping

well as the proposed pipeline to the West

product. (Cenovus, 2016) Volatile

Coast, which would total ~ 375,000

markets creates opportunities for

barrels of oil shipped per day (Cenovus,

mergers and acquisitions of smaller

2016). These projects are under scrutiny

companies or oil & gas fields.

based upon environmental concerns.

Publically Traded Companies - Cenovus Energy Inc.

8

The energy sector, in particular Oil & Gas, has remained a controversial topic in both the
Canadian and global economies over the past number of years. However, with that being said,
there is still an undeniable demand for oil and its byproducts. Cenovus has proven to be an
industry leader by maintaining profitability as a low cost producer in a struggling global
market, all while striving to ensure that these demands are met in a socially responsible fashion.
Even in a time where the industry as a whole is facing uncertain economic futures, Cenovus
upholds its promise as a company to create value by responsibly providing energy the world
wants (Cenovus, 2016) by ensuring a continued commitment to safety, innovation, and
community engagement.

Bibliography
Cenovus (2014). Corporate Responsibility Report : Our Approach to Corporate Responsibility.
Cenovus Energy Inc. Retrieved on July 25, 2016 from http://www.cenovus.com/reports/2014/
Cenovus (2014). Corporate Responsibility Report: Improving The Way We Do Business With
Our Supply Chain. Cenovus Energy Inc Retrieved on July 25, 2016 from.
http://www.cenovus.com/reports/2014/economy.html#sec-improving
Who we are. (n.d.). Retrieved July 23, 2016, from http://www.cenovus.com/about/who-weare.html
2015 Annual Report (Rep.). (2016). Retrieved July 14, 2016, from Cenovus Energy website:
http://www.cenovus.com/invest/docs/2015-annual-report/annual-report-2015.pdf

Publically Traded Companies - Cenovus Energy Inc.

9

Working at Cenovus. (n.d.). Retrieved July 14, 2016, from

https://www.glassdoor.ca/Overview/Working-at-Cenovus-EI_IE354451.11,18.htm
U.S. Energy Information Administration - EIA - Independent Statistics and Analysis. (n.d.).
Retrieved July 14, 2016, from http://www.eia.gov/analysis/
Cenovus Recognized As A Leader In Corporate Responsibility. (2015, June 08). The Globe and
Mail. Retrieved July 14, 2016, from http://www.theglobeandmail.com/globe-investor/newssources/?mid=cnw.20150608.C7293
Oil sands can play role in low-carbon future: Cenovus CEO. (May 26, 2016). The Globe and
Mail. Retrieved on July 18, 2016 from http://www.theglobeandmail.com/report-onbusiness/industry-news/energy-and-resources/oil-sands-can-play-role-in-low-carbon-futurecenovus-ceo/article30192566/
Cenovus to spend $32M to restore caribou habitat at oilsands sites. (June 14, 2016). CBC News
Calgary. Retrieved on July 18, 2016 from http://www.cbc.ca/news/canada/calgary/cenovuscaribou-32m-replanting-forests-seismic-1.3634134
The Canadian oil and natural gas industry provides economic benefits to all Canadians. Canadian
Association of Petroleum Producers. Retrieved on July 25, 2016 from
http://www.capp.ca/canadian-oil-and-natural-gas/canadian-economic-contribution)