Description of Business and Segmented Disclosures

9 Months Ended

Sep. 30, 2021

Disclosure Of Reportable Segments [Abstract]

DESCRIPTION OF BUSINESS AND SEGMENTED DISCLOSURES


1. DESCRIPTION OF BUSINESS AND SEGMENTED DISCLOSURES

Upstream Segments

•Oil Sands, includes the development and production of bitumen and heavy oil in northern Alberta and Saskatchewan. Cenovus’s oil sands assets include Foster Creek, Christina Lake, Sunrise (jointly owned with BP Canada Energy Group ULC (“BP Canada”) and operated by Cenovus) and Tucker oil sands projects, as well as Lloydminster Thermal and Cold and Enhanced Oil Recovery assets. Cenovus jointly owns and operates pipeline gathering systems and terminals through the equity-accounted investment in Husky Midstream Limited Partnership (“HMLP”). The sale and transportation of Cenovus’s production and third-party commodity trading volumes are managed and marketed through access to capacity on third-party pipelines and storage facilities in both Canada and the U.S. to optimize product mix, delivery points, transportation commitments and customer diversification.

•Conventional, includes assets rich in natural gas liquids (“NGLs”) and natural gas within the Elmworth-Wapiti, Kaybob‑Edson, Clearwater and Rainbow Lake operating areas in Alberta and British Columbia and interests in numerous natural gas processing facilities. Cenovus’s NGLs and natural gas production is marketed and transported with other third-party commodity trading volumes through access to capacity on third-party pipelines, export terminals and storage facilities which provides flexibility for market access to optimize product mix, delivery points, transportation commitments and customer diversification.

•Offshore, includes offshore operations, exploration and development activities in China and the east coast of Canada, as well as the equity-accounted investment in the Husky-CNOOC Madura Ltd. (“HCML”) joint venture in Indonesia.

Downstream Segments

•Canadian Manufacturing, includes the owned and operated Lloydminster upgrading and asphalt refining complex which upgrades heavy oil into synthetic crude oil, diesel fuel, asphalt and other ancillary products. Cenovus seeks to maximize the value per barrel from its heavy oil production through its integrated network of assets. In addition, Cenovus owns and operates the Bruderheim crude-by-rail terminal and two ethanol plants. Cenovus also markets its production and third-party commodity trading volumes of synthetic crude oil, asphalt and ancillary products.

•U.S. Manufacturing, includes the refining of crude oil to produce diesel fuel, gasoline, jet fuel, asphalt and other products at the wholly-owned Lima Refinery and Superior Refinery, the Wood River and Borger refineries (jointly owned with operator Phillips 66) and the Toledo Refinery (jointly owned with operator BP Products North America Inc. (“BP”)). Cenovus also markets its own and third-party volumes of refined petroleum products including gasoline, diesel and jet fuel.

•Retail, includes the marketing of its own and third-party volumes of refined petroleum products, including gasoline and diesel, through retail, commercial and bulk petroleum outlets, as well as wholesale channels in Canada.

Corporate and Eliminations, primarily includes Cenovus-wide costs for general and administrative, financing activities, gains and losses on risk management for corporate related derivative instruments and foreign exchange. Eliminations include adjustments for internal usage of natural gas production between segments, transloading services provided to the Oil Sands segment by the Company’s crude-by-rail terminal and crude oil production used as feedstock by the Canadian Manufacturing and U.S. Manufacturing segments. Eliminations are recorded at transfer prices based on current market prices.

To conform to the presentation adopted for the current period’s operating segments, the following comparatives prior to January 1, 2021, have been reclassified:

•The Company’s market optimization activities, previously reported in the Refining and Marketing segment, have been reclassified to the Oil Sands and Conventional segments.

•The Bruderheim crude-by-rail terminal results, previously reported under the Refining and Marketing segment, have been reclassified to the Canadian Manufacturing segment.

•The refining activities in the U.S. with operator Phillips 66, previously reported in the Refining and Marketing segment, have been reclassified to the U.S. Manufacturing segment.

•The Company’s unrealized gain and loss on risk management, previously reported in the Corporate and Eliminations segment, have been reclassified to the reportable segment to which the derivative instrument relates.

The following tabular financial information presents the segmented information first by segment, then by product and geographic location. Prior year comparatives have been re-presented (see Note 31).

A) Results of Operations – Segment and Operational Information

i) Results for the Three Months Ended September 30


	Upstream
	Oil Sands				Conventional				Offshore
For the three months ended September 30,	2021		2020		2021		2020		2021		2020
Revenues
Gross Sales		6,114		2,436		833		232		404		—
Less: Royalties (1)		669		129		40		24		24		—
		5,445		2,307		793		208		380		—
Expenses
Purchased Product (1)		822		235		445		76		—		—
Transportation and Blending (1)		1,918		1,015		20		21		3		—
Operating (1)		616		286		135		81		49		—
Realized (Gain) Loss on Risk Management		166		137		2		—		—		—
Operating Margin		1,923		634		191		30		328		—
Unrealized (Gain) Loss on Risk Management		(39)		(135)		9		—		—		—
Depreciation, Depletion and Amortization		743		470		99		75		127		—
Exploration Expense		2		—		—		25		3		—
(Income) Loss From Equity-Accounted Affiliates		—		—		—		—		(12)		—
Segment Income (Loss)		1,217		299		83		(70)		210		—

(1)Inventory write-downs prior to January 1, 2021, have been recl


	Downstream
	Canadian Manufacturing				U.S. Manufacturing				Retail
For the three months ended September 30,	2021		2020		2021		2020		2021		2020
Revenues
Gross Sales		1,215		15		5,723		1,237		592		—
Less: Royalties (1)		—		—		—		—		—		—
		1,215		15		5,723		1,237		592		—
Expenses												—
Purchased Product (1)		986		—		5,171		1,133		551		—
Transportation and Blending (1)		—		—		—		—		—		—
Operating (1)		99		8		413		179		25		—
Realized (Gain) Loss on Risk Management		—		—		17		2		—		—
Operating Margin		130		7		122		(77)		16		—
Unrealized (Gain) Loss on Risk Management		—		—		5		(3)		—		—
Depreciation, Depletion and Amortization		41		2		103		518		11		—
Exploration Expense		—		—		—		—		—		—
(Income) Loss From Equity-Accounted Affiliates		—		—		—		—		—		—
Segment Income (Loss)		89		5		14		(592)		5		—


	Corporate and Eliminations				Consolidated
For the three months ended September 30,	2021		2020		2021		2020
Revenues
Gross Sales		(1,450)		(108)		13,431		3,812
Less: Royalties (1)		—		—		733		153
		(1,450)		(108)		12,698		3,659
Expenses
Purchased Product (1)		(1,244)		(36)		6,731		1,408
Transportation and Blending (1)		(18)		(3)		1,923		1,033
Operating (1)		(187)		(73)		1,150		481
Realized (Gain) Loss on Risk Management		(1)		(1)		184		138
Unrealized (Gain) Loss on Risk Management		(2)		3		(27)		(135)
Depreciation, Depletion and Amortization		29		27		1,153		1,092
Exploration Expense		—		—		5		25
(Income) Loss From Equity-Accounted Affiliates		(1)		—		(13)		—
Segment Income (Loss)		(26)		(25)		1,592		(383)
General and Administrative		158		51		158		51
Finance Costs		360		145		360		145
Interest Income		(4)		(2)		(4)		(2)
Integration Costs		45		—		45		—
Foreign Exchange (Gain) Loss, Net		196		(159)		196		(159)
Re-measurement of Contingent Payment		135		(31)		135		(31)
(Gain) Loss on Divestiture of Assets		(25)		(1)		(25)		(1)
Other (Income) Loss, Net		(107)		(14)		(107)		(14)
		758		(11)		758		(11)
Earnings (Loss) Before Income Tax						834		(372)
Income Tax Expense (Recovery)						283		(178)
Net Earnings (Loss)						551		(194)

(1)Inventory write-downs prior to January 1, 2021, have been reclassified to royalties, purchased product, transportation and blending or operating expenses to conform with the current presentation of inventory write-downs.

ii) Results for the Nine Months Ended September 30


	Upstream
	Oil Sands				Conventional				Offshore
For the nine months ended September 30,	2021		2020		2021		2020		2021		2020
Revenues
Gross Sales		15,904		6,117		2,235		636		1,262		—
Less: Royalties (1)		1,462		200		103		28		74		—
		14,442		5,917		2,132		608		1,188		—
Expenses
Purchased Product (1)		2,114		806		1,113		184		—		—
Transportation and Blending (1)		5,476		3,552		57		63		10		—
Operating (1)		1,793		839		417		248		166		—
Realized (Gain) Loss on Risk Management		584		228		2		—		—		—
Operating Margin		4,475		492		543		113		1,012		—
Unrealized (Gain) Loss on Risk Management		194		8		10		—		—		—
Depreciation, Depletion and Amortization		1,982		1,276		309		563		369		—
Exploration Expense		15		7		(3)		25		3		—
(Income) Loss From Equity-Accounted Affiliates		(5)		—		—		—		(36)		—
Segment Income (Loss)		2,289		(799)		227		(475)		676		—


	Downstream
	Canadian Manufacturing				U.S. Manufacturing				Retail
For the nine months ended September 30,	2021		2020		2021		2020		2021		2020
Revenues
Gross Sales		3,109		58		13,889		3,633		1,540		—
Less: Royalties (1)		—		—		—		—		—		—
		3,109		58		13,889		3,633		1,540		—
Expenses												—
Purchased Product (1)		2,424		—		12,320		3,413		1,434		—
Transportation and Blending (1)		—		—		—		—		—		—
Operating (1)		284		29		1,212		564		73		—
Realized (Gain) Loss on Risk Management		—		—		48		(6)		—		—
Operating Margin		401		29		309		(338)		33		—
Unrealized (Gain) Loss on Risk Management		—		—		38		(1)		—		—
Depreciation, Depletion and Amortization		127		6		320		666		36		—
Exploration Expense		—		—		—		—		—		—
(Income) Loss From Equity-Accounted Affiliates		—		—		—		—		—		—
Segment Income (Loss)		274		23		(49)		(1,003)		(3)		—


	Corporate and Eliminations				Consolidated
For the nine months ended September 30,	2021		2020		2021		2020
Revenues
Gross Sales		(3,875)		(422)		34,064		10,022
Less: Royalties (1)		—		—		1,639		228
		(3,875)		(422)		32,425		9,794
Expenses
Purchased Product (1)		(3,327)		(196)		16,078		4,207
Transportation and Blending (1)		(39)		(24)		5,504		3,591
Operating (1)		(517)		(210)		3,428		1,470
Realized (Gain) Loss on Risk Management		91		4		725		226
Unrealized (Gain) Loss on Risk Management		(16)		—		226		7
Depreciation, Depletion and Amortization		91		104		3,234		2,615
Exploration Expense		—		—		15		32
(Income) Loss From Equity-Accounted Affiliates		1		—		(40)		—
Segment Income (Loss)		(159)		(100)		3,255		(2,354)
General and Administrative		491		124		491		124
Finance Costs		836		391		836		391
Interest Income		(11)		(4)		(11)		(4)
Integration Costs		302		—		302		—
Foreign Exchange (Gain) Loss, Net		(93)		168		(93)		168
Re-measurement of Contingent Payment		571		(97)		571		(97)
(Gain) Loss on Divestiture of Assets		(97)		—		(97)		—
Other (Income) Loss, Net		(208)		(52)		(208)		(52)
		1,791		530		1,791		530
Earnings (Loss) Before Income Tax						1,464		(2,884)
Income Tax Expense (Recovery)						469		(658)
Net Earnings (Loss)						995		(2,226)

B) Revenues by Product (1)


	Three Months Ended			Nine Months Ended
For the periods ended September 30,		2021	2020		2021	2020
Upstream
Crude Oil		5,140	2,333		13,368	5,971
NGLs		754	152		1,921	242
Natural Gas		625	17		2,125	270
Other		99	12		348	41
Downstream
Canadian Manufacturing
Synthetic Crude Oil		492	—		1,289	—
Diesel and Distillate		107	—		283	—
Asphalt		177	—		358	—
Other Products and Services		439	15		1,179	58
U.S. Manufacturing
Gasoline		2,942	642		7,245	1,782
Diesel and Distillate		1,719	347		4,497	1,211
Other Products		1,062	249		2,147	641
Retail		592	—		1,540	—
Corporate and Eliminations		(1,450)	(108)		(3,875)	(422)
Consolidated		12,698	3,659		32,425	9,794

(1) Prior period results of the Company’s market optimization activities have been reclassified to revenues, by product, in the Upstream segment.

C) Geographical Information


	Revenues
	Three Months Ended		Nine Months Ended
For the periods ended September 30,	2021	2020		2021	2020
Canada	6,243	2,418		16,774	6,082
United States	6,139	1,241		14,740	3,712
China	316	—		911	—
Consolidated	12,698	3,659		32,425	9,794



	Non-Current Assets (1)
As at	September 30, 2021		December 31, 2020
Canada		34,506		26,041
United States		6,433		3,590
China		2,602		—
Indonesia		404		—
Consolidated		43,945		29,631

(1)Includes exploration and evaluation (“E&E”) assets, property, plant and equipment (“PP&E”), right-of-use (“ROU”) assets, investments in equity-accounted affiliate, precious metals, intangible assets and goodwill.

D) Assets by Segment (1)


	E&E Assets				PP&E				ROU Assets
As at	September 30, 2021		December 31, 2020		September 30, 2021		December 31, 2020		September 30, 2021		December 31, 2020
Oil Sands		634		617		23,632		19,748		749		196
Conventional		6		6		1,948		1,758		4		3
Offshore		15		—		2,795		—		164		—
Canadian Manufacturing		—		—		2,365		176		366		392
U.S. Manufacturing		—		—		6,053		3,476		280		114
Retail		—		—		422		—		107		—
Corporate and Eliminations		—		—		384		253		463		434
Consolidated		655		623		37,599		25,411		2,133		1,139



	Goodwill				Total Assets
As at	September 30, 2021		December 31, 2020		September 30, 2021		December 31, 2020
Oil Sands		2,984		2,272		30,782		24,641
Conventional		—		—		2,706		1,978
Offshore		—		—		3,626		—
Canadian Manufacturing		—		—		3,006		578
U.S. Manufacturing		—		—		9,946		4,363
Retail		—		—		708		—
Corporate and Eliminations		—		—		3,477		1,210
Consolidated		2,984		2,272		54,251		32,770

(1) Prior periods have been reclassified to conform with the current period’s operating segments.

E) Capital Expenditures (1) (2)


	Three Months Ended			Nine Months Ended
For the periods ended September 30,		2021	2020		2021	2020
Capital Investment
Oil Sands		198	65		617	337
Conventional		41	12		135	39
Offshore		69	—		130	—
Canadian Manufacturing		9	5		23	22
U.S. Manufacturing		301	60		743	150
Retail		16	—		22	—
Corporate and Eliminations		13	6		58	51
		647	148		1,728	599
Acquisition Capital
Oil Sands		—	1		3	6
Conventional		—	3		4	4

		—	4		7	10
Acquisitions (Note 4)
Oil Sands		—	—		5,119	—
Conventional		—	—		565	—
Offshore		84	—		3,061	—
Canadian Manufacturing		—	—		2,283	—
U.S. Manufacturing		—	—		2,140	—
Retail		—	—		422	—
Corporate and Eliminations		—	—		155	—
Total Capital Expenditures		731	152		15,480	609

(1)Includes expenditures on PP&E and E&E assets.

(2)Prior periods have been reclassified to conform with the current period’s operating segments.