S&P Global Ratings has revised its outlook for Cenovus Energy to stable from negative and reaffirmed the company’s BBB credit rating, pointing to improved financial metrics and tangible progress on planned growth projects. The rating agency said it expects Cenovus’s funds from operations to debt ratio to be in the 70%-80% range over the next two years.
Cenovus has already brought three of its five prioritized growth projects into production and remains at work on the two remaining projects, one of which relates to assets obtained through its recently completed MEG Energy acquisition. Management projects that these initiatives will contribute roughly 150,000 barrels per day of additional production by the end of 2028, a rise equivalent to about 15%-20% above the company’s 2024 average production. Separately, Cenovus forecasts that its total production before royalties will top 1.0 million barrels of oil equivalent per day beginning in 2027.
In mid-2025 the company sold its 50% non-operated working interest in the Wood River and Borger refineries for C$1.9 billion. Proceeds from that disposition were directed toward net debt reduction and share buybacks. Refinery operating rates also improved during the prior year, with utilization for Canadian refining assets surpassing 100% and U.S. refineries operating at roughly 95%. S&P noted it expects refining utilization to remain between 90% and 95% going forward.
Cenovus closed its C$8.4 billion cash-and-stock purchase of MEG Energy in November 2025 and finished the year with reported net debt of C$8.3 billion. The company adjusted its share repurchase policy so that it will dedicate 50% of excess free funds flow to buybacks until net debt declines to C$6.0 billion; after that point it plans to allocate 75% of excess free funds flow to repurchases until it reaches a longer-term net debt target of C$4.0 billion. S&P Global Ratings projects Cenovus will achieve the C$6.0 billion net debt level in late 2027 or early 2028.
On capital spending, Cenovus expects growth capital expenditures to fall by C$300 million year over year in 2026 as projects are completed. The five key growth projects cited by the company are the Narrows Lake tie back, Foster Creek optimization, Sunrise optimization, Christina Lake North expansion, and West White Rose. First production dates for these projects are slated between 2025 and mid-2026, with full ramp-up anticipated by 2028.
The combination of asset dispositions, the phased approach to buybacks tied to net debt milestones, the anticipated ramp-up from growth projects, and a forecasted improvement in operating metrics underpinned S&P Global Ratings’ move to a stable outlook, while the agency maintained the issuer-level BBB rating.
Key points
- S&P revised Cenovus’s outlook to stable from negative and affirmed a BBB rating, expecting an FFO-to-debt ratio of 70%-80% over two years - impacts credit markets and energy-sector debt investors.
- Cenovus has commissioned three of five growth projects and anticipates 150,000 barrels per day of incremental production by end-2028, supporting oil production forecasts for upstream markets.
- Asset sales and the MEG acquisition shaped balance-sheet actions: a C$1.9 billion refinery stake sale funded debt reduction and buybacks, while the C$8.4 billion MEG purchase left reported net debt at C$8.3 billion year-end - relevant to M&A and corporate finance activity in energy.
Risks and uncertainties
- Timing risk on net debt targets - S&P anticipates reaching C$6.0 billion in late 2027 or early 2028; deviations could affect capital allocation plans - this affects bondholders and equity holders.
- Execution risk on remaining growth projects - two projects are still under development with full ramp-up expected by 2028; delays or underperformance could alter production and cash flow outcomes - impacts upstream operators and project financiers.
- Refining utilization assumptions - S&P assumes utilization will settle in the 90%-95% range; sustained weakness below this band could influence refining margins and cash generation - relevant to downstream operations and commodity markets.