CompanyGraph
Cenovus Energy Inc.
CVE · NYSE Arca · Canada
Extracts oil sands bitumen in Alberta using steam, then pipes and refines it at two U.S. facilities built specifically for that crude.
Cenovus Energy extracts bitumen from the Alberta oil sands at Foster Creek and Christina Lake by injecting steam — generated by burning natural gas continuously — into underground well pairs until the bitumen liquefies and flows to the surface. That bitumen is too thick to enter a pipeline without being blended with condensate diluent first, so every barrel lifted depends on two inputs, gas and diluent, arriving in coordination before anything moves. The diluted bitumen then travels through Enbridge pipeline capacity to the Wood River and Borger refineries in the U.S. Midwest, which have been physically rebuilt with coking units sized specifically for heavy Canadian crude — units that cannot process a different type of oil without years of engineering work. The entire chain is therefore one continuous physical sequence, and if the Enbridge corridor is blocked by a tariff dispute or regulatory delay, both ends freeze at once: the Alberta leases keep producing bitumen with nowhere to go, and the refineries have no alternative feedstock their cokers can handle.
How does this company make money?
The company sells crude oil by the barrel at a price tied to West Texas Intermediate, minus a discount called the Western Canadian Select differential that reflects how much cheaper heavy Canadian crude trades compared to lighter benchmarks. It also sells refined products — gasoline, diesel, and jet fuel — at prices set by the Chicago and Group 3 markets. Natural gas liquids produced alongside the crude are sold at Conway hub prices.
What makes this company hard to replace?
A refinery built around coking units for Canadian heavy crude would need years of engineering work and capital spending to modify those units for a different type of oil. On top of that, the long-term pipeline shipping agreements with Enbridge commit refineries to specific transportation capacity, making it costly to simply walk away. And on the supply side, Alberta oil sands leases cannot be transferred to another operator without regulatory approval, so substituting a different producer is not straightforward either.
What limits this company?
The ceiling is how much steam Foster Creek and Christina Lake can produce. Adding more steam capacity requires permits from the Alberta Energy Regulator, and that approval process takes years. So even when oil prices are high and the reservoirs could support more output, production cannot simply be turned up.
What does this company depend on?
The company cannot run without natural gas from Alberta producers to make the steam that lifts the bitumen, condensate diluent to blend with that bitumen before it can enter a pipeline, Enbridge and Trans Mountain pipeline capacity to carry the blended crude to the U.S. Midwest, permits from the Alberta Energy Regulator to operate the oil sands sites, and the coking units at Wood River and Borger that are configured to process heavy Canadian crude.
Who depends on this company?
U.S. Midwest refineries would lose the heavy crude feedstock their coking units are built around and would have no ready replacement. Canadian National Railway would lose crude-by-rail volumes when pipeline capacity is tight. Petrochemical plants in Illinois that rely on heavy oil-derived feedstocks for asphalt and lubricant production would also lose their supply.
How does this company scale?
Drilling more SAGD well pairs and expanding steam injection at Foster Creek and Christina Lake follows a predictable pattern across proven reserves — so the production model itself can be repeated. What does not improve much is efficiency: the ratio of steam needed to produce each barrel of oil, and the rate at which reservoirs deplete, are constrained by basic physics and cannot be meaningfully changed just by spending more money.
What external forces can significantly affect this company?
Canada's federal carbon pricing raises the cost of burning natural gas for steam, which is the single largest operating expense. U.S.-Canada trade disputes can threaten pipeline approvals and crude oil tariffs, which would interrupt the corridor the entire system depends on. Separately, China's Belt and Road infrastructure has helped bring competing heavy oil supply from Venezuela and Russia to global markets, which can push down the prices the company receives.
Where is this company structurally vulnerable?
If the Enbridge pipeline corridor between Alberta and the U.S. Midwest were blocked — by a trade dispute between the U.S. and Canada, a tariff, or a regulatory delay — the bitumen lifted in Alberta would have nowhere to go. At the same time, Wood River and Borger would have no alternative heavy crude that fits their cokers. Both ends of the system would be stranded at once, and neither could quickly find a substitute.