Title: Cenovus Energy - CVE/CVE (T; N) C$30.03; US$29.

45

Price: C$30.03;

StockRating: Outperform

TargetPrice: Cdn$42.00

June 11, 2013

The NBF Daily Bulletin

Headline: Shaunavon Asset Disposition Has Minimal Impact

Oil & Gas Exploration and Production

Cenovus Energy
CVE/CVE (T; N) Stock Rating: Target: Risk Rating: Est. Total Return
Stock Data - Q1a 2013: 52-week High-Low (Cdn$) Dividend Yield Shares Outstanding (mln) Market Cap. (mln) Net Debt (mln) Enterprise Value (mln) Production Oil Sands (bbls/d) Oil & NGL's (bbls/d) Nat. Gas (mmcf/d) Boe/d (6:1) % Nat. Gas Pricing WTI (US$/bbl) Brent (US$/bbl) AECO (Cdn$/mcf) Estimates Cash Flow (mln) CFPS - diluted Operating Earnings (mln) EPS - diluted Capex (mln) Net Debt (mln) Dividends ($/sh) Basic Payout (%) Total Payout (%) NAV ($/sh) CNAV ($/sh) Valuation P/CF P/E EV/DACF Net Debt / CF Debt / Capital EV/BOE/D P/CNAVPS Source: Company reports, NBF estimates Note: Debt figures include convertible debentures All figures in Cdn$ unless otherwise noted 2012a 7.1 x 29.9 x 7.5 x 0.9 x 32% $109 220 2012a 89 736 75 667 593.6 264 341 37% 2012a $94.10 $111.94 $2.38 2012a $3 643 $4.80 $866 $1.14 $3 368 $3 370 $0.88 18% 111% 2013e 107 964 78 562 513.2 272 054 31% 2013e $93.00 $103.75 $3.65 2013e $3 390 $4.46 $1 258 $1.66 $3 400 $3 810 $0.97 22% 122% $29.35 $42.05 2013e 6.7 x 18.1 x 7.3 x 1.1 x 34% $97 429 0.7x 2014e 6.3 x 15.2 x 7.5 x 1.2 x 34% $93 193 $28.32 - $36.25 3.2% 755.8 $22 696 $3 469 $26 165 2014e 130 000 82 812 468.2 290 847 27% 2014e $89.00 $97.25 $4.00 2014e $3 633 $4.78 $1 503 $1.98 $3 500 $4 409 $0.97 20% 116%

C$30.03; US$29.45 Outperform

(Unchanged)

Asset Sale Shaunavon Asset Disposition Has Minimal Impact HIGHLIGHTS

Shaunavon Tight Oil Assets Sell for $240 million Cenovus announced an agreement to sell its Shaunavon tight oil assets for cash proceeds of $240 million to Surge Energy Inc. The assets are located in SE Saskatchewan and include 54 net sections of land and current production of ~3,600 bbl/d (versus average January production of ~5,000 bbl/d) of medium gravity oil for an implied transaction metric of ~$67,000/boed. The transaction is subject to normal closing conditions with an effective date of July 1 and is expected to close by mid-July.

Cdn$42.00
(Unchanged)

Average
(Unchanged) 43%

Bakken Asset Remains in Buyers Market

Cenovus operated Estevan Bakken assets will remain on the market and include ~750 boe/d of production (as of January 2013). Cenovus had originally announced plans to divest of its Shaunavon and Bakken assets in February 2013, but indicated in April that it expected the sale process to take longer than originally expected due to poor market conditions and did not anticipate closing these transactions until next year.

Minimal Changes to Our Estimates

We reflected the asset sale in our model, but note minimal changes to our forecasts. The net impact results in a decrease to our 13/14 CFPS estimates by 1% and 2%, respectively.

Industry Rating: Overweight (NBF Economics & Strategy Group) Company Profile: Cenovus is a low cost integrated senior oil and gas producer with upstream operations in Western Canada and an ownership interest in two refineries in Illinois and Texas, U.S.A. The company was created in 2009 through the reorganization of EnCana Corp. and began independent operations as a publicly traded company on Dec. 1, 2009. The company trades on the TSX and NYSE.

Maintain Outperform Rating and $42 Target We believe the asset sale is largely immaterial to Cenovus and note that our valuation and outlook for Cenovus remain largely unchanged. As such, we are maintaining our Outperform rating and $42 target price which is based on a 1.0x multiple to our CNAV estimate and implies a 2014 EV/DACF multiple of 10.2x.

Stock Performance
$37.00 $36.00 $35.00 $34.00 Price ($/sh) $33.00 $32.00 $31.00 $30.00 $29.00 $28.00 $27.00 Jun-12 Source: Bloomberg Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 16 000 14 000 12 000 Volume (000's) 10 000 8 000 6 000 4 000 2 000 0 Jun-13

Kyle Preston, CFA, CMA - (403) 290-5102 [email protected] Associate: Amy Chang - (403) 290-5627 [email protected] Associate: Marc Corbeil, CFA - (403) 441-0955 [email protected]

For required disclosures, please see end of document.

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Forecast Revisions
We updated our model to incorporate the asset sale, but note minimal changes to our forecasts. The following table provides a summary of the changes.

FINANCIAL AND OPERATING FORECASTS

NBF Estimates 2013e New Production Oil Sands (bbls/d) Oil/NGLs incl. Pelican Lake (bbls/d) Gas (mmcf/d) BOE/d (@6:1) % oil Refining Sales Vol. (bbls/d) - net Refining Cash Flow ($mln) Revenue ($mln) Cash Flow ($mln) CFPS diluted Operating EPS ($mln) EPS diluted Dev CapEx ($mln) Net Acquistions ($mln) Total CapEx ($mln) Net Debt (LT+Converts) ($mln) Debt/CF Dividend per share Basic Payout (%) Total Payout % NAV CNAV 107 964 78 562 513.2 272 054 69% 211 950 $1 169 $18 083 $3 390 $4.46 $1 258 $1.66 $3 400 -$238 $3 162 $3 810 1.1x $0.97 22% 122% $29.35 $42.05 107 964 80 072 513.2 273 564 69% 211 950 $1 169 $18 127 $3 417 $4.50 $1 272 $1.67 $3 400 $0 $3 402 $4 023 1.2x $0.97 21% 121% $29.60 $42.31 -1% -1% 0% 0% 0% -1% -1% -1% -1% 0% NA -7% -5% -5% 0% 0% -2% 0% -1% 130 000 82 812 468.2 290 847 73% 211 363 $1 130 $18 695 $3 633 $4.78 $1 503 $1.98 $3 500 $0 $3 500 $4 409 1.2x $0.97 20% 116% 130 000 86 312 468.2 294 347 73% 211 363 $1 130 $18 794 $3 690 $4.86 $1 532 $2.02 $3 500 $0 $3 500 $4 565 1.2x $0.97 20% 115% 0% 0% -1% -2% -2% -2% -2% 0% NA 0% -3% -2% 0% 0% -4% 0% -1% Old % Chg New 2014e Old % Chg

NBF Commodity Forecast WTI (US$/bbl) Brent (US$/bbl) AECO (Cdn$/mcf) $93.00 $103.75 $3.65 $93.00 $103.75 $3.65 $89.00 $97.25 $4.00 $89.00 $97.25 $4.00

Source: NBF

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FINANCIAL & OPERATING SUMMARY - CENOVUS ENERGY (CVE)

STOCK RATING TARGET PRICE TOTAL RETURN RISK RATING OP $42.00 43% A CURRENT SHARE PRICE 52 WK HIGH / LOW MARKET CAP ($mln) ENTERPRISE VALUE ($mln) $30.03 $36.25 / $28.32 $22 696 $26 165

Oil Sands Crude Oil & NGLs incl. Pelican Lk. Natural Gas Total (boe/d) (6:1) % Natural Gas Refined product sales (net)

PRODUCTION MIX 2011a bbls/d 66 532 bbls/d 67 706 mmcf/d 655.5 boe/d 243 492 45% bbls/d 209 500 NETBACKS 2011a $50.58 -$5.50 -$10.42 -$2.76 $/boe $31.90 $0.77 -$2.52 $6.72 $/boe $36.86 $/boe FINANCIAL SUMMARY 2011a

CORE PROPERTIES 2012a 89 736 75 667 593.6 264 341 37% 216 375 2013e 107 964 78 562 513.2 272 054 31% 222 823 2014e 130 000 82 812 468.2 290 847 27% 221 931

Revenue Royalties Op. Costs Transportation Operating Netback Hedging G&A Interest & Tax/Other Cash Flow Netback*
*reflects corporate cash flow

2012a $47.71 -$4.00 -$11.34 -$2.66 $29.71 $3.47 -$2.86 $7.33 $37.65

2013e $50.65 -$3.80 -$12.13 -$2.93 $31.79 $1.87 -$3.53 $4.01 $34.13

2014e $53.43 -$4.30 -$12.39 -$3.00 $33.74 $0.00 -$2.85 $3.33 $34.22 NET ASSET VALUE (8%, after tax)*

2012a

2013e $18 083 $3 390 $4.48 $4.46 $1 258 $1.66 $1.66 $3 400 -$238 $3 162 $733 $0.97 22% 122% $3 810 -$603 NA NA 1.1x $3 000 2013e 756 777 759

2014e $18 695 $3 633 $4.81 $4.78 $1 503 $1.99 $1.98 $3 500 $0 $3 500 $732 $0.97 20% 116% $4 409 $796 NA NA 1.2x $3 000 2014e 756 776 759 Present Value of Reserves (P+P) Refinery (Book Value) Other Assets Asset Retirement Obligation Cash / (Net Debt) NET ASSET VALUE (NAV) Contingent Resource Value (risked) CONTINGENT NET ASSET VALUE (CNAV)
* debt and share count adjusted for subsequent financings

$mln $23 268 $3 088 $1 515 ($2 315) ($3 370) $22 186 $9 600 $31 786

$/share $30.78 $4.09 $2.00 ($3.06) ($4.46) $29.35 $12.70 $42.05

Revenue Cash Flow from Operations CFPS (basic) CFPS (diluted) Earnings EPS (basic) EPS (diluted) Capital Expenditures Acquisitions / (Dispositions) Total Dividends DPS Basic Payout Total Payout Net Debt Bank Debt (net of cash) Long Term Notes Convertible Debentures D/CF Credit Facility Shares Outstanding Basic - year-end Fully diluted - year-end Wtd Avg - diluted

$16 185 $17 229 $3 276 $3 643 $4.34 $4.82 $4.32 $4.80 $mln $1 239 $866 $1.64 $1.15 $1.64 $1.14 $2 723 $3 368 $mln -$102 $38 $2 621 $3 406 $mln $603 $665 $0.80 $0.88 18% 18% 102% 111% $mln $3 004 $3 370 $0 -$1 160 NA NA NA NA 0.9x 0.9x $3 000 $3 000 SHARES OUTSTANDING 2011a 2012a mln 754 756 mln 779 779 mln 758 759

$mln $mln

PDP Other Proved Probable 2P

Reserves mmboe 558 1 617 2 175 893 3 069

2012 RESERVES SUMMARY 2P RLI % years 18% 53% 71% Total 31.8 29% 100%

COMMODITY PRICE ASSUMPTIONS Commodity prices 2011a 2012a WTI Crude oil (US$/bbl) $95.05 $94.10 Brent Crude oil (US$/bbl) $111.07 $111.94 Canadian Par (C$/bbl) $95.36 $86.29 NYMEX gas (US$/mcf) $3.99 $2.75 AECO gas (C$/mcf) $3.62 $2.38 Exchange Rate (US$/C$) $1.01 $1.00 Source: Company reports, NBF estimates

2013e $93.00 $103.75 $90.00 $3.90 $3.65 $0.98

2014e $89.00 $97.25 $90.25 $4.20 $4.00 $0.96

EV/DACF P/CF P/E EV/BOE/D EV/2P P/NAV P/CNAV

VALUATION 2013e 2014e CVE Group Avg. CVE Group Avg. 7.3x 6.2x 7.5x 5.8x 6.7x 5.4x 6.3x 4.8x 18.1x 16.6x 15.2x 13.3x $97 429 $71 587 $93 193 $67 668 $7.88 $6.70 1.0x 1.0x 0.7x 0.8x

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Cenovus Energy Inc. (CVE) - ADDITIONAL COMPANY RELATED DISCLOSURES In the past 12 months NBF has not acted as financial advisor, fiscal agent or underwriter for the company that is the subject of this report. NBF may act in such a capacity in the future and receive, or expect to receive, compensation for such activities. NBF is an indirect wholly owned subsidiary of the National Bank of Canada. From time to time the National Bank of Canada may enter into lending or financial arrangements with companies that are the subject of NBF Research Reports. At the date of this report, National Bank of Canada is a lender to the company which is the subject of this report. NBF and/or its Affiliates may have a position in the securities mentioned herein and may make purchases and/or sales of these securities from time to time in the open market or otherwise. On the last day of the month preceding the date of this report, NBF and its Affiliates held in the aggregate less than 1% of the outstanding shares (of any class of equity securities) of this issuer. NBF is a Registered Trader on the Toronto Stock Exchange for the company that is the subject of this report. (13)