Businessweek

Cenovus Energy Inc., an oil company, engages in the development, production, and marketing of crude oil, natural gas, and natural gas liquids (NGLs) in Canada with refining operations in the United States. The company’s operations include oil sands properties, and crude oil and natural gas production in Alberta and Saskatchewan. It also has ownership interests in two refineries in Illinois and Texas, the U.S. As of December 31, 2011, the company had a land base of approximately 7.4 million net acres and company interest before royalties proved reserves of approximately 1,455 million barrels of bitumen, 175 million barrels of heavy crude oil, 115 million barrels of light and medium crude oil and NGLs, and 1,203 billion cubic feet of natural gas. It also had company interest before royalties probable reserves of approximately 490 million barrels of bitumen, 109 million barrels of heavy crude oil, 51 million barrels of light and medium crude oil and NGLs, and 391 billion cubic feet of natural gas as of December 31, 2011. Segments The company operates through three segments: Oil Sands, Conventional, and Refining and Marketing. Oil Sands This segment consists of the company’s producing bitumen assets at Foster Creek and Christina Lake; heavy oil assets at Pelican Lake; new resource play assets, such as Narrows Lake, Grand Rapids, and Telephone Lake; and the Athabasca natural gas assets. The Foster Creek and Christina Lake operations as well as the Narrows Lake property are jointly owned with ConocoPhillips, an unrelated U.S. public company, through the FCCL Partnership (FCCL). FCCL owns the Foster Creek, Christina Lake, and Narrows Lake properties, as well as other bitumen interests. Cenovus FCCL Ltd., the company’s wholly owned subsidiary, is the operator and managing partner of FCCL, and owns 50 percent of FCCL. As of December 31, 2011, the company held bitumen rights of approximately 1,227,000 gross acres (889,000 net acres) within the Athabasca and Cold Lake areas, as well as the rights to lease an additional 544,000 net acres. Foster Creek: The company has a 50 percent interest in Foster Creek, an oil sands property in northeast Alberta that uses steam-assisted gravity drainage (SAGD) technology and produces from the McMurray formation. It holds surface access rights from the Governments of Canada and Alberta, and bitumen rights from the Government of Alberta for exploration, development, and transportation from areas within the Cold Lake Air Weapons Range. In addition, it holds rights to lease various acres of bitumen rights in other areas on the Cold Lake Air Weapons Range on its behalf and/or its assignee’s behalf. In 2011, the company drilled 10 wells using this technology, and as of December 31, 2011, there were 41 wells of this type producing. The company operates an 80 megawatt natural gas-fired cogeneration facility in conjunction with the SAGD operation at Foster Creek. Christina Lake: The company has a 50 percent interest in Christina Lake, an oil sands property in northeast Alberta that uses SAGD technology and produces from the McMurray formation. In 2011, it drilled three wells at Christina Lake using its Wedge Well technology and as of December 31, 2011, there were four wells of this type producing. Narrows Lake: The company holds a 50 percent interest in Narrows Lake, an oil sands property within the Christina Lake Region in northeast Alberta. Pelican Lake: Using a pattern, horizontal well polymer flood, the company produces heavy crude oil from the Cretaceous Wabiskaw formation at its Pelican Lake property, which is located within the Greater Pelican Region in northeast Alberta. The company holds a 38 percent non-operated interest in a 110-kilometre, 20-inch diameter crude oil pipeline, which connects the Pelican Lake area to a major pipeline that transports crude oil from northern Alberta to crude oil markets. New Resource Play Assets: The company’s new resource play assets include its emerging oil sands properties. Its Grand Rapids property is located in the Greater Pelican Region in northeast Alberta, where deposits of bitumen have been identified in the Cretaceous Gr