Cenovus Energy : 2024 Annual Report (2024 Annual Report)

At Cenovus, our purpose is to energize the world to make people's lives better.

Message from our President & Chief Executive Officer 3

Management's Discussion and Analysis 4

Consolidated Financial Statements 68

Notes to Consolidated Financial Statements 77

Supplemental information 125

Advisory 132

Information for shareholders 149

For additional information about forward-looking statements, specified financial measures and reserves contained in this Annual Report, see the Advisory on page 132.

Keeping our business robust is essential in this time of continually evolving market dynamics.

Message from our President & Chief Executive Officer

Cenovus achieved significant operational and financial milestones in 2024, marking a year of solid performance and meaningful returns to our shareholders. Our continued focus on operational efficiency, safety and financial discipline has ensured we are well-positioned for future growth and to navigate the evolving energy landscape.

At the core of our success is safety, which remains fundamental to everything we do. In 2024, we had our best-ever process safety performance, making us a top-quartile performer in this area ‒ a trend we've continued since 2022.

Our financial discipline has resulted in one of the strongest balance sheets in our industry. Last year we met our $4.0 billion net debt target, enabling us to return 100% of excess free funds flow to shareholders, over and above our regular dividends. In 2024, we had $3.2 billion of cash returns to our common and preferred shareholders in the form of base and variable dividends, common share purchases, and through preferred share redemptions.

Since 2021, the company's total shareholder returns on a relative basis have outperformed the S&P/TSX composite and energy indices by 144% and 50% respectively.

Our financial performance is driven by operational excellence in our Upstream operations, with daily and annual production records at our Oil Sands operations.

2024 marked the first year our U.S. Downstream network was fully operational, and we're moving quickly to make that business competitive and profitable. Throughput, utilization and costs are all trending positively, and I'm pleased with the work underway to further strengthen this part of the business.

Mid-to late 2025 will mark a significant inflection point for our company. Our capital spending decreases as we complete a number of growth projects, and we begin to see the first of our 150,000 barrels per day of growth. All our key growth projects remain on track towards completion and are expected to result in a material rate of change in our free cash flow through 2026 and beyond. This free cash flow profile, along with our strong balance sheet, positions the company well to manage continued volatility in commodity prices, return cash to shareholders and strategically invest in the business.

As we look to the future, we are focused on maintaining a competitive cost structure, through innovation, streamlining our operations - foundational for our ability to grow - and a strong balance sheet. Keeping our business robust is essential in this time of continually evolving market dynamics.

We know that Canadians, and the world, rely on the essential natural resources our industry provides. We are proud to advocate for our company and industry, sharing the benefits our sector responsibly delivers.

I want to thank the shareholders, and our Board, employees and contractors, for your ongoing support. I am looking forward to the significant year we have ahead.

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For the year ended December 31, 2024 (Canadian dollars)

Management's Discussion and Analysis (unaudited)

Overview of Cenovus

Year in review

Operating and financial results

Commodity prices underlying our financial results

Outlook

Reportable segments

19

Upstream

Oil Sands

Conventional

Offshore

Downstream

Canadian Refining

U.S. Refining

Corporate and eliminations

Quarterly results

Oil and gas reserves

Liquidity and capital resources

Risk management and risk factors

Critical accounting judgments, estimation uncertainties and accounting policies

Control environment

19

30

30

26

36

34

24

19

31

This Management's Discussion and Analysis ("MD&A") for Cenovus Energy Inc. (which includes references to "we", "our", "us", "its", the "Company", or "Cenovus", and means Cenovus Energy Inc., the subsidiaries of, joint arrangements, and partnership interests held directly or indirectly by, Cenovus Energy Inc.) dated February 19, 2025, should be read in conjunction with our December 31, 2024 audited Consolidated Financial Statements and accompanying notes ("Consolidated Financial Statements"). All of the information and statements contained in this MD&A are made as at February 19, 2025, unless otherwise indicated. This MD&A contains forward-looking information about our current expectations, estimates, projections and assumptions. See the Advisory for information on the risk factors that could cause actual results to differ materially and the assumptions underlying our forward-looking information. Cenovus management ("Management") prepared the MD&A. The Audit Committee of the Cenovus Board of Directors ("the Board"), reviewed and recommended the MD&A for approval by the Board, which occurred on February 19, 2025. Additional information about Cenovus, including our quarterly and annual reports, Annual Information Form ("AIF") and Form 40-F, is available on SEDAR+ at sedarplus.ca, on EDGAR at sec.gov and on our website at cenovus.com. Information on or connected to our website, even if referred to in this MD&A, do not constitute part of this MD&A.

40

39

Cenovus holds equity ownership interests in a number of joint ventures, as classified under IFRS Accounting Standards, that are accounted for using the equity method in our Consolidated Financial Statements. Unless otherwise indicated, operational results of these joint ventures are not reflected in this MD&A. For further information, see the Advisory.

45

Basis of Presentation

64

67

This MD&A and the Consolidated Financial Statements were prepared in Canadian dollars (which includes references to "dollar" or "$"), except where another currency is indicated, and in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") (the "IFRS Accounting Standards"). Production volumes are presented on a before royalties basis. Refer to the Abbreviations and Definitions section of the Advisory for commonly used oil and gas terms.

OVERVIEW OF CENOVUS

We are a Canadian-based integrated energy company headquartered in Calgary, Alberta. We are one of the largest Canadian-based crude oil and natural gas producers, with upstream operations in Canada and the Asia Pacific region, and one of the largest Canadian-based refiners and upgraders, with downstream operations in Canada and the United States ("U.S.").

Our upstream operations include oil sands projects in northern Alberta; thermal and conventional crude oil, natural gas and natural gas liquids ("NGLs") projects across Western Canada; crude oil production offshore Newfoundland and Labrador; and natural gas and NGLs production offshore China and Indonesia. Our downstream operations include upgrading and refining operations in Canada and the U.S., and commercial fuel operations across Canada.

Our operations involve activities across the full value chain to develop, produce, refine, transport and market crude oil, natural gas and refined petroleum products in Canada and internationally. Our physically and economically integrated upstream and downstream operations help us mitigate the impact of volatility in light-heavy crude oil price differentials and contribute to our net earnings by capturing value from crude oil, natural gas and NGLs production through to the sale of finished products such as transportation fuels.

For a description of our business segments see the Reportable Segments section of this MD&A.

Our Strategy

At Cenovus, our purpose is to energize the world to make people's lives better. Our strategy is focused on maximizing shareholder value over the long-term through sustainable, low-cost, diversified and integrated energy leadership. Our five strategic objectives include: delivering top-tier safety performance and sustainability leadership; maximizing value through competitive cost structures and optimizing margins; a focus on financial discipline, including maintaining targeted debt levels while positioning Cenovus for resiliency through commodity price cycles; a disciplined approach to allocating capital to projects that generate returns at the bottom of the commodity price cycle; and absolute and per share free funds flow growth.

On December 12, 2024, we released our 2025 corporate guidance which focused on disciplined capital allocation in support of increasing shareholder returns over time. We will continue to be focused on controlling costs, improving the profitability of our strategic downstream business and optimizing our advantaged portfolio to deliver value for our shareholders. For further details, see the Outlook section of this MD&A and our 2025 corporate guidance dated December 11, 2024, available on our website at cenovus.com.

YEAR IN REVIEW

Overall, our 2024 results reflect strong operational performance in the upstream business, steady performance in our Canadian Refining business and improving performance in the U.S. Refining business. Constructive crude oil prices, including the narrowing of the light-heavy price differential, benefited our upstream financial results while declining market crack spreads along with the narrowing of the WTI-WCS and upgrading differentials had a significant impact on our downstream Operating Margin. In addition, we:

• • Delivered safe and reliable upstream performance. Upstream production averaged 797.2 thousand BOE per day, compared with 778.7 thousand BOE per day in 2023, primarily driven by strong performance from our Oil Sands assets. Oil Sands production averaged 610.7 thousand BOE per day, our highest-ever annual production, compared with 595.4 thousand BOE per day in 2023. The increase in production is attributed to successful results from our redevelopment, sustaining, growth and optimization programs.

• • Achieved Offshore milestones. We progressed the West White Rose project and are on track to deliver first oil in 2026. The project is approximately 88 percent complete and mechanical completion of the topsides and concrete gravity structure occurred in the fourth quarter. Refit work on the SeaRose floating production, storage and offloading ("FPSO") vessel was completed and the vessel returned to the field in November. The SeaRose FPSO is on station and reconnected to the White Rose field. Production is expected to resume late February 2025.

• • Advanced our Oil Sands growth projects. We achieved significant milestones on our major upstream growth projects including mechanical completion of the Narrows Lake pipeline to Christina Lake, bringing three well pads online as part of the Sunrise growth program and progressing construction of the Foster Creek optimization project, which was approximately 64 percent complete as at December 31, 2024. At our Lloydminster conventional heavy oil assets, we continue to progress our planned drilling program.

• • Improved U.S. Refining throughput and refined product production. Average crude oil unit throughput (or "throughput") increased 96.7 thousand barrels per day compared with 2023, to 556.4 thousand barrels per day in 2024. Refined product production averaged 590.0 thousand barrels per day, an increase of 105.0 thousand barrels per day from 2023. The increases in throughput and refined product production were mainly driven by a full year of production at the Toledo and Superior refineries combined with improved reliability across our U.S. Refining operations.

• • Safely completed significant turnarounds. In the Canadian Refining segment, we completed the largest turnaround in the asset's history at the Lloydminster Upgrader ("Upgrader") that ran from early May until early July. In the U.S. Refining segment, we completed a significant turnaround at the Lima Refinery as well as a turnaround at our non-operated Borger Refinery. In our upstream operations, we completed turnarounds at Christina Lake and at certain Conventional assets.

• • Generated cash from operating activities of $9.2 billion. Cash from operating activities increased by $1.8 billion compared with 2023. Adjusted Funds Flow was $8.2 billion, a decrease of $639 million compared with 2023, reflecting weaker market crack spreads that impacted our downstream results, partially offset by strong upstream performance due to higher realized pricing and increased sales volumes. The Chicago 3-2-1 crack spread declined 31 percent to US$16.74 per barrel compared with 2023.

• • Increased our target returns to shareholders. On achieving our Net Debt target, in the third quarter we increased target returns to shareholders, stewarding to 100 percent of Excess Free Funds Flow over time. In the year, we returned $3.2 billion to common and preferred shareholders, comprising the purchase of 55.9 million common shares for $1.4 billion through our normal course issuer bid ("NCIB"), $1.5 billion through common share base and variable dividends, $45 million through preferred share dividends and the redemption of all 10.0 million of the Company's series 3 preferred shares at a price of $25.00 per share, for a total of $250 million.

• • Raised our common share base dividend. Beginning in the second quarter, the Board approved a 29 percent increase in the base dividend to $0.720 per common share annually. On February 19, 2025, the Board declared a first quarter base dividend of $0.180 per common share.

• • Upgraded credit ratings. We achieved our mid-BBB credit ratings target with all agencies, following S&P Global's upgrade of Cenovus to BBB with a Stable outlook on March 18, 2024. This upgrade is a reflection of our debt reduction, financial policy track record and operational momentum.

Summary of Annual Results

• (1) Refer to the Operating and Financial Results section of this MD&A for a summary of total upstream production by product type.

• (2) Represents Cenovus's net interest in refining operations.

• (3) Total processed inputs include crude oil and other feedstocks. Blending is excluded.

• (4) Non-GAAP financial measure or contains a non-GAAP financial measure. See the Advisory.

• (5) Specified financial measure. See the Specified Financial Measures Advisory.

($ millions, except where indicated)	2024	2023	2022
Upstream Production Volumes (1) (MBOE/d)	797.2	778.7	786.2
Downstream Total Processed Inputs (2) (3) (Mbbls/d)	678.0	586.8	513.0
Crude Oil Unit Throughput (2) (Mbbls/d)	646.9	560.4	493.7
Downstream Production Volumes (Mbbls/d)	693.1	599.2	525.1
Revenues	54,277	52,204	66,897
Operating Margin (4)	10,809	11,022	14,263
Operating Margin - Upstream (5)	11,121	9,870	11,824
Operating Margin - Downstream (5)	(312)	1,152	2,439
Cash From (Used In) Operating Activities	9,235	7,388	11,403
Adjusted Funds Flow (4)	8,164	8,803	10,978
Per Share - Basic (4) ($)	4.41	4.64	5.63
Per Share - Diluted (4) ($)	4.38	4.54	5.47
Capital Investment	5,015	4,298	3,708
Free Funds Flow (4)	3,149	4,505	7,270
Net Earnings (Loss)	3,142	4,109	6,450
Per Share - Basic ($)	1.68	2.15	3.29
Per Share - Diluted ($)	1.67	2.09	3.20
Total Assets	56,539	53,915	55,869
Total Long-Term Liabilities (4)	19,408	18,993	20,259
Long-Term Debt, Including Current Portion	7,534	7,108	8,691
Net Debt	4,614	5,060	4,282
Cash Returns to Common and Preferred Shareholders	3,246	2,798	3,457
Common Shares - Base Dividends	1,255	990	682
Base Dividends Per Common Share ($)	0.680	0.525	0.350
Common Shares - Variable Dividends	251	-	219
Variable Dividends Per Common Share ($)	0.135	-	0.114
Purchase of Common Shares Under NCIB	1,445	1,061	2,530
Payment for Purchase of Warrants	-	711	-
Dividends Paid on Preferred Shares	45	36	26
Preferred Share Redemption	250	-	-
5

OPERATING AND FINANCIAL RESULTS

Selected Operating and Financial Results - Upstream

Year Ended December 31, Percent 2024 Change 2023
Production Volumes by Segment (1) (MBOE/d) Oil Sands Conventional Offshore	610.7 119.9 66.6	3 - 5	595.4 119.9 63.4 778.7
Total Production Volumes	797.2	2
Production Volumes by Product (1) Bitumen (Mbbls/d) Heavy Crude Oil (Mbbls/d) Light Crude Oil (Mbbls/d) NGLs (Mbbls/d) Conventional Natural Gas (MMcf/d)	591.3 17.6 12.9 32.0 860.2	3 5 (9) (2) 3	576.7 16.7 32.5 832.6
Total Production Volumes (MBOE/d) Per-Unit Operating Expenses by Segment (2) ($/BOE) Oil Sands Conventional Offshore (3) Oil and Gas Reserves (MMBOE) (4) Total Proved Probable Total Proved Plus Probable	797.2	2	778.7 12.54 13.02 17.20
11.40 11.99 19.27 5,664 2,793	(9) (8) 12 (3) (2)
8,457	(3)

• (1) Refer to the Oil Sands, Conventional or Offshore Reportable Segments section of this MD&A for a summary of production by product type by segment. Includes Cenovus's 40 percent equity interest in Husky-CNOOC Madura Ltd. ("HCML") joint venture, which is accounted for using the equity method in the Consolidated Financial Statements.

• (2) Specified financial measure. See the Specified Financial Measures Advisory.

• (3) Contains a non-GAAP financial measure. See the Specified Financial Measures Advisory. Offshore Per-Unit Operating Expenses reflect Cenovus's 40 percent equity interest in the HCML joint venture. Operating expenses for the Offshore segment, excluding Indonesia, for the year ended December 31, 2024, was $423 million (2023 - $384 million).

• (4) Includes values attributable to Cenovus's 30 percent equity interest in the Duvernay Energy Corporation ("Duvernay") joint venture and Cenovus's 40 percent equity interest in the HCML joint venture.

Production

Total upstream production increased in 2024 compared with 2023 due to:

• • Successful results from our redevelopment, sustaining, growth and optimization programs in our Oil Sands segment.

• • A full year of production from the Terra Nova FPSO resuming production in November 2023.

• • Increased production in Indonesia from the MAC field which had first gas in the fourth quarter of 2023.

The increase year-over-year is also due to lower production in 2023 in China following the temporary unplanned outage from the disconnection of the umbilical by a third-party vessel in April 2023. The production increases in 2024 were partially offset by turnaround activities in the Oil Sands and Conventional segments, and the suspension of production at the White Rose field in December 2023 for the SeaRose asset life extension ("ALE") project in the Atlantic region.

In our Conventional segment, production volumes were consistent year-over-year. Production increased due to less well downtime in 2024 compared with 2023, partially offset by the divestiture of non-core assets. Well downtime in 2024 related to planned turnaround activity, while 2023 downtime was primarily in response to wildfire activity. In the second half of 2024, production was impacted by the deferral of new well development in response to lower natural gas benchmark prices.

Per-Unit Operating Expenses

For the year ended December 31, 2024, per-unit operating expenses decreased in the Oil Sands segment, compared with 2023, mainly due to lower fuel costs as a result of significant declines in natural gas pricing and increased sales volumes. Per-unit operating expenses decreased in the Conventional segment, compared with 2023, mainly due to lower processing and gathering costs, electricity costs and workover costs, partially offset by increased repairs and maintenance costs. Per-unit operating expenses increased in the Offshore segment, compared with 2023, primarily due to higher repairs and maintenance and vessel mooring costs related to the SeaRose ALE project, and higher repairs and maintenance costs at the Terra Nova field. Overall, the Company has managed inflationary pressures through the use of long-term contracts, working with vendors and managing the timing of purchases of long-lead items.

Oil and Gas Reserves

Based on our reserves reports prepared by independent qualified reserves evaluators ("IQREs"), total proved reserves and total proved plus probable reserves as at December 31, 2024, were approximately 5.7 billion BOE and 8.5 billion BOE, respectively. Total proved reserves and total proved plus probable reserves each decreased three percent compared with 2023.

Additional information about our reserves is included in the Oil and Gas Reserves section of this MD&A.

Selected Operating and Financial Results - Downstream

Year Ended December 31,

Percent

2024 Change

2023

Crude Oil Unit Throughput by Segment (Mbbls/d)
Canadian Refining	90.5	(10)	100.7
U.S. Refining	556.4	21	459.7
Total Crude Oil Unit Throughput	646.9	15	560.4
Production Volumes by Product (1) (Mbbls/d)
Gasoline	280.5	21	231.2
Distillates (2)	219.9	22	179.9
Synthetic Crude Oil	41.0	(14)	47.6
Asphalt	44.0	25	35.2
Ethanol	4.8	(4)	5.0
Other	102.9	3	100.3
Total Production Volumes	693.1	16	599.2
Per-Unit Operating Expenses by Segment (3) (4) ($/bbl)
Canadian Refining	22.56	68	13.40
U.S. Refining	12.99	(11)	14.63
Per-Unit Operating Expenses - Excluding Turnaround Costs by Segment (3) ($/bbl)
Canadian Refining	15.38	16	13.29
U.S. Refining	11.55	(18)	14.01

• (1) Refer to the Canadian Refining and U.S. Refining Reportable Segments section of this MD&A for a summary of production by product by segment.

• (2) Includes diesel and jet fuel.

• (3) Specified financial measure. Per-unit metrics are calculated based on total processed inputs. See the Specified Financial Measures Advisory.

• (4) Inclusive of turnaround costs. In the Canadian Refining segment, operating expenses represent expenses associated with the Lloydminster Upgrader, the Lloydminster Refinery and the commercial fuels business.

We safely completed two significant turnarounds, as well as a turnaround at the Borger Refinery, in our refining segments in 2024. In Canada, we completed a turnaround at the Upgrader, which was the largest in its history in scope and cost, that ran from early May to early July. In the U.S., we completed a significant turnaround at the Lima Refinery that ran from early September to late October.

In 2024, total downstream throughput and refined product production increased compared with 2023. Throughput and production increased due to realizing a full year of production at the Toledo and Superior refineries, combined with improved reliability at our operated and non-operated refineries. We acquired the Toledo Refinery on February 28, 2023 (the "Toledo Acquisition") and the Superior Refinery ramped up throughout 2023. The increases were partially offset by reduced throughput and production during the turnarounds discussed above.

In 2024, per-unit operating expenses, excluding turnaround costs, increased in the Canadian Refining segment compared with 2023, primarily due to reliability projects completed during the turnaround period. Per-unit operating expenses, excluding turnaround costs, in the U.S. Refining segment decreased year-over-year primarily due to the increase in total processed inputs.

Selected Consolidated Financial Results

Revenues

Revenues increased four percent compared with 2023. Upstream revenue increased seven percent compared with 2023, primarily due to the narrowing of the WTI-WCS and condensate-WCS differentials following the start-up of the Trans Mountain Pipeline expansion project ("TMX") and increased sales volumes. Downstream revenues increased three percent compared with 2023, primarily due to higher sales volumes in the U.S. Refining segment, partially offset by lower refined product pricing.

Operating Margin

Operating Margin is a non-GAAP financial measure and is used to provide a consistent measure of the cash generating performance of our assets for comparability of our underlying financial performance between periods.

Year Ended December 31,

($ millions)

20242023

Gross Sales

External Sales Intersegment Sales

57,726 55,474

8,970 8,234

66,696 63,708

Royalties

(3,449) (3,270)

Revenues Expenses

63,247 60,438

Purchased Product Transportation and Blending Operating Expenses

33,926 31,425

11,331 11,088

7,159 6,891

Realized (Gain) Loss on Risk Management Activities Operating Margin

22 12

10,809

11,022

Operating Margin by Segment

Years Ended December 31, 2024 and 2023

15,000

10,000

($millions)

5,000

(5,000)

Oil Sands

Conventional

Offshore

Canadian Refining

U.S. Refining

2024

2023