Kam Sandhar - Director, IR Brian Ferguson - President and CEO Drew Zieglgansberger - EVP, Oil Sands Manufacturing Bob Pease - EVP, Corporate Strategy & President, Downstream Ivor Ruste - CFO Harbir Chhina - EVP, Oil Sands Development.

Greg Pardy - RBC Capital Markets Paul Cheng - Barclays Mike Rimell - UBS Securities Chris Cox - Raymond James Arthur Grayfer - CIBC Fai Lee - Odlum Brown Nima Billou - Veritas Investment Research Nia Williams - Reuters Jeremy van Loon - Bloomberg News Shawn Fulser - Mergermarket Tonya Zelinsky - Upstream International.

Good day ladies and gentlemen and thank you for standing by. Welcome to Cenovus Energy Fourth Quarter and Year-End 2015 Results. As a reminder, today's call is being recorded. At this time, all participants are on a listen-only mode. Following the presentation, we will conduct a question-and-answer session. [Operator Instructions].

Members of the investment community will have the opportunity to ask questions first. At the conclusion of that session, members of the media may then ask questions. Please be advised that this conference call may not be recorded or rebroadcasted without the express consent of Cenovus Energy. I'd now like to turn the conference over to Mr.

Kam Sandhar, Director Investor Relations. Please go ahead, Mr. Sandhar..

Thank you, operator, and welcome everyone to our fourth quarter 2015 results conference call. I would like to refer to you to the advisories located at the end of today's news release.

These advisories describe the forward-looking information; non-GAAP measures and oil and gas terms referenced today and outline the Risk Factors and assumptions relevant to this discussion. Additional information will be available in our fourth quarter Management Discussion & Analysis and most recent annual information form or Form 40F.

The quarterly results have been presented in Canadian dollars and on a before-royalties basis. Brian Ferguson, President and Chief Executive Officer will begin with an update on our plans for 2016, following that Drew Zieglgansberger, Executive Vice President; Oil Sands Manufacturing will provide an update on our operating performance.

Bob Pease, Executive Vice President, Corporate Strategy and President, Downstream will discuss refining results and our view of fundamentals. Brian will then provide closing comments before we begin Q&A portion of the call..

Thanks Kam. Good morning. 2015 was a watershed year for Cenovus and for our industry. We had a stiff headwind in 2015, which in 2016 has gone to hurricane force. We are well prepared to withstand it. Cenovus entered 2016 with significant balance sheet strength and is a stronger company than it was a year ago.

This was the outcome of actions we undertook in 2015, including achieving significant cost savings, executing a large divestiture, and issuing equity. While these were very tough decisions, they were the right decisions for our company. My key message today is that we will not sacrifice our financial resilience; this is not a time for half measures.

Today, we have announced another $400 million to $500 million in cost reduction. We are reducing our 2016 capital program by approximately $200 million to $300 million. We expect minimal impact on our previously forecasted production ranges for the year.

In addition to capital, we are aggressively pursuing a further $200 million savings in operating costs and G&A. On the operating cost side, we are expecting to see a 15% improvement in non-fuel oil sands operating costs relative to initial guidance. We also expect to see cost savings from further workforce reductions and compensation reductions.

While we now have more regulatory and fiscal certainty in Alberta, we need that same certainty from Ottawa before we will resume construction of deferred oil sands projects. We will only resume these projects if we can ensure balance sheet strength while doing so.

Lastly, the board has approved a dividend reduction from $0.16 per share to $0.05 per share. This is clearly a big decision and in this volatile commodity price environment we feel it is a critical step to help maintain financial resilience. Dividends remain a key component of our shareholder value proposition.

The significant improvements in capital efficiency and operating costs that we are now capturing should provide sustained value improvements when commodity prices recover. In a more normalized price environment, we expect to be able to deliver a combination of dividend growth and value added production growth. However, in the short run, cash is king.

This said we will preserve our financial strength to ensure that we can take advantage of our organic growth opportunities as markets stabilize. In addition to the changes announced today, Cenovus has $4 billion in cash on the balance sheet at December 31, an undrawn $3 billion credit line maturing in 2019.

Another undrawn $1 billion credit line maturing in 2017, no debt maturities until the fourth quarter of 2019, and 24% of our rest of year oil volumes are hedged at a floor price of approximately CAD 72 per barrel. We will continue to ensure our financial resilience without compromising our future.

I will ask Drew to provide an update on Foster Creek now..

Thanks, Brian. I would like to walk you through some of the things we are excited about and working on in our oil sands. You'll remember that during the last couple of years, we have been working on improving the wellbore conformance of our SAGD well pairs at Foster Creek. Better conformance means higher well productivity.

It has the potential to allow longer horizontal wells and wider spacing that results in lower capital requirements, lower F&D, and enhanced economics. The primary initiatives that supported our goal of improving conformance were downhaul instrumentation with various optimization enhancements along with steam circulation startup on new well pads.

With over a year of data now from these initiatives we are very pleased with the results. Where conformance at Foster Creek used to be in the 70% to 75% range on average, we are now seeing it at 90% which is similar to that of Christina Lake.

The improved conformance and wellbore optimization has accelerated production from our older SAGD wells which means we have seen higher well productivity from these pads after the optimization work. That accelerated production from older pads is followed by higher declines, which is expected.

Another positive outcome of improved conformance is the opportunity to revisit our Wedge Well strategy. Where Wedge Wells have previously helped to mitigate the impact of some poor conformance in well pairs, we now expect they will only be implemented on a case-by-case basis and may not be required between all well pairs.

We are seeing oil being efficiently produced by the initial well pairs with good conformance and fewer Wedge Wells should mean lower sustaining capital in finding and development cost. Now unrelated to this conformance, we had a higher than average number of wells down for servicing at the end of this past year.

As we have said before, we would expect there to be 3% to 4% of wells down at any given time on a field of this size.

Approximately 7% of our producing well pairs were offline at the end of the year for a variety of reasons including pump change outs, instrumentation change, testing different completions, regular maintenance, and some mechanical issues.

Foster Creek well downtime was within our expected range in 2015 but was concentrated in the second half of the year. Now given the deterioration of commodity prices in 2015, we chose not to address these wells as quickly as we would have in a higher price environment.

As commodity prices improve, we expect to increase our maintenance program to get that backlog down to normal levels. Lastly, the SOR at Foster Creek has been slightly higher in recent months, as a result of extending the life of some mature pads because we chosen to continue to inject steam.

In 2015, we made the decision to defer some sustaining capital, given the strong performance from these matured pads that we started to see in late 2014 and early 2015. There was always a balance of having extra pads ready and not deploying resources too soon in times of capital constraints.

Going forward, we plan to bring on seven new well pads at Foster Creek in 2016. Having new well pads to ramp up will be more efficient use of the steam capacity and will help grow production over the course of the year, well a few more of the mature pads move to co-injection.

We expect production to be in the 60,000 to 65,000 barrel per day net range in the first half of the year. The second half we expect run rates between 65,000 to 70,000 barrels net per day and we will exit the year higher than 70,000 barrels per day on a net basis.

We expect 2016 production and the SOR at Foster Creek to be within previously guided ranges. As 2016 unfolds, we will remain disciplined on operating safely, with a keen focus on reducing and controlling costs. We will also work towards having our assets in the best position possible to ramp up production when prices recover.

I will now pass the call to Bob for some thoughts on refining and fundamentals..

Thanks Drew. For the full-year 2015, Cenovus's operating cash flow from refining and marketing on a FIFO basis was $385 million. On a LIFO basis, operating cash flow for the year was $452 million. As discussed last quarter, the Wood River turnaround finished up in October, impacting Q4 throughput and results.

Fourth quarter refining operating cash flow was also impacted by a $15 million inventory write-down due to continued declines in commodity pricing. We are now in the seasonally weakest part of the year for refining, the December to February period.

Gasoline demand normally picks up in March which leads into what is normally the strongest for refining in March through September. The recently announced lifting of the U.S. crude export ban might have a slightly negative impact for U.S. refineries. However there were already exceptions being made to export some lightly refined products.

That said we remain positive about the outlook for refining with wide heavy differentials benefiting our heavy oil refining business and offsetting our heavy oil sales pricing. Just to talk about that briefly, we are currently seeing pricing pressure on the heavy crude market as the U.S.

Gulf Coast is importing more medium sour barrels primarily from the Middle East. Higher imports of sour crude have put pressure on both Maya and Canadian heavies. We still expect the WTI to WCS differential to be in the $14 to $15 range for 2016 even when oil prices recover. The Wood River debottleneck remains on track for start-up in Q3 of this year.

This light-ins processing project will add 18,000 barrels per day gross crude capacity with the ability to process more light or dilbit type heavy crudes. I will now pass the call back to Brian for some closing comments..

Thanks Bob. Cenovus has an excellent balance sheet and we continue to take steps to maintain our financial resilience and help ensure we come out of this downturn as a stronger company, continued discipline on capital spending, further operating in G&A savings, and execution of our business plan remain our priorities for the year.

Cenovus team is now ready to respond to your questions..

[Operator Instructions]. We will now begin the question-and-answer session. Your first question comes from Greg Pardy from RBC Capital Markets. Your line is now open..

Thanks. Good morning everybody. Just a couple for me.

First of all, I guess this may be for Brian, how should we be thinking about your dividend policy now? I mean understood -- understandable the changes you made given prevailing oil prices but once we move back into $55, $60 or something in that range how should we think about it going forward?.

Thanks Greg. Just to reiterate, obviously here in the short run, we're doing everything that we can to ensure that we continue to preserve the strength of our balance sheet, and as I said in the call notes, the old cliché goes cash is king in this kind of a business environment.

When we start to see a recovery in oil prices and you suggested in the $50 to $60 range, it's absolutely our intent that the things that we're doing right now and actually taking advantage of this environment to continue to drive our productivity upwards to drive improvements that are sustained in our capital efficiency and our operating costs will really set us up for significantly improved sustained free cash flow in higher price environments that you were describing.

I've always viewed that a dividend is an important form of capital discipline, it is a commitment to our shareholders, and I would expect in the environment that you were describing that we will have a pretty robust business model and margins will support us having an appropriate balance between dividend and the potential for returning to dividend growth as well as allowing us to allocate capital to the growth in the high quality oil sands assets that we have.

So that environment expect us to really be focusing again, once again on total shareholder return..

Okay. Very good, thanks for that. Secondly is perhaps this question for Drew, could you comment just on the decision then to defer the turnaround at Foster, I think you had plan for the second quarter. And then with respect to the timing on the new well pads coming on, are those going to come on more or less evenly throughout the year? Thanks..

Sure. Thanks Greg. So when we -- if we look at the performance of Foster Creek the surface facilities have been running very well. And when we look at our turnaround schedules we always start planning those well over a year in advance.

And so as we came in the middle of 2015, obviously we put it into the schedule for this coming spring and at that time, we were in a different price environment. The facilities today still continue to run very, very well. We don't have or don't see any real mechanical or process or even safety concerns.

We also don't have a regulatory requirement at Foster Creek this year for turnarounds or inspections. So really what I’m describing is the turnaround at Foster Creek is very much discretionary spending.

And so as we look at kind of the year out and trying to look at our cash and making sure we do the best we can with our cash balances, we made the choice to defer the Foster Creek turnaround and we'll look at it probably into the spring next year.

Obviously it's -- when we look at the performance it's been very good and there is nothing tell us right now that we're incurring any additional operating or processor or safety risks by deferring it. So we've made that decision.

On your second question around sustaining, so we are planning right now and we would always plan to actually have about seven pads come on this year at Foster Creek as far as new ones. They will be fairly scheduled just a couple per quarter kind of things. We do have a couple coming on here this quarter now.

So over the course of this year, you will see the production levels continue to come back and you'll see the SORs come down as we utilize some of that steam more efficiently in some new well pairs and pads over the course of the year..

Okay, great. And the last one for me is when you -- the -- well you had to shut in obviously in connection with the forest fires and so forth last year.

But were there any impacts as a consequence to that -- of that shut-in or is everything that you described around Foster either it was intentional or it was just I don't know unplanned or what have you? Just trying to understand if there were any impacts from the fire?.

Yes, so may be Greg I'll just take this opportunity may be to answer this question a little longer than we probably normally would on the Q&A session may be just to kind of help everyone. So but I will address in your questions specifically on the forest fire and the shutdown.

If we look back here couple of years ago with the Foster Creek and we looked at the conformance in the reservoir. I just want to remind everyone that our surface facilities and everything are running very well. The reservoir itself is actually running very well.

Our normal year-over-year downtime for wells is similar to what we've experienced in the past and but we did decide to defer some capital in 2015.

But if we go back to why we're actually very comfortable and quite excited and happy with the reservoir performance, it goes back to a few years ago when we looked at making some changes around doing long steam circulations, changing our line of design, putting inflow and outflow devices into our wells, going back to more instrumentation, relooking at our asset jobs and work over timings, removing some scab liners and changing and optimizing completions.

That has allowed all of this improved conformance that we started to see at the end of 2014 into 2015. We're now approaching what we see at Christina Lakes as far as about 90% good well conformance and that has some substantial benefits for us.

Obviously that improved conformance allows us to defer and potentially reanalyze whether Wedge Wells are required but also allows us to look at probably going to longer wells, going to wider spacing, fundamentally helps us achieve reducing our F&D cost closer to 30%.

Now given that improved performance that we saw at the end of last year, and into '15, we made the decision earlier last year to defer some capital for some future pads to preserve that capital.

Now as we started to see those production declines start to come into the late second quarter, into the third quarter, we did have to shutdown from the forest fire.

Once we came back on, we saw lot of that flush production come in Q3 and since July until the end of the year, I think everybody has probably noticed that decline has come on the production level. Now not to confuse that with any challenges that's actually the reservoir and the performance of the wells are probably better than they've ever been.

Coming off of that flush production from the fire, what's happened is, is that when we look at the timing of bringing on other sustaining pads that is the area that we have to probably enhance and bring the timing forward.

Now at the same time, the first half of the year we didn't -- we only had one well go down for any of our normal downtime that we had previously experienced. But at the end of Q3 and particularly into Q4 we had upwards of about 7% of our wells down. Now, year-over-year that still actually is well within our normal operating range.

That though couples with the decline that everybody is seeing. That's not that it's -- we've had an abnormal level in the fourth quarter and we're now getting onto those wells.

So there is nothing in particular from the fire that is causing any performance or concerns whether it's on the surface facilities or whether it's on the downhole or the performance again they are all running very well? And I will actually address the SOR too just in case you may come back with that question.

So we continue to inject steams at maximum rates and it's because we are actually running the steam and water facilities at or above capacity. So they continue to run very well. We've chosen to continue to steam and extend the life of some of these matured pads which is driving SOR higher but again this is on a temporary basis.

And so as we bring on some more new pads this year, you will see the production come back up from a production level with the corresponding SOR coming down. But again just to reiterate, the current production levels are temporary, the reservoir development and the work we've done over the last few years has turned out very well.

We're very happy with the performance. We actually put some data on our website this morning to kind of show some of that actual performance over a kind of a big part of 13 pads and so year-over-year actually we continue to see good performance and right now the levels are temporary..

Your next question comes from Paul Cheng from Barclays. Your line is now open..

Hi guys good morning. Brian, if we're looking at your current spending level, what is the underlying decline curve is going to look like if we stay at this level over the next couple of years for your base operation.

And also whether that spending level that you have for the oil sand would be able to sustain the production or we also going to start seeing decline?.

Thanks for the question, Paul. The capital that we announced, reductions we announced today. So the -- now our capital spend is in the $1.2 million to $1.3 billion range, the majority of that's in the oil sands, it allows completion and startup of two new phases at Foster Creek and Christina Lakes.

So we actually see coming online over the course of this year and 2017 an incremental 100,000 barrels a day on a gross basis, at a capital spend at this level will allow us to continue to actually grow our production, in particular, oil sands production over the next three year period..

No, I understand on the gross side that I'm talking about you're excluding the new phases that is bringing on-stream, by looking at the -- let's say Foster Creek from Phase A to G and Christina from Phase A to F those that with this kind of spending, we would be able to keep those at the different capacity or we actually may see decline, and also that whether the non-conventional, we would see decline?.

We will. On the oil sands specifically no decline continuing growth at this level of spending. The -- with regard to the conventional business that is something that has got a great deal of flexibility; we simply need to choose how many rigs we want to run.

And then we can look at and in fact we have the opportunity to more than offset decline on the conventional side if we choose to do that depending again on the strength of a balance sheet..

No, I totally understand I'm just saying that your spending at today's level what that decline rate may look like for the conventional side, for the conventional side?.

So we've reiterated and updated our guidance that is on our website. And I think right now what were the conventional oil is what? Right now we're talking about 10% decline year-over-year in the conventional volumes that's a combination of choosing to spend less and the divestures..

Okay. Two final question. One, I know that you also picking some additional cost cuts just curious that with what you expect as the activity level for the next couple of years.

Do you believe that you right now have the right size of your organization or that you may need to take some additional action in on top of what you have announced on the headcount side? And secondly, that I think it is no secret that rating agency probably across the board cut the rating for everyone either one, two, three notches just want to see in your discussion with the rating agency what is your overall impression that where you're going to fall in that and also that do you foresee any meaningful impact on your funding cost as well as for your operations?.

So, thanks for the added questions, Paul. With regard to staffing, yes, as we indicated in the news release, we do anticipate there will be additional workforce reductions. We're also looking at all aspects of our compensation costs.

So anticipate there is also going to be reductions in our compensation structure that will align with today’s business environment. With regard to your question on rating agencies, I'm going to ask Ivor Ruste, our Chief Financial Officer to respond to that one..

Thanks Brian. Good morning, Paul. Certainly we've had a number of discussions with the three rating agencies that we deal with. Rating agencies look at rating the debt that we issued and over the course of the last few months S&P did downgrade us one notch in October 2015 still with an good investment grade and DBRS did likewise in January.

Discussions with Moody's continue at this point in time. I reinforced with -- reinforces the benefit our focus these days in maintaining good balance sheet strength and liquidity. We don't need to borrow money and therefore the rating on that any new debt is not relevant at this point in time.

But discussions with Moody's who have a deeper price deck reduction than the other two rating agencies continue to go on at this point in time and we will let you know if there is any change there..

Your next question comes from Mike Rimell from UBS Securities. Your line is now open..

Thanks. I just have a couple of questions. First one is just around the offline producing well pairs, can you just help me understand how I should think about, I got the trajectory of bringing those back on. I guess the decision was made to sort of leave them offline due to low commodity prices but obliviously commodity prices remain depressed.

Is that something I should expect to pick up in the first quarter or is it commodity dependent or how should I think that going forward and then just a quick follow-up one after that? Thanks..

Thanks, Michael. I would ask Drew to respond to the question on the timing of workforce..

Yes, thanks Mike. So as we came into mid or end of Q4, we had up to about 18 well pairs at Foster Creek that were down. As I alluded to in my call notes, we made the choice not to publicly as aggressive to get those back on. Now as we've come into February though, we have gotten to most of those wells and they are starting to come back on here now.

So you will start to see the well count come back up in the corresponding production. I'll may be just add to that too those in case the data doesn't show we have about 30 Wedge Wells that are down at Foster Creek now that we actually don't plan to bring back on.

Again, as I said earlier with the excellent performance that we're now seeing out of our older matured wells and obviously with the new ones as well, we don't believe these Wedge Wells are now required to still get the production levels and the performance out of the reservoir and the recovery, if anything we can again get the recovery the resource and have sustained good production levels and reduce our cost.

So that's how we're planning to manage it now..

Great, thanks.

So I guess the decision originally, I mean what's the originally commodity related or was there something else at play there or is this sort of an expression of a view of commodity prices rising soon?.

Yes may be just to follow-up Mike the -- it was really a cost driver as far as how quickly we got back onto the wells, as far as why they're down again those are just out of normal operations and maintenance and downtime that we've experienced over the number of years.

They just happen to all have occurred at a very discrete time period right at the end of Q3 into Q4. So it really was a cost and value benefit of how quickly we got to bring those back on and as I said they will start to come back on and you'll see some production increase here shortly from that.

But the reason that they were down are just normal routine maintenance and historical levels of maintenance and downtime..

Perfect, thanks.

And then just last quick one from me, what's driving the increase of fuel cost at Foster Creek is that high reservoir or?.

Yes, primarily Mike that's correct. If you look on a per unit basis with the SOR where it is right now that would be the primary use on the construction. Again, we've chosen to run the facilities full out, the steam and the water plant side and they're performing very well, again at or above capacity on those pieces of facility.

So then your usage continues to be high from a gas consumption..

Your next question comes from Chris Cox from Raymond James. Your line is now open..

Thanks for taking my questions. Most of my questions are probably for Drew on Foster.

The first one I have here, is just how should we think about productivity of that project given some of your commentary today and a more detailed guidance provided and may be more specifically looking at the planned exit for the year just over 70,000 barrels a day and that still seems to me like its below capacity the existing assets even before we give effect the start of the Phase G.

So maybe you would be handicapping our expectations a little bit around the productivity of the base operations and specifically for phases AD?.

Yes, thanks Chris. So if I mean your question really is more of a function of timing.

So when Phase G comes on here and production starts to come in the third quarter, I mean remember that the steam circulation and all this improvement that we've made it now also they'll make sure we -- everybody remembers that it will take up to 18 months for ramp up. So Foster Creek phase F is still just on the backend now of ramp up.

Again now it's a function of the timing and matching the current declines of the base. So I will just reiterate though that the performance of our historical well pairs and pads has actually never been better and so that is we have a little bit of catch-up on sustaining pads to do now to utilize the steam more effectively.

But again at the same time, if you look at Phase G as it comes on and the A through G capacity is another 12 to 18 months for that ramp up. And also you have to remember that under normal operating conditions on a calendar year we target the 90% to 95% utilization of the facility and the overall asset.

So right now, I would actually counter your handicap to say that the reservoir performance continues to be proven, it’s probably never been better and now it’s a matter of getting our steam utilization and our efficiency of the asset to the appropriate level..

Okay. That helps and then may be just still getting back to the steeper declines you are seeing here from improved performance. It still does seem like there -- some of the recent declines in production for project came as a bit of surprise for you guys especially we just think about, previous guidance from management.

And so was it the magnitude of declines from some of the more matured wells or the timing of it that that kind of came as a surprise for you and does any of that impact your expectations for recoveries out of those areas?.

I'm going to ask Harbir to respond to that one, Chris..

Hi, Chris. So a number of things happened after the fire. We did a lot of downhole completion workover changes which really got the wells humming pretty good. And so you -- as a result of the really great production and you can see that on some of the charts on our pads, we had higher declines than we would normally have had but that was as expected.

And so the recovery factors are still going to be in that 70% type recovery factor but without Wedge Wells whereas before we were trying to get it with Wedge Wells.

So it was really the excellent performance at Foster in the third quarter, the flush as well as all the things that we've done over the last two years that resulted in the higher decline now. If we look at the last three year between Foster and Christina we only brought on five sustaining pads.

This year we're bringing on nine sustaining pads, so which is two at Christina and seven at Foster. And so that tells you that the declines aren't really an average year by year, they do fluctuate according to when the wells are coming on and what stage of development they're at.

And that's being reflected in the higher sustaining pads coming on this year..

Okay. And then I guess my last question here is on Foster, it does seem like the ramp up at Phase F is also may be a bit longer than expected may be having quite hit where you would have expected that project to get to.

May be if you could just elaborate a little bit on if anything is limiting the ramp up here a bit?.

Phase F is performing exactly the way we expect it. The only thing is on the base decline, we’re little bit behind on the sustaining pads to preserve capital. So it has got nothing to do with Phase F, it's really the decline and lack of investment in 2015 on more sustaining pads, which is being caught up this year..

Okay.

So no issue of getting to 30,000 barrels a day for Phase F and keeping it there?.

No, no, we don't have any issues with Phase F. The Foster Creek is performing better than it ever has in the last 15 years..

Okay, thank you all guys..

And Chris, Brian here. I would just add that so we’ve had our full reserve evaluation, you’ve seen an increase overall 7% in our reserves. We actually had McDaniel's has given us higher recovery factor and actually added reserves at Foster Creek and they've obviously gone through on a well by well basis over the course of this year.

So you got independent valuation that supports what Harbir has just told you..

Your next question comes from the line of Arthur Grayfer from CIBC. Your line is open..

Good morning. Two questions for me. The first one is around the lower non-energy OpEx of FCCL.

I’m under the impression that part of the lower OpEx is due to a higher threshold for what requires maintenance and what doesn't; is that a fair assumption? And if it is a fair assumption how do I think about the risk or the volatility around production levels with that as a percentage?.

So I -- Art, we had a little trouble hearing you there. I think you were asking us why are non-fuel operating costs at FCCL are being reduced and I'll ask Drew to respond to that..

Yes, hi Arthur. So I’ll just maybe give a little bit of color on cost reductions overall and all of our drivers capital and OpEx actually. We still haven’t plateaued in basically all of our drivers.

So we’re still continuing to see good cost improvement around the teams working on their processes, re-evaluating some of the risk and some of the work that we need to do versus nice to do as well as working with our vendor and supplier base to continue to get good productivity and other cost benefits.

So overall across all of our drivers, we’re still seeing continued improvement. When we put our budget and our estimates together back in August and September to inform our budget, we were in a different environment, we were still seeing substantial cost savings.

If you look at what we just released here on the calendar year for 2015 we were $540 million under what we had planned from expense standpoint.

What we’re doing right now is just putting in a lot of those savings now relative to our estimates from the fall that inform the budget and so a lot of our cost savings we’re seeing has just continued to improve in our cost structures.

Now at the same time, we are evaluating and continue to evaluate whether we need to continue to spend on some pieces of our operation.

And the turnaround at Foster Creek is a great example where the facilities are running very well and they continue to perform very well, we have no indication of any operating or other risk that is outside our normal operating parameters.

And so we continue to choose to be very disciplined in what we’re going to spend money on and taking an acceptable level of operating risk to continue to run our facilities that we’ve experienced here for the past year..

Okay.

Can you hear me a little bit better now?.

Yes, thank you..

Okay, perfect. Thank you.

Okay, so that is only the question I wanted answered was you do feel comfortable with just focusing on the need to have as opposed to the nice to have, you are not increasing the risk profile or the production volatility by any meaningful way?.

That’s a very good summary, Art..

Okay. And then the second question I have, you highlighted that with the CapEx cuts on FCCL, there is been minimal impact to 2016 production levels.

Can you elaborate on that perhaps beyond that timeframe? Should we assume there will be some impact may be in '17, '18 or down the road?.

No, there is no impact in fact we're planning to continue to see our volumes grow as we bring on the two new phases at Christiana Lakes and Foster Creek. So this capital program at this level allows continuing growth in our core assets..

[Operator Instructions]. Our next question comes from the line of Fai Lee from Odlum Brown. Your line is open..

Thanks, it’s Fai here. Brian in terms of just looking forward and hindsight is always 2020, but would you consider swapping out some of the U.S. dollar denominated debt with Canadian dollar denominated debt after you get recovery.

Just given the correlation between the Canadian dollar and oil prices because that seem that would give better hedge during times that we’ve seen recently?.

Thanks for the question Fai. I will ask Ivor Ruste, the CFO to respond..

Thanks Fai. I think we continue to evaluate all the opportunities there in a changed foreign currency environment. There are no specific plans at this point of time we are looking at swapping some of our U.S. dollar debt exactly but nothing substantial to change our plans. We have the maturities in that long-term debt until October 2019 at this point..

Yes, I'm not suggesting you should consider doing it now because just given where the dollar is at this point but may be once things improve may be something to consider?.

Appreciate that and we're looking at those things as well. Thank you..

Your next question comes from the line of Nima Billou from Veritas Investment Research. Your line is open..

Thank you very much. Appreciate it. See I saw last time you had dictated that you would reduce CapEx if you saw the environment start to deteriorate and you've done that, think you guys are managing very prudently.

I guess what I wanted to know is what is your priority once prices do recover, what signal would you look for because it would seem now would be a good opportunity, or is a complementary company, make energy sort of really speaks out, you guys have the financial resources, if you do a combination of a share and cash deal, it would seem very complementary.

So I guess I’m trying to decide what’s the priority once prices recover and what can you do or what would you think of doing with these financial resources.

I know you don’t want to put the company at risk but you guys have an advantage, you set yourselves up very well from financial perspective, you still got $4 billion in cash on the books, so what would cause you to use it and when?.

Well thank you for the questions. As you observed, yes, we are in a very strong position in terms of our balance sheet and as we've said all the actions that we’ve undertaken are designed and focused here in the short run to ensure that we preserve our financial strength.

First call on capital for us as we continue to go forward and when we started to see some price recovery we will be on choosing the timing of reactivating additional investments in our organic portfolio both in the oil sands on the conventional side, as to any potential acquisition activity, we do continually assess opportunities there but beyond that I will not comment on what we are considering..

Your next question comes from the line of Nia Williams with Reuters. Your line is open..

Just going back to the wells at Foster Creek that you deferred maintenance on last year, is that now a part of the structure going forward if wells go down, you will hold off maintenance while commodity prices remain low?.

We will continue to be very, very diligent about our cost structure and we do everything that we can to look at how we aggregate bundle just how we actually manage our operations and we don't go back into just one workovers, we group them.

So we're looking at everything we do both in our process and on our pricing basis to continue to drive that at capital efficiency and operating cost reductions..

Okay.

So is that something we can expect to see again if more wells went down you would hold off will remain around or below?.

Expected to be very disciplined around how we choose to spend capital as we go forward..

Your next question comes from the line of Jeremy van Loon from Bloomberg News. Your line is open..

Good morning, Brian.

Just a question for you kind of on technology and cost cutting, are you guys close to having anything that would really make a dramatic reduction in your cost structure on the oil sands side that you could implement on existing operations?.

Short answer to that is, Jeremy, yes we look at that quite a bit, we're really quite excited about solvents and opportunities there.

But perhaps what I could do is ask Harbir to comment briefly on some of the technologies we’re working on that he is quite excited about?.

So one of the first ones is really our zero-based modules. We’ve been able to cut our as you know two-thirds of our capital over a 30-year period is on sustaining pads and wells.

And so if you can cut something on the pad side, which we've been able to cut about 40% to 50% on the metal which means an equivalent savings in terms of cost and those pads are starting up towards the end of this year and into 2017. Now that will apply to every project in the future for the next 50 years. And Brian talked about solvents.

We are continuing to look at that. We know propane prices have dropped to basically nothing. So we're looking at to see we can implement that solvent in the future. But right now we are testing butane. So we continue to test all those solvents to see what prices are and to see which one will apply.

And the other one I'm really excited about as we haven't changed our facilities in decades. Today we're testing out since 2015 and into 2016 we're testing technologies that we think a project like Telephone Lake will have a 60% less footprint than a Foster or Christina has been built at.

And that is going to have a major cost initiative in terms of looking at 30% type savings and in terms of cost structure on our facility. So that's going to be major. So we're looking at more downhole as well as surface enhancements to make us very competitive with light tight oil in North America..

And just a follow-up I mean on the first two measures you mentioned I mean assuming you could make some of those changes to existing operations, what level of cost savings could you have per barrel if those were implemented?.

Yes, so we're looking at F&D coming from about 12 to 13 bucks to single digits. So a 30% improvement is what we're looking for and that's without solvents and without this new downhole, sorry without the new design on the surface, this is mainly the downhole stuff that we would be working on.

So expect us to exceed more than that 30% in the future, if everything works out this year..

And that would be over what kind of timeframe?.

We could start implementing that on a new project which would be once we trigger probably in the next three to five year timeframe..

Your next question comes from the line of Shawn Fulser from Mergermarket. Your line is open..

After the sales of the royalties deal that you did last year, are there any other assets that you think would be non-core that might capture good return or growth on the block?.

Yes, we do have some convention -- part of our conventional business that small relatively small. We have nothing of the order of magnitude dollar wise compared to the divestitures we did last year.

But we do have an ongoing divestiture program and as we see markets more suitable to asset sales, we will be looking at continuing to divest some of the non-core conventional part of our business..

Okay.

And will that include refineries, are you still committed to the refineries or would you may be consider selling them part of the interest or all of them?.

Our downstream is a core component of Cenovus's strategy and it is not for sale..

Okay. And just finally one last one, you said that without certainty from the federal government on environmental rules your future oil sands projects aren't going to go.

Can you comment what certainty looks like and then if you don't get that certainty what would you do with those assets?.

So the assets continue to be core to us and it's really a question of timing of when we choose to apply capital.

What we're looking for now I anticipate that we will see the clarity later this year is around on the fiscal side that are there any income tax changes that are coming on the environmental side, what's going to be involved in new B process, new C process those sorts of things. But I do anticipate that we will have clarity on that later this year..

Okay.

And then just I’m sorry last one a lot of producers are selling off midstream assets is there any consideration given to that for Cenovus?.

No, in fact we bought some midstream assets last year, the unit train loading facility at unit train loading facility at bitumen..

Your next question comes from the line of Tonya Zelinsky from Upstream International. Your line is open..

You spoke to of course workforce reductions. I'm wondering if you can shed some light on what kind of numbers you are expecting to see and when you expect to see them..

Thanks for the question, Tonya. No I’m not in a position right now to respond in terms of the number of staff, we don't expect it to be order of magnitude of the changes we -- that we initiated last year.

We are going through first and foremost and focusing on and the timing of work that we need to accomplish and want to accomplish and the cost reductions that we feel we need to achieve and then we will be assessing what level of staffing is required to accomplish that work..

See you haven't determined what areas you might be looking to make the cuts?.

We will be looking at all areas of the company to make sure that we are staffed appropriately in all areas..

And then lastly can you just comment on how many total reductions you've seen so far since let's say 2014?.

The reductions over the course of 2015 were approximately 24% or 1,500 people..

Your next question comes from the line of [indiscernible]. Your line is open..

I want to thank you. Actually my question has been answered. Thank you..

Thank you..

There are no further questions at this time. I would like to turn the call back over to Mr. Ferguson..

Thank you for joining us today. The call is now complete..

Ladies and gentlemen, this concludes today's conference call. You may now disconnect..