Foster Creek receives regulatory approval to expand

Cenovus Energy Inc. (TSX, NYSE: CVE) has taken a significant step forward in the expansion plans for its Foster Creek oil sands operation after receiving regulatory approval from the Alberta Energy Resources Conservation Board (ERCB). The approval covers three phases of expansion (F, G and H), which are expected to increase Foster Creek’s production capacity to 210,000 barrels per day (bbls/d) from the current 120,000 bbls/d.

"The regulatory approval of these expansions at Foster Creek is another milestone reached in Cenovus’s efforts to expand production and increase net asset value,” said Brian Ferguson, President & Chief Executive Officer of Cenovus. "With these approvals, we believe there is a step change in the value of this project as there’s increased certainty around the schedule and timing of the expansion.”

Each of the three phases that have been approved by the ERCB is designed to add an additional 30,000 bbls/d of oil production capacity to the Foster Creek facility. The next step for the expansion project is to receive endorsement from the Foster Creek/Christina Lake partnership with ConocoPhillips.

Engineering on phase F is already underway and preliminary ground work is expected to start soon. Additions to plant infrastructure will happen first, followed by pipelines and well pads. Cenovus expects to employ about 1,000 people to complete phase F. First production from this phase is anticipated in 2014. Production from the other two phases is anticipated in 2016-2017.

Cenovus expects it will be able to maintain its industry-leading capital efficiencies in the construction of these three phases.

"In addition to expanding our current operations, our teams are working hard to prepare for regulatory reviews of several new, additional projects,’’ Ferguson said. "We anticipate our combined expansions to result in a five-fold increase in our oil sands production by the end of 2019.”

A regulatory application for an additional Foster Creek expansion, phase I, is expected to be submitted by Cenovus in 2014. It’s anticipated that phase would add another 25,000 bbls/d of production capacity, bringing the total capacity at Foster Creek to about 235,000 bbls/d in 2019 from current levels.

"The staff members at Foster Creek have helped that facility earn a reputation as one of the most innovative and efficient oil sands operations,” said John Brannan, Cenovus Executive Vice-President & President of the Integrated Oil Division. "As we move forward with these expansions, we will draw upon the knowledge we’ve gained from the current operations and make improvements to help reduce our costs, decrease the amount of energy needed to produce the oil and minimize our impact on the environment.”

Foster Creek began operating as a steam-assisted gravity drainage (SAGD) project in 1996 and became the industry’s first commercial SAGD project in 2001. There are now about 160 wells producing more than 100,000 bbls/d of oil. In February, Foster Creek became Alberta’s largest producing SAGD project to reach payout to date for royalty purposes, reflecting the success of the operation.

Construction is progressing on expansions at Christina Lake, Cenovus’s other producing oil sands asset. Phases C and D are each expected to add an additional 40,000 bbls/d of production capacity with phase C projected to begin production in the second half of 2011 and phase D scheduled to start producing in 2013. That would bring Christina Lake’s expected total production capacity to 98,000 bbls/d in 2013 compared to the current 18,000 bbls/d.

An application for the next oil sands project, Narrows Lake, is now with the regulators. That operation is expected to have output capacity of 130,000 bbls/d and, if all goes as planned, may begin production in 2016.

Drilling of a SAGD pilot well pair is complete and construction of the associated facilities is underway in the Grand Rapids formation of the Greater Pelican Region with a regulatory application for a 180,000 bbls/d commercial operation expected to be filed by the end of 2011.

Delineation drilling and seismic work continues on Cenovus’s other properties in order to gain additional data to contribute to future regulatory applications.

NOTE: Production numbers in this news release are on a gross basis. Cenovus has a 50% ownership of Foster Creek, Christina Lake and Narrows Lake with ConocoPhillips.

Cenovus Energy Inc.

Cenovus Energy Inc. is a Canadian, integrated oil company. It is committed to applying fresh, progressive thinking to safely and responsibly unlock energy resources the world needs. Operations include oil sands projects in northern Alberta, which use specialized methods to drill and pump the oil to the surface, and established natural gas and oil production in Alberta and Saskatchewan. The company also has 50% ownership in two U.S. refineries. Cenovus shares trade under the symbol CVE, and are listed on the Toronto and New York stock exchanges. Its enterprise value is approximately $25 billion. For more information, visit www.cenovus.com.

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This news release contains certain forward-looking statements and information about our current expectations, estimates and projections about the future, based on certain assumptions made by the Company in light of its experience and perception of historical trends. Although we believe that the expectations represented by such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct.

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