Cenovus Energy (CVE.TO)

He does not have kind thoughts on it. It is cheap relative to good will. The debt is 50.4%, not overwhelming, but it is rising. He thinks they need to decide if they are just a thermal oil player or conventional. You can't be both. Sty away.

He likes the sector. Heavy oil play can make some sense. The balance sheet is worse than most players in the sector. Growth is lower than competitors. He has a bias towards the entire sector. A rising tide might lift all boats.

Large caps will underperform the mid-caps. This one is different because of the high leverage to oil. As a large cap liquid name if you are bullish in oil ($65 or higher), okay but otherwise look at WCP-T.

He's added to his position. The market didn't like them buying Conoco's assets (overpaid); they took on a lot debt. But the new CEO has done well cutting costs. They've been hit by the WCS differential. This has a lot of room to move higher, levered to a higher oil price. De-leveraging will happen quickly with rising oil prices. This week's oil pullback is a buying opportunity. (Analysts' price target: $16.27)

Had there been 4 top picks this would have been the fourth. He really likes it. They bought Conoco assets last year. The street didn’t like the deal and lost confidence in Management. They have new Management now with a new CEO that is on the path of right-sizing the company and its balance sheet. It is looking really well now, particularly if we go to a 80 – 90 dollars barrel of oil.

(Past Top Pick on Oct. 3, 2017, Up 10%) Oil prices are up and he's positive energy. With a new CEO, he likes their new direction. He's been with this since its bottom (he averaged down). Has great long-term assets. But they've enjoyed a great run for the past six months so he may exit.

The story is turning around here. He is modeling 55% cash flow growth 2018 to 2019. Trades at 5 times 2019 cash flow which is reasonable. The problem here is their balance sheet is 3.5 times debt to cash flow. This will come down if oil prices stay at these levels. A name you can own if you like oil.

Their Q1 production was 488,000 boe/day because of all their acquisitions but they reported losses from their hedge book. Their operating margin was $157 million cash versus $305 a year before, but they spent $522 million. The company has $9.8 billion of debt, up from 9.5 billion at the end of December. They have about a half billion dollars of assets for sale. They have $19.4 billion of equity. Book value (ex goodwill) is about $13.92, which is higher than the stock price. The dividend is about 5 cents per quarter. They have a new CEO. It is not clear where their growth will be. Schachter thinks they should focus on their thermal operations and get rid of their conventional-world assets. He is concerned about the balance sheet. The debt to equity ratio looks tolerable. He compared it to Whiting Petroleum, Chesapeake Energy and WPX Energy, all well-known American energy companies that are treated as very exciting but have much worse balance sheets. He sees the Canadian energy companies as value stories compared to the American ones. The bargains are in Canada.

He expects the heavy oil differential to have recovered in a year’s time. Yield %. (Analysts’ price target is $ )

He does not see any improvement in the technical chart – it is still in a down trend. There is some evidence of a bottom formation, but it is early. He would take profit above $11. He is weary of this one.

They put some hedges on and then the differentials blew out. A lot of US investors are taking positions right now. Crude by rail contracts are being signed. Keystone could get up and going any minute now. They bought the best oil sands properties. Eventually you will see this company recover.

CPG-T vs. CVE-T. Seasonality starts Feb 25^th. Today they announced a draw from inventory rather than a build. This might be enough to get this one going. He would prefer CVE-T a little bit more.

Since the acquisition almost 3 years ago they have made divestitures and paid the debt down. You could do worse.

She is not buying energy now because of her overall negative view of the Canadian energy market at this time. If she was going to buy at this time, she would buy a large producer (which Cenovus is) but she would prefer CNQ because it is more diversified a

Leery at $9 level. If it closes below $9 it's got plenty of room to fall.