Cenovus Energy (CVE.TO)

A restructuring story, so will take some time. Has a new CEO coming in and will be cutting costs. Still has very good production. Expects the company to tick along. (Analysts' price target is $14.50.)

Had a tough year and their share price tanked. It’s starting to see a bit of a turnaround, and there has been some nice appreciation over the last couple of months. Pulled back in the last few weeks with the sector. They started to eliminate debt, which is a huge thing for them, because their debt ratios were off the charts. Have had some strategic asset sales which is bringing down the debt, and the market is liking that.

Likes the ConocoPhillips deal. It appears the market might be coming around on this finally. If you take the negative view, it is like they purchased more oil sands assets and deep basin, where they don’t really have expertise, and now they are going to have to sell assets into a bad market. However, those assets they are selling cash flow even at $45, and there is lots of money out there looking for those types of assets. Dividend yield of 1.6%. (Analysts’ price target is $13.50.)

Not one of his favourite energy stocks. Made one really bad acquisition at the wrong time and piled themselves up with debt. The CEO announced he is leaving, but in the meantime is trying to undo some of the mess. He would rather go for a well-managed company with good assets and that will be growing.

There was the crash in oil prices, and this company didn’t restructure as fast as everybody else, and got really hurt. Recently did a very big acquisition and had to issue a bunch of shares, and the stock has fallen even more. This is probably the time to own the stock because of new management coming in, who will probably exit some businesses allowing them to pay down some debt. Dividend yield of 1.6%. (Analysts’ price target is $13.)

He has problems with them. It is not a nice balance sheet. It was a thermal operator and now they are a conventional operator and people will take time to know they are good at both. It has a couple of dollars downside on it.

The amount of debt is a concern, which is why they’re disposing of assets. Even with that leverage relative to its peers, free cash flow is lower. They don’t know who the next CEO is going to be. There is no reason to own this.

(A Top Pick Nov 4/16. Down 40%.) Had bought this with its clean balance sheet, etc. and then they made a gigantic acquisition which transformed it. However, they’ve been very successful at disposing of some assets, and he expects they will close on some more dispositions before year-end. They know they have to address the balance sheet problem.

Lower lows and lower highs, it is down, down, down. The whole energy space is challenged for the next number of years. We had a pull back. He thinks there is value here. It could take 6 months or a year before we realize that value. This company has company specific risk. He does not know if the deal they are going to do will be accretive or trouble like the market thinks. You need to see the trend stop going down. We might have some support coming in here. If it holds and we take out some intermediate highs of a few weeks ago, you can gain confidence that the bottom is in.

This is really out of favour, but in their last quarter they really surprised the street with a big tax rebate and a few other things that really helped boost their numbers. Longer-term, this is probably a good name, but still probably a “no touch” for 6 months to a year. Thinks the worst is over, but it may take a while for it to start reacting again.

He would stay away. Just reported with $.71 in cash flow versus $.53. The problem is, $13 billion of debt against $18 billion of equity. They are trying to sell $4-$5 billion of assets to get the balance sheet in line. The only buyers are a few Canadian companies. This company was doing very well in thermal, but by going in and trying to be Pan-Canadian again, getting into the conventional oil/gas business, the market is skeptical and the stock is going to go much lower.

They made an acquisition, and everybody thought they overpaid. Now they have a balance sheet problem, so before you get involved, wait to see what they dispose of and how much they get for it. She wouldn’t rush into this until they fix the balance sheet a little.

The chart is not looking too good. There is a distinctive trend down. It may be trying to form a base, showing an early sign of bottoming. You want more than just early signs. Seasonally these stocks do well from January to April.

Cenovus Energy (CEV-T) or Algonquin Power (AQN-T) for long-term gains and dividends? All interest sensitive stocks in a rising interest rate environment tend to pull back, especially so in a sharply rising rate environment, which she does not anticipate in Canada. If we get these pullbacks and high-quality utilities, it is a good time to get in. If you want yield, Algonquin Power is definitely the stock to get into. This one is an energy oil sands producer, whose cash flow is going to be largely predicated on what crude oil does.

This has been particularly hit with the acquisition they made, which they had funded with debt, and now have to figure out what to do with the assets they have to sell. As crude prices come down, the value of the assets they had hoped to sell, isn’t what it used to be. Be wary of companies that have too much debt. There are a lot better plays in the oil patch with a relative higher risk/reward.