Cenovus Energy (CVE.TO)

Oil is recovering, although in fits and starts. This is a well-run integrated oil producer. He would favour Suncor (SU-T) given the longer reserve life and the better assets as well as the downstream operations. However, he wouldn’t have tremendous concerns with this company.

(A Top Pick Feb 29/16. Up 17.19%.) Low cost oil sands producer. A lot of US investors are more enamored with near-term production growth that might come from some of the shale producers in the US, but they are ultimately going to find that decline rates are going to hurt and they’ll have to replace the reserves. This company’s oil reserves are almost infinite.

(Market Call Minute.) Not a lot of upside. They have good projects, but there is not a lot of big torque in the projects to get you excited. You won’t go wrong Holding this though.

(A Top Pick Oct 8/15. Down 6.95%.) During this last year, it actually reached $14.50, so it has had a nice recovery. This outperformed when oil companies were getting creamed, because it had the best balance sheet. The attraction is that they have good growth coming. They expand their SAGD operations in the oil sands in chunks, so he believes they have 2, maybe 3 50,000 barrel chunks they can do over the next 3 years or so.

Companies in the oil sands are not exactly favourites in the market these days, and yet here is a company that really seems to have their heads around what they are doing. They have huge interests, not only in the oil sands, but in a couple of refineries as well. Has a very pristine balance sheet. They are probably one of the lower cost producers in their area. Good management and good balance sheet. Dividend yield of 1.08%.

He would classify this as a “hold”, but has a 2-3 year timeframe in mind. You need higher prices. The company has done a good job in putting its balance sheet back in shape. It is a relatively low cost operator in the SAGD area. He likes this on a longer-term basis, but currently it is not one of his favourites.

(Market Call Minute.) He would sell this and short it. The stock is overvalued.

Thinks the long range outlook for this is quite good. Had some problems recently. In the Foster Creek assets, the production levels quarter after quarter have disappointed a little. Cut the dividend almost 70%. Also, reining in a lot of head office spending. Could see them having a compound annual growth rate in production pushing 8% over 2018-2020. This would be a long term hold. Dividend yield of about 1%.

(Top Pick Jan 16/15, Down 34.60%) There has been a lot of news on operating inefficiencies, but they have corrected those. Their oil sands costs are the lowest of their peers. The dividend cuts were hard to take, though. He sticks with a company for the long term and takes opportunities to average down. He thinks the dividend will increase when oil prices recover.

This is quite challenged at this time. Have raised some capital, cut the dividend and sold their royalty package. Essentially with commodity prices where they are, the debt has ramped right back up again.

(A Top Pick Feb 26/15. Down 19.93%.) This company really addressed their balance sheet problems. Did an equity issue, sold royalties, cut their dividends, etc. Amongst the senior producers, this is probably in the best shape right now. Have long term assets and have delayed their SAGD production until 2017 and later.

Often companies make long term decisions where they are prepared to go below the all in cost of production to generate some level of cash flow. There is not a debt issue with CVE-T. They probably have the best balance sheet in Canada. They are not generating any significant earnings, but this is a long term gain. There is some science in shutting down production and then bringing them back when prices are better. You need this downturn to be at least another year before you will see shut-ins.

For a 2-3 year outlook, you are possibly going to have to see oil pick up substantially. Cash flow outlook for this year and next is pretty dismal. He wouldn’t put new money in this year.

(A Top Pick Jan 16/15. Down 12.9%.) At the January level it was good to be averaging into the position. The biggest way to make gains is having the confidence to average into a stock you have confidence in when it is down. This company has the best cost structure of any oil sands company and still pretty good growth ahead if oil prices rise.

It had picked up quite nicely before the oil price turned. He likes this company because they really addressed their balance sheet challenges. They have one of the best balance sheets in the business now.