Cenovus Energy (CVE.TO)

(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.

There is the potential of another oil/gas company looking into this company. An interesting company because of their assets. Trading at 7X forward price to cash flow, but he is confident in their ability. A very healthy balance sheet with $5 billion in cash.

(A Top Pick Aug 26/14. Down 45.02%.) He has stuck with this. It has been one of the more proactive in this environment, right from the beginning. Feels they have done a very, very credible job. Operationally they seem to be doing fine in their latest quarter. One of those companies that will prosper going forward.

(Top Pick Oct 2/14, Down 38.01%) Their cost structure is amongst the best in industry. They have done their best to get through the downturn and that is why you own this. They cut their dividend recently, but they are still the highest yielder amongst the group.

(A Top Pick March 12/14. Down 31.32%.) One of the problems is that it is at the end of the pipe, the oil sands. The good aspect is that they do have refining capacity in middle America, which is a wonderful place to have refining capacity. They cut their dividend, which makes sense in this $45-$50 oil.

(A Top Pick May 7/14. Down 38.1%.) This went down with all the other oil stocks. The company has substantially cut back CapX with cash flow coming down. Recently did an equity issue, as well as a royalty sale, so they really addressed their balance sheet problems and are in very good shape. They have good, long term, core assets. This company has about 85,000 barrels of potential growth that are in various phases of development, which they can bring on fairly quickly when it pays.

This is in a sector inside the market that is out of favour right now. He is not seeing any money flows into energy stocks right now, and thinks there are still negative outflows. This summer is going to be difficult on energy.

In this commodity environment, people are taking a hard look at these stocks. Their share price is a function of the commodity price. You should hold large cap energy names that pay a dividend so this one is one of the ones to own.

(Top Pick Jul 2/14, Down 37.23%) He got out. He bought it as a trade, but it did not work. The headwinds in the oil side of the business are pretty big.