Cenovus Energy (CVE.TO)

This is not a growth situation any more until we sort out the oil prices, but feels the dividend is safe. The oil price may take only 6-9 months. This is probably as low as it is going to get.

(Market Call Minute.) He doesn’t mind this, but in a pecking order, why go there?

Very oil sands focused. They raised $1.5 billion this year to shore up the balance sheet. You kind of wonder when they are paying $900 million out the door on the other side, if they are raising money to pay you back in the form of a dividend. Have had operational challenges is some of their oil sands projects, and he thinks these are largely behind them. As a long term holding, this is all right. Thinks you can do better with something else.

(A Top Pick March 12/14. Down 24.17%.) Sold his holdings last fall at $28.80 (1% loss).

They want to keep their development plans on track so they have to issue stock to finance it. It is one of the higher quality asset plays in the oil space.

(A Top Pick May 7/14. Down 29.42%.) Long-term assets and low cost producer of SAGD in Christina Lake and Foster Creek. Have other assets they have delayed putting money into, but will do so longer-term. Balance sheet is in pretty good shape. Just did a $1.5 billion issue. Instituted a DRIP program at a 3% discount. Also, have royalty properties that they could sell. Management has stated that protecting the dividend is very important to them. Yield of 4.89%.

(A Top Pick March 7/14. Down 24.69%.) He just participated in a recent equity issue they just did. Management has been very proactive. They have taken a couple of rounds of cutting back their CapX for the next couple of years and have raised equity to shore up their balance sheet. It is a tough environment for these companies, but these assets are 30-50 year assets. Expects cash flows are going to be severely hit this year. However, given a turnaround in pricing somewhere along the line, this is going to come back fairly quickly.

He is not fussy about it and there are others he would rather own such as ECA-T and TOU-T.

Just raised $1.5 billion. Thinks they are raising capital to take advantage. A quality name with quality operations with an opportunity to buy quality names that are out-of-favour. He is cautious in the near term on oil stocks, so he is not a buyer of oil stocks and would probably wait for the 2^nd quarter for some weakness, before getting involved.

He eliminated his position in this a couple of months ago. Just did a $1.5 billion issue, and that is going to be used to maintain the dividend. Stock really hasn’t performed that well. The big oil sands companies have some problems ahead of them. If the oil price goes back to $75, these companies are okay, but what if oil only went back to $60? It almost looks like we are in a situation with oil where we were with gas, just in North America. We are in a period where oil is going to be relatively low, particularly in the oil sands. He would stay away from the big guys that have oil sands production, and go with the smaller guys that are maybe more flexible.

They are cutting CapX, cutting jobs and freezing wages, which are the right things. This is a sign of the times. She likes that they are getting in early and making sure that they manage that balance sheet. Unfortunately, she doesn’t know if it is going to be enough with what is going on right now. Have a “take or pay” contract with Inter Pipeline (IPL-T) which is one risk that is going to hurt their cash flow this year. Their transportation costs are going to increase because they don’t have the production growth to make up for those extra barrels that this requires. In a 2-4 year timeframe, it is a good quality company with lots of growth potential.

Some of the higher-quality and more liquid names in the energy space, such as this, one make sense. He is not sure where the immediate catalyst for this stock and energy are in the near term, but as supply conditions tighten a bit energy prices will start to move.

They have been a little delayed in putting out what they are going to do in 2015. Like a lot of them, he expects to see a CapX pullback and a hold on the dividend for now. Will probably have flattish production, and the payout ratio will probably drift a little high. The dividend is safe as long as oil prices don’t go down.

(A Top Pick Jan 15/14. Down 13.51%.) He is trying to look at what he wants to own for the long-term. This has underperformed in the last couple of years. Represents a good investment opportunity for the real, long-term investor. Good quality assets and a good quality management team. Yield of 4.32% is pretty safe.

Chart shows a big downturn. It is in a good place. Wait for the base building pattern to happen a little bit more and an uptick. He would be looking at a momentum indicator and typically uses a Relative Strength Index.