Cenovus Energy (CVE.TO)

Increased dividend at year-end. Markets got spooked about guidance regarding steam/oil ratios at Foster Creek. He has seen this stumble coming for some time so got out.

Has had its troubles. Two refineries in the US lost cash flow because of squeezed margins and they had to pay for renewable identification numbers for ethanol plants. We are down to a base building pattern but it has not picked up at this point. He would wait. There are better opportunities. You want to see it break through its trend line.

Very well run business. Have been struggling a little bit with their Foster Creek project but that is one of the highest class oil sands projects that we have in Canada right now. Cheap to produce and the project has a long life. This will considerably add to their growth in the next few years. A lot of the issues have been short term. You want to hold this for 2-3 years as they ramp up Foster Creek.

Primarily oil assets with a little bit of natural gas. Have SAGD oil sands assets. When they reported, their operating costs were a bit high, partially due to cooler weather. Also, part of it was due to the steam to oil ratio, where they will be pumping their reservoirs with more steam, which adds to the operating costs. When the stock is down at this point, he is not going to give up on it and if it goes much lower, he will add to his position.

A great company. This is probably a good opportunity to add a little bit to your position. Stock has been slow, but you are talking about oil sands development, long lived reserve life and until the market realizes that is something they value, it is going to underperform or go sideways. We are starting to see the foreigners/US investors come back, which is good news.

For a while, this company could do no wrong. They would come out with gangbusters earnings and beat consensus expectations. It was the cream of the crop. Doesn’t think the drop is strictly a Cenovus problem but an oil patch issue. Can’t think of a lot of oil companies that have done extremely well. Dividend is probably not as big as he would like to see.

He thought this would be a company he would not have to sell for a decade. It has a great rate of return in a very competitive industry, but their costs have crept up. He wants to see them executive on the cost discipline area.

(Market Call Minute) Exit if you are overweight oils. A hold at best if you are looking at it for yield.

(Market Call Minute.) Would rather hold some of the other oil Sands companies. In the midst of some challenges with their operations.

(A Top Pick Jan 3/13. Down 8.8%.) Had “best in class” operating metrics coming out of 2008 in the downturn and they got paid for that in the marketplace. Had some operational difficulties last year, but these assets are multi-decade assets and there will be a bad year here and there, but as a long-term investor, that just gives you a chance to accumulate more. Have been growing their dividend which he likes to see. Going to have lots of free cash flow but it’s a little bit further out because they have growth projects in front of them that they are spending money on.

Integrated oil/gas company. Designing the best projects on the best reservoirs on SAGD projects. Has been suffering with the same type of events where US investors look at the sharp discount to the WTI price and have been selling their Canadian assets. Small but growing dividend. This is just a matter of patience and waiting for markets to re-erect themselves.

We are approaching the seasonal strength for energy, which runs from January through to May. However this stock is not looking as appealing as he sees for other energy stocks. Technically trading in a bit of a range, with the high side being $31.40 and the low side at around $20-$29. You want to see it break out of its range at $31. It is significantly underperforming the market.

He likes the peers. This one is lagging. He can’t see any harm done. 3.2% yield is good. He is fine with it. He would like to see it get above $32-$33.

Sold his holdings and bought Suncor (SU-T) instead. Well run company but, over the last 8 months or so, they have really dropped off and costs were going up. His view is that oil is going higher, so these stocks will perform well.

(Market Call Minute) Avoids heavy oil and oil sands.