Cenovus Energy (CVE.TO)

Lots of capex to fix issues with refining assets. Sold last September when sentiment soured on price of oil. Investor sentiment muted even when company reached deleveraging targets. Nothing materially wrong with it, whole industry has rolled over. Sharp management, committed to investors.

When he's ready to get back into energy, he'd buy this at a much smaller weight and buy some SU as well.

Unique in that they own US refineries. Negative energy story has brought stock down. 

High exposure to price of oil and to the differential of Canadian heavy oil (back to almost-new lows). Upstream is going exceedingly well. But downstream has poor utilization rates, mishaps, negative EBITDA; those are all the reasons it's massively lagged peers. Fix that, and good rerate potential; won't play out until latter half of 2025 or early 2026.

If you own, he'd hesitate to sell. He's watching, near the top of his list to deploy capital. You could wake up one morning to a big pop in the stock price.

Downstream operations have been extremely weak. Look at the dividend history. They've cut the dividend in the past, so not a stable dividend payer. Dividend looks high because stock price is low. Look elsewhere.

Coming into the time when you want to own energy, between mid-February and May/June. Chart shows it's at, or maybe below, support. He'd need to see a bounce to be bullish on it. Watch for another 2 weeks or so; if it breaks down, you have to get out.

A value trap. The ultimate catalyst (fixing their downstream) keeps getting deferred and deferred. Share buybacks in recent months is sluggish. A very cheap stock, but downstream keeps biting them. He's cheering for them, but look at CNQ instead.

Q4 missed on downstream margins. Upstream projects are on schedule and on budget. Expects FCF to inflect meaningfully as spending drops and production starts to kick in. Sector faces headwinds, but this is a name you can go to. Way cheaper than peers. Nice production growth, cashflow growth, shareholder returns of 8%. Would be adversely hit by tariffs. All in, he'd be a buyer.

She doesn't own any producers, and she owns PPL, so she likes that idea.

Trades under 12x PE and are buying back lots of shares. Likes it. Options: sell the April $25 call and get 20 cents, not a big premium, but leaving lots upside to get closer to the upper-$20s. But he is not selling calls on CVE, because he expects the share price to recover. But at $27-28, he will sell at $30s. For new money, he will sell $20-22 puts.

Likes the energy space, and this name is his play. Pipelines to the West Coast have opened up. 

Energy stocks are in a holding pattern, and this one is typical. Take a look at the 3-year chart. In a trading range, but looks to be cracking support and that's a danger. Technically, he'd be a bit concerned.

One of his worst calls in 2024 backing this instead of SU. Downstream challenges continue. Negative EBITDA in a quarter matters. Sentiment is really bad toward these guys. Quality inventory. He sold for a tax loss, plans to come back when confident that downstream issues (refining, which is a low-margin business) are fixed.

The ZEO ETF recently broke out to new highs. But this one is not a leader among those. He prefers CNQ, IMO or SU.

EPS was 42c, vs estimates of 42.4c; revenue of $16.55B beat estimates of $11.63B. EBITDA of $2.4B beat estimates by 2.3%. With maintenance at Cenovus' Christina Lake facility completed, total production could rise above 800,000 barrels a day in 4Q vs. 771,000 in 3Q, which may lift upstream cash flow and earnings. Operating cash flow dipped slightly to C$2.5 billion in 3Q vs. C$2.8 billion in 2Q, mostly due to the pullback in commodity prices and a negative operating margin for the company's downstream segment. Assuming stable cash flow in 4Q, the company should continue its robust capital returns program -- it returned C$1.1 billion to shareholders in 3Q across share purchases and buybacks. Cenovus reached its net-debt target of C$4 billion in July, which sets the stage for returning 100% of excess free funds flow to shareholders starting with 3Q and beyond. Considering its valuation, dividend and potential, we would be fine buying some, within the context of the cyclical energy sector. 
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He owns and likes both. The difference is that SU has downstream operations with gas stations. Cenovus is integrated with long-life reserves in production plus many refineries (which has suffered major compression), so the upstream looks attractive. Both have great balance sheets and free cash flows and pay similar dividends. Another difference: it's unlikely Suncor can be bought whereas maybe Cenovus could. He gives the edge to Suncor.