Cenovus Energy (CVE.TO)

Q1 increased dividend nicely, special dividend. Met debt obligations, so now going to return a lot to shareholders, impressive. Cheaper (4.5x) than peers (5.1x). 10% shareholder returns vs. peers at 8%. Heavy oil is working, with lots of takeaway capacity; demand is good.

Oil's all over the place, and there are geopolitics. Likes it as a Canadian levered play on heavy oil. On a down day like today, buy a sleeper like this.

If you're thinking about this name, he'd say to start with CNQ first. CVE is higher up on cash costs, so netbacks are lower. More torque-y and leveraged to oil price. A more high-beta version of CNQ. The plans for cashflow basically come from the CNQ playbook, but with a 1.5 beta.

It really depends on your risk profile as an investor. He'll stick with the 1.0 beta in energy.

Cenovus trades at a discount compared to some of its refining assets, even after they invested in those assets last year. He sold Suncor to buy this last spring.

Likes their valuation compared to the other integrated oils. They fixed refining problems from 2023 and their debt has been falling. The will shift from paying shareholders 50% of their free cash flow to 100%, maybe in Q2.

Chart's not that attractive, sideways. Better operations elsewhere. Was a leader, but not as strong this year. Yield is 2.7%, less than others.

He prefers a name like CNQ (he owns), or ATH (not owned).

13% free cashflow yield, 35 years of inventory. Reaching final net debt target in the next month, and then they can pay investors 13% a year for 30 years. Very attractive.

Range-bound. Downstream challenges with a number of refineries, now rectified. Almost a 10% position for him. Large cap, plus about to hit debt target. 30 years of inventory yielding 13%. Should be 62% upside from here.

Debt reduction taking longer. Should hit debt target in July/August, give or take. Will then pivot to 100% free cashflow back to shareholders. Doesn't see increase in dividend. Trades at discount to peers. Target of $43, 58% upside. His favourite large cap, about 9.5% weighting.

Very good Q1. Likes management and assets. Long-life assets, refining business, downstream and upstream, balance sheet exciting as it keeps achieving its debt metrics. In Q3, going to 100% capital return to shareholders. 

Caveat: on cusp of seasonal weakness for oil and gas, which can continue through June, July, sometimes into August. If you're a long-term investor, buy and don't look at it until next Dec-Jan, and it could be up if O&G markets are steady. If you're more technical, buy during the upcoming lull.

The only large-cap he likes and feels good heading into their quarter. Have improved and fixed their refinery problems. Should pay off their debt by Q2 or Q3, which will trigger share buybacks. Boasts a good 13% free cash flow yield. He sees 50% upside.

Was under pressure last year because refineries needed investments, which CVE swiftly did, so capacity is up. That's when he bought. Shares and valuation have since risen. They have a lot of exposure to the WCS-WTI price differential that the as the pipeline expansion will come online--an opportunity. Also, they are lowering debt. Could be a dividend bump or share buybacks to come.

Large-cap energy producer, underperforming the group. He owns ARX and SU, both with dividend growth and returning capital to shareholders. Won't go wrong with it, but better names.

See his Top Picks.

Disappointing. They've struggled with downstream operations, frustrating investors, and are working to fix this. He expects them to reach their debt target in August, then they will pivot to 100% free cash flow. $43 target price of 57% upside. Trimmed his holding slightly. Trades at a discount to CNQ.

Likes the energy sector: great fundamentals, will generate free cash flow. CVE has benefited from rising oil prices. This is positioned well for 2-3 years.

That's a pretty short timeframe, so where it goes could be largely determined by commodity price. Longer term, low-cost, long-life production base to draw on. In production growth phase, tailing off in 4 years. Reasonable choice.