Cenovus Energy (CVE.TO)

Will continue to own stock. Excellent company with quality upstream production. Downstream issues continue to be an issue. Overall, business moving in the correct direction. Other companies like Suncor have been attracting like minded capital from investors. Very good management that has experience to fix downstream issues. Company also will reach final debt target, and will return 100% of cash flow to investors. 

He prefers oil stocks with a larger cap, instead of this mid-cap. Oil is trading at a low end of the range due to fears of an economic slowdown, but predicts it will be higher in a few years. CVE has sorted out their past problems, though is not as good as CNQ or Suncor.

There were refinery issues (old, unreliable) which weakened the share price, but ultimately the refineries will generate returns. They have a strong production plan to increase output from their Oil Sands and are near their debt target that will lead to buybacks. A cheap stock with upside.

Good senior producer exposed to the energy patch with long-life assets. But she prefers CNQ for its exposure to the Oil Sands and natural gas; they buy assets that fall out of favour.

A 10% weight for him. Favourite large cap in Canada. Very strong team. Downstream operational issues cleared up. 12% free cashflow yield next year at $80 oil. Debt target hit. 100% free cashflow to investors.

It is a positive signal that as CVE reaches $4.0B in net debt, the company will start to return 100% of its excess fund flows to shareholders. CVE production grew nicely by 8% in the most recent quarter. The share price was under pressure as the company reported a slight earnings miss of $0.57 compared to an expectation of $0.68, in addition, oil prices went down in the last few days and this also affected investors' sentiment for oil stocks. However, we think over a three – five five-year time horizon, CVE should do pretty well from the current level given the planned capital returns.
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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.