Cenovus Energy (CVE-T)

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. 
Unlock Premium - Try 5i Free  

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.

Share price valuation is reasonable. Cash flow multiples are reasonable, but there are better names in energy. Would look elsewhere. 

Oil prices weak recently. Lots of Middle East conflict. US energy producers in general have performed much worse than Canadian, partly because of debate on whether shale can sustain production. 

He owns SU, IMO and CNQ. Longer term, the sector is attractive and these companies will generate a ton of cash and strong dividend growth. You can put CVE in this category, but near-term technical questions. He'd love to see price of oil stabilize. It has in last couple of days, but that's geopolitically driven.

Give it some space. Not leading the market, but not technically broken in any way. Generally, gets a little firmer coming into winter. Comfortable owning.

Its growth projects are on track. It has reached its debt target and 100% of free cash flow can go to shareholders. He expects a double in the base dividend in April. It is cheaper than its peers along with a better balance sheet. It is levered to heavy oil and is a go to name.

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.
Unlock Premium - Try 5i Free

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.