Six analysts have raised their earnings forecasts for this oil and gas company in the past 30 days.
Cenovus Energy Inc. (CVE)
From The Successful Investor
Cenovus Energy Inc. (CVE) gets 30% of its revenue from its Western Canadian oil sands properties and conventional oil and gas wells.
Its biggest properties are its 50%-owned Christina Lake and Foster Creek oil sands projects; ConocoPhilips (New York symbol COP) owns the remaining 50%.
Refining supplies 70% of Cenovus’s revenue. The company ships its oil to its 50%-owned refineries in Illinois and Texas. Phillips 66 (New York symbol PSX) owns the other 50%.
Due to low oil prices, the company has cut 31% of its workforce since the end of 2014 and lowered its production costs per barrel by 14%. These moves should reduce Cenovus’s annual costs by $200 million. It also plans to spend $1.2 billion on exploration and maintenance in 2016. That’s down $300 million from its original forecast.
Partly due to asset sales, Cenovus’s oil production in the first quarter of 2016 fell 9.4%, to 197,551 barrels a day from 218,020 barrels a year earlier.
The company lost $423 million, or $0.51 a share, in the quarter. That’s much higher than its year-earlier loss of $88 million, or $0.11. Cash flow per share dropped 95.3%, to $0.03 from $0.64; revenue fell 28.5%, to $2.2 billion from $3.1 billion.
Cenovus’s long-term debt of $6.1 billion (as of March 31, 2016) is a manageable 39% of its market cap. It also holds cash of $3.9 billion, and has access to $4.0 billion in credit.
Cost savings could push up cash flow per share from a depressed $0.92 in 2016 to $2.12 in 2017. The stock trades at 9.0 times the 2017 estimate. The $0.20 dividend still looks safe.
Cenovus is a buy.
Patrick McKeough, The Successful Investor, www.tsinetwork.ca, 888-292- 0296, May 2016