5) Cenovus Energy Inc. (NYSE:CVE)
Forward P/E Ratio as of 26 August: 9.02x
Share Price as of 26 August: $19.28
Number of Hedge Fund Holders: 46
Short % of Shares Outstanding (31 July 2024): 0.82%
Cenovus Energy Inc. (NYSE:CVE) is an integrated oil company, which is focused on creating value through the development of its oil sands assets.
Considering Cenovus Energy Inc. (NYSE:CVE)’s research ahead of its peers, resource potential to demonstrate the low-cost SAP technology, and project break-evens among the lowest in the oil sands industry, its SAP technology should give the company a cost advantage over its peers. Canadian oil industry should benefit from the TMX pipeline, which should help in reducing oil differentials and fuelling profitability. Cenovus Energy Inc. (NYSE:CVE) is committed to debt reduction and returning excess FCF to shareholders, providing attractive opportunities.
Cenovus Energy Inc. (NYSE:CVE) achieved a significant milestone by reaching its net debt target of $4 billion as of July. It posted strong 2Q 2024 results, with healthy performance from the oil sands assets and strong operating margins. Oil sands assets produced ~610,000 barrels per day with the $2.7 billion operating margin.
The company anticipates healthy performance in 4Q, primarily after the Christina turnaround completion. Moving forward, its earnings growth is expected to be supported by growth opportunities in the thermal heavy oil assets and favorable market dynamics in the Mid-Con refining market. Also, its focus on growth projects, refining business, and cost control should act as principal growth enablers.
In 2Q 2024, the company’s total revenues came in at ~$14.9 billion, up from $13.4 billion in the first quarter. This growth was mainly because of improved benchmark oil prices, including a narrower light-heavy crude oil differential, together with healthy operating results.
Four equities research analysts have given the stock a “Buy” rating. The average 12-month price target is $30.67. A total of 46 out of 912 hedge funds tracked by Insider Monkey held stakes in Cenovus Energy Inc. (NYSE:CVE) as of the end of the second quarter.
L1 Capital, an investment management firm, released its first quarter 2024 investor letter. Here is what the fund said:
“Cenovus Energy Inc. (NYSE:CVE) (Long +20%) shares performed strongly as the WTI oil price increased 16% to ~US$83/bbl, while refining margins in the U.S. Midwest improved dramatically from a low base. During March, Cenovus’s 2024 investor day was well received, where its 5-year outlook for the business included growth in upstream production of around 150m bbl/d above the current 800m bbl/d and a material turnaround of its downstream refining business. Over the next five years, the company expects to generate C$32b of cumulative free cash flow based on a US$75/bbl WTI oil price, a highly attractive prospect given its current market cap of ~C$51b. Furthermore, it has committed to return 100% of excess cash flow back to investors once it reaches its C$4b net debt target (expected in 2024). Cenovus’s strong cash flow generation, combined with the long-life nature of its oil sands assets and its low cost of production, make it one of our preferred Energy exposures.”
