6) Cenovus Energy Inc. (NYSE:CVE)
5-Year Revenue Growth: ~35.4%
Average Upside Potential: ~37.9%
Market cap as of 12 November: $29.2 billion
Cenovus Energy Inc. (NYSE:CVE) is engaged in developing, producing, refining, transporting, and marketing crude oil, natural gas, and refined petroleum products in Canada and internationally.
Cenovus Energy Inc. (NYSE:CVE)’s flagship Christina Lake Steam Assisted Gravity Drainage (SAGD) facilities continue to serve as the cornerstone of its upstream business. Wall Street experts opine that the company’s upstream operations, mainly its oil sands assets, have been a source of strength. In the Oil Sands segment, Cenovus Energy Inc. (NYSE:CVE) is progressing with the tie-back of Narrows Lake, building a 17-kilometre pipeline connecting the reservoir to the Christina Lake processing facility, which is expected to add between 20,000 bbls/d and 30,000 bbls/d of production.
The company highlighted that the project is ~93% constructed. The critical tie-ins to the Narrows Lake pipeline were completed during the Christina Lake turnaround. Notably, the project is on track for its first production in mid-2025. The company remains optimistic about its strategic initiatives, which form a base for long-term growth. At Sunrise, as part of the growth program, Cenovus Energy Inc. (NYSE:CVE) brought 2 new well pads online in Q3 2024, which will continue to ramp up into the next quarter. Also, one additional well pad is expected to come online in early 2025.
Cenovus Energy Inc. (NYSE:CVE)’s healthy portfolio of long-life, low-decline oil sands assets and positive leverage to improving commodity prices should act as growth drivers. Its low steam-to-oil ratio and cost-reduction initiatives resulted in some of the most efficient SAGD operations among industry peers. This efficiency equates to lower production costs and a lower carbon footprint, placing Cenovus Energy Inc. (NYSE:CVE) well in terms of both profitability and environmental sustainability.
As per Wall Street analysts, the shares of Cenovus Energy Inc. (NYSE:CVE) have an average target price of $22.13. L1 Capital, an investment management firm, released its Q1 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.”
