We recently published a list of the 8 Most Profitable Oil Stocks To Invest In. In this article, we are going to take a look at why Cenovus Energy Inc. (NYSE:CVE) is one of the best oil stocks to invest in.
OPEC Anticipated to Hold Oil Supply
One of the leading oil-producing regions, OPEC countries and its allies are expected to extend their latest round of oil production cuts for the first quarter of 2025, according to analysts. OPEC+ controls nearly half of the world’s oil production and supply. The oil governing body was planning to initiate unwinding output cuts through 2025. However, the decline in global demand and output outside OPEC could impact oil prices.
“Market participants are closely watching to see if OPEC+ will focus on bolstering prices by extending production cuts, or opt to defend its share of the global crude oil market by easing those cuts,” said Satoru Yoshida, commodity analyst with Rakuten Securities. Yoshida added that the OPEC decision to cut oil supply would potentially have a short-term impact. Still, the market is anticipated to rise by the year-end following the takeover of the Trump administration.
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The OPEC+ countries are holding around 5.86 million barrels per day of output, which accounts for almost 5.7% of global demand. To support the oil market, the oil supply has been managed in a series of steps agreed since 2022. The OPEC members had planned an output increase of 180,000 barrels per day for January 2025. The non-OPEC+ countries are expected to boost the oil supply by almost 1.5 million barrels per day in 2025. Nevertheless, the global oil benchmark Brent Crude has mostly traded between $70 to $80 per barrel in 2024, while it hit a 2024 low below $69 in September.
The global oil market is impacted by several factors including, geopolitical risks, production levels, and OPEC’s strategies. The ceasefire between Israel and Hezbollah could affect prices, but the new war in Syria could potentially be a new issue for oil producers. However, oil prices remain lower than expected based on inventory fundamentals. In the long term, oil price hikes above $100 are less likely to occur due to the impact of U.S. shale production over the past decade.
With that, let’s take a look at where Cenovus Energy Inc. (NYSE:CVE) ranks among the most profitable oil stocks to invest in.
A close-up shot of a large pipeline pumping crude oil and pipe valves in a petroleum trust.
Our Methodology
To compile our list of the 8 most profitable oil stocks to invest in, we scanned oil stocks through Finviz Screener using two indicators. We shortlisted the stocks with a minimum net income of $2.5 billion or more in the trailing twelve months (TTM) and a 5-year net income compound annual growth rate (CAGR) of over 10%. From that list, we narrowed our choices to the 8 stocks widely held by hedge funds, as of Q3 2024. As of the third quarter, the list is ranked in ascending order of hedge fund sentiment.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Cenovus Energy Inc. (NYSE:CVE)
Number of Hedge Funds Holders: 48
5-Year Net Income CAGR: 38.83%
TTM Net Income: $2.73 Billion
Cenovus Energy Inc. (NYSE:CVE) is another Canada-based integrated energy company with segments including upstream, downstream, and corporate and eliminations. The upstream segment consists of oil sands, conventional, and offshore, while the downstream manages Canadian and U.S. manufacturing.
Cenovus Energy Inc. (NYSE:CVE) resumed Christina Lake which will improve the company’s production. The company has also completed pipeline tie-in work that will support new production from Narrows Lake in 2025. This will potentially add 20,000 to 30,000 barrels per day with the first production expected in mid-2025. In addition to that, the company is also progressing its development at Sunrise and Foster Creek Optimization Project and expects to add to the growth of the oil sands business in the next two years. These are some of the company’s low-cost projects that will generate high returns.
During the third quarter of 2024, the company reported slightly lower production in its upstream segment, where it produced over 771,000 barrels of oil equivalent per day. This was mainly due to the turnaround at the Christina Lake oil sands facility. On the other hand, Cenovus Energy Inc. (NYSE:CVE) reported a notable increase in its downstream refining segment, with total throughput up by almost 20,000 barrels per day, compared to Q2 2024.
Cenovus Energy Inc.’s offshore production remains steady as it recorded 66,000 barrels of oil equivalent per day in Q3. The SeaRose FPSO offshore facility has achieved life-extension work while its West White Rose project is 85% complete and will produce the first oil in 2026.
Overall, CVE ranks 5th on our list of the most profitable oil stocks to invest in. While we acknowledge the potential of CVE as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CVE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
