CVE - Cenovus Energy: Possibly One Of The Most Undervalued Energy Stocks
2024-02-18 09:27:28 ET
Summary
- Cenovus Energy achieved significant operational milestones in Q4'23, including the successful restart of two refineries and progress on the TMX pipeline.
- Canadian oil industry is expected to benefit from the TMX pipeline, potentially reducing oil differentials and boosting profitability.
- Despite headwinds, Cenovus Energy remains committed to debt reduction and returning excess free cash flow to shareholders, offering attractive investment opportunities.
All financial numbers in this article are in Canadian dollars unless noted otherwise. Please note that oil and gas prices are always in US dollars.
Introduction
Two years ago, I came out as a huge fan of Canadian energy companies, as the nation's big oil names, Canadian Natural ( CNQ ), Suncor ( SU ), and Cenovus Energy ( CVE ) , have everything I'm looking for in oil companies:
- Deep reserves, which lowers the risks of "forced" M&A to keep production numbers steady.
- Efficient production provides these companies with low breakeven prices and elevated free cash flow at elevated oil prices.
- A focus on shareholder distributions, as all three companies are dedicated to returning roughly all of their free cash flow to shareholders (after achieving their target leverage ratios).