CENOVUS ENERGY INC. $14(Toronto symbol CVE; Conservative Growth Portfolio, Resources sector; Shares outstanding: 833.2 million; Market cap: $11.7 billion; Price-to-sales ratio: 0.9; Dividend yield: 1.4%; TSINetwork Rating: Average; www.cenovus.com) gets 35% of its revenue from its Western Canadian oil sands properties and conventional oil and gas wells. Chief among these assets are its 50%-owned Christina Lake and Foster Creek oil sands projects; ConocoPhilips (New York symbol COP) owns the remaining 50%.
Refining supplies the remaining 65% 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%.
Low crude prices have prompted Cenovus to cut its capital spending by 26.5%, to about $1.25 billion in 2016 from $1.7 billion in 2015.
Cenovus should also see more savings from its recent job cuts, lower salaries and other cost-saving measures. These moves should save it $200 million in 2016.
Cenovus’s $6.5-billion debt (as of December 31, 2015) is now a high 56% of its currently depressed market cap.
However, the company holds $4.1 billion in cash thanks to the recent sale of its royalty properties for $3.3 billion. What’s more, it doesn’t have to begin repaying these loans until late 2019.
The company has also cut its quarterly dividend by 68.8%, to $0.05 a share from $0.16. The new annual rate of $0.20 yields 1.4%.
The stock now trades at just 5.1 times Cenovus’s projected 2016 cash flow of $2.75 a share.
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