CENOVUS ENERGY INC. $38 (Toronto symbol CVE; Conservative Growth Portfolio, Resources sector; Shares outstanding: 754.3 million; Market cap: $28.7 billion; Price-to-sales ratio: 1.8; Dividend yield: 2.1%; TSINetwork Rating: Extra Risk; www.cenovus.com) operates three oil sands projects in Alberta and one in Saskatchewan.
Cenovus ships the heavy bitumen from these properties to refineries in Illinois and Texas. U.S.-based ConocoPhillips (New York symbol COP) owns 50% of the refineries, as well as 50% of Cenovus’s main Foster Creek and Christina Lake oil sands projects in Alberta.
Cenovus gets about half of its output from the oil sands. Conventional oil and natural gas wells supply the other half.
The company continues to expand Foster Creek and Christina Lake. It plans to spend $3.1 billion to $3.4 billion on these and other projects in 2012. That’s up 23% from its 2011 capital expenditures.
Cenovus’s 2012 cash flow should be between $2.9 billion to $3.5 billion, so it can easily afford these costs. The company also plans to sell $100 million to $150 million of non-core assets this year.
These investments will push up Cenovus’s 2012 production to between 155,000 and 171,000 barrels of oil equivalent per day (including natural gas) from 135,000 barrels in 2011.
Cenovus’s expansion plans will also help it meet its goal of producing 500,000 barrels a day, including 400,000 barrels from the oil sands, by the end of 2021.
The company’s balance sheet is strong: Its long-term debt of $3.6 billion is a low 13% of its market cap. It also holds cash of $358.0 million, or $0.47 a share.
The company still plans to raise its dividend in 2012; the current annual rate of $0.80 a share yields 2.1%.
The stock seems expensive at 22.9 times the $1.66 a share that Cenovus probably earned in 2011. However, the company’s 2012 earnings should rise to $2.11 a share. That gives the stock a more reasonable p/e ratio of 18.0. Cenovus also trades at 8.8 times its likely 2012 cash flow of $4.34 a share.
Cenovus is a buy.
; Conservative Growth Portfolio, Resources sector; Shares outstanding: 754.3 million; Market cap: $28.7 billion; Price-to-sales ratio: 1.8; Dividend yield: 2.1%; TSINetwork Rating: Extra Risk; www.cenovus.com) operates three oil sands projects in Alberta and one in Saskatchewan.
Cenovus ships the heavy bitumen from these properties to refineries in Illinois and Texas. U.S.-based ConocoPhillips (New York symbol COP) owns 50% of the refineries, as well as 50% of Cenovus’s main Foster Creek and Christina Lake oil sands projects in Alberta.
Cenovus gets about half of its output from the oil sands. Conventional oil and natural gas wells supply the other half.
The company continues to expand Foster Creek and Christina Lake. It plans to spend $3.1 billion to $3.4 billion on these and other projects in 2012. That’s up 23% from its 2011 capital expenditures.
Cenovus’s 2012 cash flow should be between $2.9 billion to $3.5 billion, so it can easily afford these costs. The company also plans to sell $100 million to $150 million of non-core assets this year.
These investments will push up Cenovus’s 2012 production to between 155,000 and 171,000 barrels of oil equivalent per day (including natural gas) from 135,000 barrels in 2011.
Cenovus’s expansion plans will also help it meet its goal of producing 500,000 barrels a day, including 400,000 barrels from the oil sands, by the end of 2021.
The company’s balance sheet is strong: Its long-term debt of $3.6 billion is a low 13% of its market cap. It also holds cash of $358.0 million, or $0.47 a share.
The company still plans to raise its dividend in 2012; the current annual rate of $0.80 a share yields 2.1%.
The stock seems expensive at 22.9 times the $1.66 a share that Cenovus probably earned in 2011. However, the company’s 2012 earnings should rise to $2.11 a share. That gives the stock a more reasonable p/e ratio of 18.0. Cenovus also trades at 8.8 times its likely 2012 cash flow of $4.34 a share.
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