Canada’s oil sands continue to face strong opposition from environmentalists. That’s mainly because the process of recovering heavy oil from the oil sands produces higher carbon emissions than conventional sources.
However, new technology has let oil stocks cut way down on their oil-sands emissions. As well, turmoil in Egypt and other Middle Eastern countries highlights the oil sands’ strategic importance to the U.S. and Canada. These factors make it less likely that Ottawa will introduce regulations that would slow oil-sands development.
Cenovus: a diversified producer with a focus on the oil sands
In the latest issue of The Successful Investor, we’ve published a special analysis of three oil stocks with significant oil-sands operations. One of these companies is Cenovus Inc. (symbol CVE on Toronto). The oil stock’s shares have risen 36% since the old EnCana Corp. split itself into two companies in December 2009: Cenovus and the new Encana (Toronto symbol ECA).
Cenovus operates three oil-sands properties in Alberta, and one in Saskatchewan. The company ships the heavy bitumen from these projects to refineries in Illinois and Texas. ConocoPhillips (New York symbol COP) owns 50% of these refineries, as well as 50% of Cenovus’ two main oil-sands projects. Cenovus also owns conventional oil and natural-gas properties.
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Big investment should boost this oil stock’s production
The company plans to spend roughly $2.3 billion to expand and upgrade its operations in 2011. It will invest about half of these funds in its oil-sands projects, and up to $650 million in its conventional oil and natural-gas properties.
These investments should increase the oil stock’s 2011 production by 2% over 2010. In addition, the company plans to spend up to $410 million to upgrade its two refineries in the U.S. This will help it handle the higher production.
Cenovus’ 2011 cash flow should be around $2.2 billion, so it can comfortably afford these upgrades. As well, it plans to raise an additional $300 million to $500 million by selling certain properties and investments.
Oil sands producers have big potential—and risk
Canada’s reserves of oil sands are vast. However, extracting oil from oil sands is hugely expensive. Oil sands projects typically run way over budget. That adds to the risk of construction delays and problems. Moreover, petroleum from oil sands needs more processing than regular crude oil. These higher costs make oil-sands producers like Cenovus especially vulnerable to oil-price declines.
As we mentioned, Cenovus has risen 36% since December 2009. In the latest Successful Investor, we look to see if it has the potential to go even higher.
You can get our special analysis, including our clear buy/sell/hold advice, on Cenovus and two other oil stocks with significant oil sands production in the latest Successful Investor. What’s more, you can get this issue absolutely free when you subscribe today. Click here to learn how.
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The Successful Investor Inc. and its affiliate Successful Investor Wealth Management (referred to hereafter as TSI Network) know that you care how information about you is used and shared, and we appreciate your trust that we will do so carefully and sensibly. This notice describes our privacy policy. By visiting websites owned by or associated with TSI Network, you are accepting the practices described in this Privacy Policy.
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Legal Notices and Disclaimers
The contents of this web site and our publications are based upon sources of information believed to be reliable, but no warranty or representation, expressed or implied, is given as to their accuracy or completeness. Any opinion reflects the Successful Investor’s judgment at the date of publication and neither the Successful Investor, nor any of its affiliated companies, nor any of their officers, directors or employees, accepts any responsibility in respect of the information or recommendations contained in the publications or on this web site. Moreover, the information or recommendations are subject to change without notice.
Information presented on this web site or contained in our publications is not an offer, nor a solicitation, to buy or sell any securities referred to on the web site or in the publications. The material is general information intended for recipients who understand the risks associated with an investment in any securities referred to in the publications or on this web site. The Successful Investor has made no determination regarding whether an investment, course of action, or associated risks are suitable for the recipient.
