The Successful Investor Hotline – Friday, July 3, 2015

Article Excerpt

CENOVUS ENERGY INC., $19.44, Toronto symbol CVE, has agreed to sell its royalty lands to the Ontario Teachers’ Pension Plan. The company collects royalties from firms that drill for oil and gas on these properties, which total 4.8 million acres in Alberta, Saskatchewan and Manitoba. It also gets some of the oil these drillers recover: in the first quarter of 2015, these wells supplied 7,800 barrels a day, or 3.6% of the Cenovus’s daily oil production of 218,020 barrels. Cenovus will receive $3.3 billion when it completes the sale, probably before July 31, 2015. To put that in context, its market cap (or the value of all of its outstanding shares) is $16.1 billion. The company will probably use the cash to pay down its long-term debt of $6.0 billion (as of March 31, 2015). That puts it in a better position to profit when oil prices rebound. Cenovus is a buy. Cenovus was recently covered in the July 2015 issue of The Successful…