Cenovus Energy Keeps Bucking Oil’s Recent Weakness

Earlier this week, our Small Cap Network newsletter had this tosay about our featured stock Cenovus Energy (NYSE: CVE):

Some of you might remember our newsletter edition back on September 1st when I pointed out CVE was bucking the recent oil weakness, which was definitely a good sign.

Today, shares of CVE are trading almost $2 bucks higher than the September 1st price of $7.92 when we talked about how the stock was starting to look attractive again. That’s about a 21% gain from then to now, so pretty good if you stuck with it.

I should also point out there’s a lot of chatter out there right now about a potential rally in oil, so you might want to go back and dig up those older oil names that used to be so attractive. It’s been a long time, but if there’s one thing you can always count on when it comes to stocks, it’s that sectors take turns doing well over time.

You can clearly see that rally in Cenovus Energys technical chart:

Cenovus Energy is a Canadian integrated oil company whos operations include oil sands projects in northern Alberta, which use specialized methods to drill and pump the oil to the surface, and natural gas and oil production in Alberta, British Columbia and Saskatchewan. The Company also has 50% ownership in two U.S. refineries. Shares trade under the symbol CVE, and are listed on both the Toronto and New York stock exchanges.

Earlier this month, Cenovus Energy hadannounced adefinitive agreement to sell its Pelican Lake heavy oil operations, as well as other miscellaneous assets in northern Alberta, for gross cash proceeds of $975 million. Proceeds from the sale will be applied against the $3.6 billion asset-sale bridge facility put in place to help fund the acquisition of assets from ConocoPhillips earlier this year. The CEO stated:

This represents a significant first step in our strategy to optimize our asset portfolio and deleverage our balance sheet as planned following the acquisition of the ConocoPhillips assets. The divestiture processes for the remainder of our legacy conventional assets are proceeding as expected, with strong interest from potential buyers.

The press release also noted:

The sale process for the companys Suffield oil and natural gas assets is well advanced. The company also has data rooms open for its Palliser assets in southern Alberta as well as its Weyburn carbon-dioxide enhanced oil recovery operation in Saskatchewan. In addition, Cenovus has certain other non-core assets that are currently being considered for sale. The company intends to apply proceeds from these additional asset sales against its outstanding debt and remains focused on reaching its target of being below two times net debt to adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) in 2019.

On June 20th, Cenovus Energy hadannounced that its President & CEO Brian Fergusonwould be retiring as an officer and director of the company on October 31, 2017.It was Ferguson whohad championedthe unpopular purchase of western Canadian oil sands assets while theCompany’s decision to announcehis departure without naminga successor further upset investors looking for quick change.

However and on the same day, Cenovus Energy put forward a five-year plan that the Company expects will generate 14% annualized free funds flow growth through 2021 at a West Texas Intermediate (WTI) price of US$55 per barrel (bbl) while increasing production at a 6% compound annual growth rate and reducing its debt. The press releasenoted thatCenovus Energy is progressing its plan to divest non-core assets and is targeting between $4 billion and $5 billion in announced sales agreements by the end of the year, which is expected to more than satisfy the $3.6 billion asset sale bridge facility used to help fund the acquisition from ConocoPhillips. The Company is now targeting to reach divestiture agreements by the end of 2017 for its entire legacy conventional portfolio.

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