CENOVUS ENERGY INC. $19

CENOVUS ENERGY INC. $19 (Toronto symbol CVE; Conservative Growth Portfolio, Resources sector; Shares outstanding: 833.3 million; Market cap: $15.8 billion; Price-to-sales ratio: 1,2; Dividend yield: 1.1%; TSINetwork Rating: Average; www.cenovus.com) gets 30% of its revenue from its Western Canadian oil sands properties and conventional oil and gas wells. Its biggest properties are its 50%-owned Christina Lake and Foster Creek oil sands projects; ConocoPhilips (New York symbol COP) owns the remaining 50%. Refining supplies 70% 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%. Due to low oil prices, the company has cut 31% of its workforce since the end of 2014 and lowered its production costs per barrel by 14%. These moves should reduce Cenovus’s annual costs by $200 million. It also plans to spend $1.2 billion on exploration and maintenance in 2016. That’s down $300 million from its original forecast. Partly due to asset sales, Cenovus’s oil production in the first quarter of 2016 fell 9.4%, to 197,551 barrels a day from 218,020 barrels a year earlier. The company lost $423 million, or $0.51 a share, in the quarter. That’s much higher than its year-earlier loss of $88 million, or $0.11. Cash flow per share dropped 95.3%, to $0.03 from $0.64; revenue fell 28.5%, to $2.2 billion from $3.1 billion. Cenovus’s long-term debt of $6.1 billion (as of March 31, 2016) is a manageable 39% of its market cap. It also holds cash of $3.9 billion, and has access to $4.0 billion in credit. Cost savings could push up cash flow per share from a depressed $0.92 in 2016 to $2.12 in 2017. The stock trades at 9.0 times the 2017 estimate. The $0.20 dividend still looks safe, and yields 1.1%. Cenovus is a buy.

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