CENOVUS ENERGY INC. $28 - New York symbol CVE

CENOVUS ENERGY INC.$28 (New York symbol CVE;Conservative Growth Portfolio,Resources sector; Sharesoutstanding: 755.6 million;Market cap: $21.2 billion; Price-to-sales ratio: 1.3; Dividend yield: 3.3%; TSINetworkRating: Average; www.cenovus.com) gets half itsoutput from the western Canadian oil sands.Conventional oil and gas wells supply the other half.

U.S.-based Phillips 66 (New York symbol PSX)owns 50% of Cenovus’s main Foster Creek and ChristinaLake oil sands projects in Alberta. These assetsproduce heavy bitumen, which Cenovus ships to its50%-owned refineries in Illinois and Texas. Phillips 66owns the other 50% of these operations.

In the first three months of 2013, Cenovus produced271,100 barrels of oil equivalent a day (66% oil and34% gas), up 3.1% from 262,900 barrels a year earlier.However, lower oil prices cut Cenovus’s revenueby 5.4%, to $4.3 billion from $4.6 billion a year earlier(all amounts except share price and market cap inCanadian dollars).

Even so, earnings rose 15.0%, to $391 million, or$0.52 a share. That’s mainly because profits jumped116.6% at the company’s refineries, which supplied66% of its revenue and 64% of its earnings in the latestquarter. A year earlier, Cenovus earned $340 million,or $0.45 a share. Cash flow per share rose 7.6%, to$1.28 from $1.19.

The company should earn $1.97 a share in 2013,and the stock trades at 14.9 times that estimate. It’salso attractive at just 6.0 times its projected cash flowof $4.89 a share. The $0.97 dividend yields 3.3%.

Cenovus is a buy.

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