Cenovus Energy Inc.

CENOVUS ENERGY INC. $19 (Toronto symbol CVE; Conservative Growth Portfolio, Resources sector; Shares outstanding: 833.2 million; Market cap: $15.8 billion; Price-to-sales ratio: 1.0; Dividend yield: 3.4%; TSINetwork Rating: Average) gets 35% of its revenue from its Western Canadian oil sands properties and conventional oil and gas wells. Chief among these assets are its 50%-owned Christina Lake and Foster Creek oil sands projects; ConocoPhilips (New York symbol COP) owns the remaining 50%.

Refining supplies the remaining 65% 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% of these operations. Cenovus’s refineries help cut its exposure to falling oil prices, as cheaper crude lowers their operating costs.

Cenovus still plans to spend $1.8 billion to $2.0 billion on expansions and upgrades in 2015, unchanged from its previous estimate. These projects should add 50,000 barrels a day to its production by the end of 2016.

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The past year’s plunge in oil prices has forced all three of these producers to slash their costs and delay new projects. Like Imperial Oil (see page 81), Suncor and Cenovus have refineries that help offset oil’s drop. Encana doesn’t have refineries, but it has narrowed its operations to four main projects that give it a better balance between oil and natural gas. We see all three firms as buys for patient investors. SUNCOR ENERGY INC. $37 (Toronto symbol SU; Conservative Growth Portfolio, Resources sector; Shares outstanding: 1.4 billion; Market cap: $51.8 billion; Price-to-sales ratio: 1.6; Dividend yield: 3.1%; TSINetwork Rating: Average; www.suncor.com) gets 80% of its crude production from its huge Alberta oil sands projects. The remaining 20% comes from traditional oil and gas wells....

CENOVUS ENERGY $18.66 (Toronto symbol CVE; Shares outstanding: 828.5 million; Market cap: $15.9 billion; TSINetwork Rating: Average; Dividend yield: 5.7%; www.cenovus.com) gets 35% of its revenue from its oil sands projects and conventional oil and gas wells in Western Canada.

Refining supplies the remaining 65% of Cenovus’s revenue. The company ships oil to its 50%-owned refineries in Illinois and Texas. Phillips 66 (New York symbol PSX) owns the other 50% of these operations.

Cenovus has now agreed to sell its royalty lands to the Ontario Teachers’ Pension Plan for $3.3 billion. 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.

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CENOVUS ENERGY $18.66 (Toronto symbol CVE; Shares outstanding: 828.5 million; Market cap: $15.9 billion; TSINetwork Rating: Average; Dividend yield: 5.7%; www.cenovus.com) gets 35% of its revenue from its oil sands projects and conventional oil and gas wells in Western Canada. Refining supplies the remaining 65% of Cenovus’s revenue. The company ships oil to its 50%-owned refineries in Illinois and Texas. Phillips 66 (New York symbol PSX) owns the other 50% of these operations. Cenovus has now agreed to sell its royalty lands to the Ontario Teachers’ Pension Plan for $3.3 billion. 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....

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....

POTASH CORP. OF SASKATCHEWAN, $38.61, Toronto symbol POT, has offered to buy German fertilizer producer K+S AG for $8 billion U.S. That’s equal to 31% of its $32.2-billion (Canadian) market cap. The company sells most of its products to customers in the U.S. and Asia, so a takeover would greatly expand its presence in Europe. It would also gain access to K+S’s new Legacy potash mine in Saskatchewan, which will open in 2016. Merging Legacy’s operations with its five existing mines in Saskatchewan would give Potash Corp. an opportunity to cut costs. K+S will probably reject the offer, so Potash Corp. may have to raise its bid....

CENOVUS ENERGY INC. $21 (Toronto symbol CVE; Conservative Growth Portfolio, Resources sector; Shares outstanding: 828.4 million; Market cap: $17.4 billion; Price-to-sales ratio: 0.9; Dividend yield: 5.0%; TSINetwork Rating: Average; www.cenovus.com) has temporarily shut down its Foster Creek oil sands project in northern Alberta, as forest fires in the area are hindering traffic on the main access road to the site.

Cenovus own 50% of Foster Creek, while U.S.-based ConocoPhillips (New York symbol COP) owns the other 50%. In the first quarter of 2015, Cenovus’s share of this project’s output was 68,000 barrels a day, or 31% of its total daily oil production of 218,000 barrels.

The fires have also forced other oil projects in Alberta to close. In all, these operations account for 9% of the province’s total production. However, the shutdowns have increased the spot price of Western Canadian crude, which should help Cenovus offset the lost revenue.

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CENOVUS ENERGY $20.58 (Toronto symbol CVE; Shares outstanding: 824.6 million; Market cap: $17.4 billion; TSINetwork Rating: Average; Dividend yield: 5.2%; www.cenovus.com) has temporarily shut down its Foster Creek oil sands project in northern Alberta because forest fires in the area are hindering traffic on the main road to the site.

Cenovus own 50% of Foster Creek, while U.S.-based ConocoPhillips (New York symbol COP) owns the other 50%. In the first quarter of 2015, Cenovus’s share of this project’s output was 68,000 barrels a day, or 31% of the company’s total oil production of 218,000 barrels.

The fires have also forced other oil projects in Alberta to close. In all, these operations account for 9% of the province’s total production. This has pushed up the spot price of Western Canadian crude, which should help Cenovus offset the lost revenue.

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TRANSCONTINENTAL INC., $16.06, Toronto symbol TCL.A, fell 12% this week after reporting lower-than-expected earnings. In its 2015 second quarter, which ended April 30, 2015, the company’s earnings rose 13.7%, to $39.1 million, or $0.50 a share. That fell short of the consensus estimate of $0.54. A year earlier, Transcontinental earned $34.4 million, or $0.44 a share. The gain largely came from two recent acquisitions: in May 2014, the company bought U.S.-based Capri Packaging, a maker of plastic bags and pouches for cheese and other dairy products, for $146.5 million. And in June 2014, it paid Sun Media $78.8 million for 74 weekly newspapers in Quebec....

CENOVUS ENERGY INC. $21 (Toronto symbol CVE; Conservative Growth Portfolio, Resources sector; Shares outstanding: 828.4 million; Market cap: $17.4 billion; Price-to-sales ratio: 0.9; Dividend yield: 5.0%; TSINetwork Rating: Average; www.cenovus.com) has temporarily shut down its Foster Creek oil sands project in northern Alberta, as forest fires in the area are hindering traffic on the main access road to the site. Cenovus own 50% of Foster Creek, while U.S.-based ConocoPhillips (New York symbol COP) owns the other 50%. In the first quarter of 2015, Cenovus’s share of this project’s output was 68,000 barrels a day, or 31% of its total daily oil production of 218,000 barrels. The fires have also forced other oil projects in Alberta to close. In all, these operations account for 9% of the province’s total production. However, the shutdowns have increased the spot price of Western Canadian crude, which should help Cenovus offset the lost revenue....