There are few stocks in the energy sector that have not participated in the recent rally driven by higher oil prices. While few stocks have been sluggish due to weak fundamentals, others have still not caught investor’s attention in a big way even as they trade at attractive valuations. This article will discuss Cenovus Energy (NYSE:CVE), which has remained largely sideways since April 2016. In my view, the next 12-24 months should be good for the stock in terms of market returns and this article will elaborate on the upside triggers.
The company’s fundamentals and liquidity is the first point to discuss as it will put into perspective the company’s strong financial muscles as industry conditions improve. As of September 30, 2016, Cenovus Energy had $3.9 billion in cash and $4.0 billion in committed credit facility. With total liquidity buffer of $7.9 billion and with net debt to capitalization of 17%, Cenovus Energy is well positioned fundamentally. It is also worth noting here that the company has no debt maturity until 4Q19 and with net debt to adjusted EBITDAX of 2.0, there is scope for leveraging as industry conditions improve. Continue Reading »