Tuesday, November 2, 2010

Cenovus Energy Inc

This is another stock that was talked about at the recent Money Show in Toronto. There were those who liked oil companies and they mentioned both Suncor Energy Inc (TSX-SU) and Cenovus Energy Inc (TSX-CVE). I do not own this company, but since I will be selling Penn West Energy Trust (TSX-PWT.UN), this and Suncor would be a likely replacement. This company was split off from EnCana. This was the oil part of EnCana and EnCana now is just a gas play. My spreadsheet reflects this split.

As part of EnCana, this company had a good record of increasing their dividends. However, as with all resource stocks that pays more than just a nominal dividend, their dividend payments fluctuated with the price of oil and gas. Since separating in November 2009 from EnCana, this company has left the dividends at the same rate of $.20 a quarter. Dividends are now paid in CDN$, not US$.

Most of the growth rates for this company are great. The best is the increase in revenue, which has grown over the past 5 and 10 years at the rate of 18% and 10.8% per year, respectively. The worse growth is in earnings, which for the last 5 years have a negative growth of 5.6% per year. The 10 year growth for earnings is positive at 16.8% per year. For this company, the earnings came in at $1.09 in December 2009. EnCana did better with earnings at December 2009 of $2.60.

It is all fine and well to separate past earnings and revenue etc between the two companies. However, we will not really know how well either will do separately until we have a few more years of data. The reason I used old EnCana data and split it for these new companies is because they are not really new; they do have a past joint history. However, do not forget that the past history of a company can only tell you so much. Past history gives you an idea of where a company has come from. This will color the company’s future, but cannot really predict where it is going.

When I look at the Liquidity Ratio, I can see that it has improved since the end of 2009 when it was at 1.24. The current Liquidity Ratio is better at 1.38. (The Liquidity Ratio shows whether or not current assets can cover current liability and a ratio of 1.00 shows equal current assets and liabilities. I rather have it at 1.50, but 1.38 is acceptable.) The Asset/Liability Ratio at 1.84 is better than the Liquidity Ratio and is a very good one.

The Return on Equity for the end of 2009 at 8.5% was low for this company, which has a 5 year average ROE of 10.4%. The one for the 3rd quarter of 2010 is better at 12%. Another point to make on this stock is that if it was held over the past 5 years, investors would have made between 10% and 15% return, with the dividends being just over 2.4% of this return.

A lot of analysts are saying that we should have Canadian resource companies in our portfolios, and especially some oil companies. Certainly, resources are currently on the upswing and will probably be for sometime because of the development going on in China and India. I also have a spreadsheet on Suncor, which I will talk about at a future date.

Cenovus Energy Inc. is an integrated oil company. The Company's operations include enhanced oil recovery (EOR) properties and established crude oil and natural gas production in Alberta and Saskatchewan. It also has ownership interests in two refineries in Illinois and Texas, United States. Its web site is here Cenovus. See my spreadsheet at cve.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.

No comments:

Post a Comment