Full access to Entrepreneur for $5
Subscribe

Cenovus (CVE) Eyes Atlantic Assets Rejig, $10B Net Debt

The restructuring move from Cenovus (CVE) is likely to make its upstream portfolio more profitable and free up some capital, which can be allocated mo...

By
This story originally appeared on Zacks

Cenovus Energy Inc. CVE recently agreed to restructure its stakes in the Atlantic region with respective partners in the region. The agreement incorporates its working interests in Terra Nova and White Rose projects. The move is expected to improve the company’s economics in the region.

- Zacks

The deal will increase its stake in Terra Nova to 34% from 13%. Also, it will receive $78 million from the exiting partners for future asset retirement obligations. The asset life expansion project at Terra Nova will likely proceed, extending the field’s life to 2033. Production from the site will likely resume before 2022-end. Output from the field is expected to reach 29,000 barrels per day by 2023.

The company also agreed to decrease its stake in the White Rose project, while partner Suncor Energy Inc. SU will receive an increased working interest. Cenovus’ stake in the field will be reduced from 72.5% to 60%, while the same in the satellite extensions will be decreased to 56.375% from 68.875%. Per the deal, Suncor’s stake in the offshore field will likely rise to 40% from 27.5%. The West White Rose project restarting decision is expected to be made by the middle of the next year.

The restructuring move from Cenovus is likely to make its upstream portfolio more profitable and free up some capital, which can be allocated more efficiently toward producing assets. These steps are likely to boost shareholder value. Further, the Terra Nova asset life expansion project and restart of the West White Rose project can enable it to attain its target of achieving compound annual production growth of 2-3% from 2020 to 2024.

Additionally, the company announced that it is working toward reaching the target of $10 billion net debt this year. At second quarter-end, the company had $12.4 billion in net debt. With its rising free funds in recent quarters, Cenovus is likely to achieve the goal within time. In the first half of 2021, it generated $1,877 million in free funds flow, reflecting a massive improvement from the year-ago free funds outflow of $1,074 million. Upon reaching the goal, it intends to allocate parts of the free funds for increasing shareholder returns.

Price Performance

The stock has gained 38.9% in the year-to-date period compared with a 6.6% rise of the industry it belongs to.

Zacks Investment Research

Image Source: Zacks Investment Research

Zacks Rank & Stocks to Consider

The company currently has a Zacks Rank #3 (Hold). Some better-ranked stocks from the energy space include Suburban Propane Partners, L.P. SPH and Comstock Resources, Inc. CRK, each having a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Suburban Propane’s bottom line for 2021 is expected to rise 62.9% year over year.

The Zacks Consensus Estimate for Comstock Resources’ earnings for 2021 is pegged at $1.10 per share, signaling a major improvement from the year-ago figure of 23 cents.



Breakout Biotech Stocks with Triple-Digit Profit Potential

The biotech sector is projected to surge beyond $2.4 trillion by 2028 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.

Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Recommendations from previous editions of this report have produced gains of +205%, +258% and +477%. The stocks in this report could perform even better.

See these 7 breakthrough stocks now>>



Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

 

Comstock Resources, Inc. (CRK): Get Free Report

 

Suncor Energy Inc. (SU): Free Stock Analysis Report

 

Suburban Propane Partners, L.P. (SPH): Free Stock Analysis Report

 

Cenovus Energy Inc (CVE): Free Stock Analysis Report

 

To read this article on Zacks.com click here.

 

Zacks Investment Research