Cenovus (CVE) Considering Atlantic Asset Redevelopment, $ 10 Billion Net Debt – September 9, 2021

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Cenovus Energy Inc. (CVE Free Report) recently agreed to restructure its holdings in the Atlantic region with respective partners in the region. The agreement integrates its direct interests in the Terra Nova and White Rose projects. This move is expected to improve the business economy in the region.

The deal will increase its stake in Terra Nova to 34% from 13%. In addition, it will receive $ 78 million from outbound partners for future asset retirement obligations. The plan to extend the life of assets at Terra Nova is likely to continue, extending the life of the field until 2033. Production at the site will likely resume before the end of 2022. Production from the field is expected to reach 29 000 barrels per day by 2023.

The company has also agreed to reduce its stake in the White Rose project, while its partner Suncor Energy Inc. (EU Free Report) will receive increased work interest. Cenovus’ stake in the field will be reduced from 72.5% to 60%, while the same in satellite expansions will be reduced to 56.375% from 68.875%. According to the agreement, Suncor’s interest in the offshore field will likely increase from 27.5% to 40%. The decision to restart the West White Rose project is expected to be made by the middle of next year.

Cenovus’ restructuring move is likely to make its upstream portfolio more profitable and free up capital, which can be allocated more efficiently to production assets. These measures are likely to increase shareholder value. In addition, Terra Nova’s asset life extension project and the restart of the West White Rose project may enable it to achieve its goal of achieving compound annual production growth of 2-3% of 2020 to 2024.

Additionally, the company has announced that it is working to meet the target of $ 10 billion in net debt this year. At the end of the second quarter, the company had net debt of $ 12.4 billion. With the increase in its free funds in recent quarters, Cenovus is likely to meet the target in time. In the first half of 2021, it generated $ 1,877 million in free cash flow, reflecting a massive improvement over the $ 1,074 million free cash outflow the previous year. Once the target is reached, he intends to allocate a portion of the available funds to increase shareholder returns.

Price return

The stock has gained 38.9% during the period since the start of the year, compared to a 6.6% increase in the industry to which it belongs.

Image source: Zacks Investment Research

Zacks ranking and actions to take into account

The company currently has a Zacks Rank # 3 (Hold). Some of the top-ranked stocks in the energy sector include Suburban Propane Partners, LP (SPH Free report) and Comstock Resources, Inc. (CRK Free Report), each with a Zacks Rank # 2 (Buy). You can see The full list of Zacks # 1 Rank (Strong Buy) stocks today here.

Suburban Propane’s net income for 2021 is expected to increase 62.9% year over year.

Zacks’ consensus estimate for Comstock Resources earnings for 2021 is set at $ 1.10 per share, signaling a major improvement over last year’s 23-cent figure.

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