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Why Has Cenovus Energy (CVE) Rallied 18.8% Since Q1 Earnings?

Zacks Equity Research

Since the first-quarter results announcement on Apr 29, Cenovus Energy Inc. CVE has seen a 18.8% rise in share price. It is to be noted that the rally was undeterred by the coronavirus outbreak’s impact on the integrated energy player’s quarterly results. The stock in fact gained on a rise in the price of Canada’s heavy oil as oil sands producers curtailed production volumes.

Weak Q1 Earnings

Cenovus Energy reported first-quarter 2020 loss per share of 72 cents, wider than the Zacks Consensus Estimate of a loss of 19 cents. In the prior-year quarter, the integrated energy firm reported earnings of 5 cents per share.  

Revenues of $2,994 million missed the Zacks Consensus Estimate of $3,230 million. Moreover, the top line declined from the year-ago figure of $3,908 million.

The leading energy firm’s weak quarterly results were primarily because of lower contributions from oil sands and refining operations. The coronavirus pandemic hurt global energy demand that dented refining margins and led crude to trade in the bearish territory. Thus, the virus outbreak hurt Cenovus Energy’s overall business in the March quarter.

Cenovus Energy Inc Price, Consensus and EPS Surprise

 

Cenovus Energy Inc Price, Consensus and EPS Surprise

Cenovus Energy Inc price-consensus-eps-surprise-chart | Cenovus Energy Inc Quote

Operational Performance

Quarterly gross revenues from the Oil Sands unit fell to C$2,027 million from C$2,427 million in first-quarter 2019. In the March quarter, the company recorded daily oil sand production of 387,036 barrels, up 12.8% year over year.

Notably, the segment’s operating loss was C$680 million against the year-ago quarter’s profit of C$467 million owing to higher transportation & blending expenses and lower realized crude prices.

Gross revenues at the Conventional unit were C$162 million, down from C$220 million in the year-ago quarter. In the March quarter, the company recorded daily oil sand production of 29,766 barrels, up 6.3% year over year.

The segment’s operating loss came in at C$356 million against a profit of C$8 million in the year-ago quarter due to higher transportation & blending expenses.

The Refining and Marketing segment generated gross revenues of C$2,049 million, down from C$2,689 million a year ago. Moreover, the unit’s operating loss was C$454 million against a profit of C$224 million due to lower market crack spreads.

Expenses

Transportation and blending expenses in the reported quarter increased to C$1,611 million from C$1,159 million a year ago. However, expenses for purchased products fell to C$1,805 million from C$2,105 million.

Capital Expenditures & Balance Sheet

The company incurred total capital expenditure of C$304 million in the quarter under review.

As of Mar 31, 2020, the Canadian energy player had cash and cash equivalents of C$160 million and total long-term debt of C$6,979 million. Its total debt-to-capitalization ratio was 0.29.

Zacks Rank & Stocks to Consider

Cenovus Energy currently carries a Zacks Rank #4 (Sell). Meanwhile, a few better-ranked stocks in the energy sector are Murphy USA Inc MUSA, Key Energy Services, Inc. KEGX and CNX Resources Corporation CNX. While Key Energy sports a Zacks Rank #1 (Strong Buy), Murphy USA and CNX Resources carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Murphy USA is likely to see earnings growth of 7% in the next five years.

Key Energy is likely to see bottom-line growth of 97.2% in 2020.

CNX Resources has witnessed upward estimate revisions for 2020 bottom line in the past 60 days.

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