Cenovus Energy Inc. CVE has witnessed upward earnings estimate revisions for 2023 and 2024 in the past 30 days.
The Zacks Consensus Estimate for the Zacks Rank #3 (Hold) company’s 2023 and 2024 earnings are pegged at $1.91 and $2.33 per share, respectively.
Factors Favoring the Stock
Global crude oil prices have risen substantially over the past year. The positive trajectory in oil prices is a boon for Cenovus’ upstream operations.
For 2023, the company expects upstream production of 790,000-810,000 barrels of oil equivalent per day (Boe/d), indicating an increase from the 786,200 Boe/d reported in 2022. With the recent surge in commodity prices, higher production will boost the company’s bottom line.
Like upstream businesses, Cenovus benefits from its strong refinery utilization. The company expects downstream throughput volumes of 580,000-610,000 barrels per day for 2023, indicating a significant increase from the 2022 reported level.
Between 2020 and 2024, Cenovus expects compound annual production growth of 2-3%. With disciplined capital investment and production growth, the company expects consistent growth in earnings and fund flows for the period.
CVE continues to reduce debt through free fund flow generation and asset divestments. Cenovus reduced its net debt by more than 50% in 2022. The company expects to continue progressing on debt reduction throughout 2023. Also, the Canada-based energy player increased its base dividend 33% to 56 cents per share annually, starting in the second quarter of 2023.
In 2022, Cenovus generated $7,270 million in free fund flow, reflecting a major improvement from the year-ago free fund flow of $4,685 million. Cenovus intends to allocate some of the free funds for increasing shareholder returns.
Cenovus’ commitment to the energy transition is commendable. The company plans to reduce absolute greenhouse gas emissions by 35% by 2035 end. CVE commits to reaching net-zero emissions by 2050.
Cenovus discontinued its practice of crude price hedging as it realized steep losses on its existing risk management program. The company realized steep losses of $134 million on its existing risk management program in 2022. While this policy helps to capture upside exposure to the near to medium-term rebalancing of oil markets, the lack of any hedge protection makes Cenovus more exposed to potential weakness in crude prices than some of its peers.
Some better-ranked players in the energy space are Enterprise Products Partners LP EPD, Sunoco LP SUN and Eni SPA E, each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Enterprise Products reported first-quarter 2023 adjusted earnings per limited partner unit of 64 cents, which beat the Zacks Consensus Estimate of 62 cents. This was primarily due to higher contributions from the Natural Gas Pipelines & Services business.
In the first quarter, Enterprise Products generated an adjusted free cash flow of $1,347 million against a negative free cash flow of $1,618 million in the year-ago quarter. EPD recorded a distributable cash flow of $863 million in the same time frame.
Sunoco reported first-quarter 2023 earnings of $1.41 per unit, beating the Zacks Consensus Estimate of $1.21. Better-than-expected quarterly earnings were primarily driven by higher contributions from the Fuel Distribution and Marketing segment.
For 2023, SUN revised its adjusted EBITDA guidance upward to $865-$915 million from the previously mentioned $850-$900 million.
Eni reported first-quarter adjusted earnings from continuing operations of $1.85 per American Depository Receipt (“ADR”), beating the Zacks Consensus Estimate of $1.39. Better-than-expected quarterly earnings resulted from an increase in refinery throughput volumes.
For 2023, Eni reiterated its total hydrocarbon production guidance of 1.63-1.67 MBoe/d, indicating an increase from the 1.61 MBoe/d reported in 2022. The company expects to discover exploration resources of 700 MBoe this year.
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