Up by over 126% in the last five years, Cenovus Energy Inc. (TSX: CVE) is a force to be reckoned with in the Canadian energy industry. Many may even consider Cenovus as Canada’s top integrated oil and gas company right now.
If you want to invest in the Canadian energy sector, Cenovus stock has several things going for it that might make it an attractive investment to consider for your self-directed portfolio.
Today, we will look at what is happening with the stock to help you make a more well-informed decision.
A drastic change
Cenovus Energy’s CEO, Alex Pourbais, announced his retirement in February. The development might have rightfully sparked some concern, considering he is responsible for getting the company where it is today. At a time when everybody turned their backs on the energy industry, he championed Cenovus and continued going against the tide to place his faith in it.
Cenovus acquired Husky Energy due to his conviction, allowing the integrated energy giant to secure a bargain with the acquisition. Timed to perfection, the acquisition came when low investor sentiment and low commodity prices caused the energy sector to decline.
An excellent year in 2022
The oil and gas sector flourished in 2022 as the world moved into the post-pandemic era. The surge in demand for oil and gas products allowed Cenovus stock to increase its earnings tenfold and adjusted funds flow by 53%. Cenovus also justified the move through the flexibility and cost efficiencies resulting from its acquisition of Husky Energy, .
The strong performance allowed Cenovus Energy to reduce its debt load significantly. Acquiring the company also increased its dividend payouts threefold, contributing to investor value and making it a more favourable investment for many Canadians. Further, Husky Energy reduced the company’s debt by $5.3 billion, making a substantial improvement to its financials.
Foolish takeaway
Cenovus Energy investors have a lot to look forward. Reduced debt levels mean the company’s perceived risk level is significantly lower. With a substantial return of capital to its shareholders, demand for Cenovus Energy stock could increase in the coming weeks. Additionally, Cenovus energy continues to fuel its downstream assets as part of its new integrated structure.
The refineries coming into the fold as a result of its acquisition of Husky Energy play a critical role in this positive development for Cenovus Energy. The company already has incredibly efficient upstream assets in its portfolio. Cenovus plans to increase the operational efficiency of its acquired refineries to bring them to the same level as its upstream assets.
Owing to its integrated infrastructure, Cenovus Energy stock now has the ability to generate generous cash flows in all commodity cycles. Since it is not facing any legal issues like Suncor Energy, Canadian investors may place Cenovus Energy stock in a more favourable position when considering whether to invest in energy stocks.
