Let’s face it: Canadian energy stocks aren’t the flashiest investments on the market. But every once in a while, a stock like Cenovus Energy (TSX: CVE) starts flashing value signals for long-term investors. Cenovus has quietly delivered a strong first quarter in 2025. All while oil prices hover in a volatile range and investors wait to see what central banks do next. Now, it might just be the kind of opportunity that’s easy to overlook.
So should you buy it while it’s still trading below $20? Let’s look at the facts before jumping in.
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Into earnings
In Q1 2025, Cenovus posted net earnings of $859 million, a significant jump from just $146 million in Q4 2024. Adjusted funds flow hit $2.2 billion, up from $1.6 billion the previous quarter, and the energy stock generated $983 million in free funds flow. That’s a healthy amount of cash being churned out, especially when you consider the $595 million returned to shareholders through dividends, share buybacks, and the redemption of preferred shares.
The energy stock isn’t standing still either. It increased its base dividend by 11%, now sitting at $0.80 per share annually. For yield-seeking investors, that’s a nice bump backed by a commitment to return 100% of excess free funds flow, once it hits $4 billion in net debt. As of March 31, 2025, net debt stood at $5.1 billion, slightly up from $4.8 billion due to working capital needs, but still heading in the right direction.
Working hard
Operationally, Cenovus is firing on all cylinders. Upstream production came in at 818,900 barrels of oil equivalent per day (BOE/d), edging past last quarter’s already high 816,000 BOE/d. Downstream throughput also held steady at 665,400 barrels per day, and Canadian refining hit a record utilization rate of 104%. U.S. refining performance improved too, thanks to fewer shutdowns and narrower price differentials.
The energy stock is also progressing with its growth projects. Narrows Lake started steaming in April and first oil is expected in Q3. Sunrise brought another pad online, and Foster Creek’s optimization is now 75% complete. West White Rose is about 90% done and on track for first oil in mid-2026. These aren’t pie-in-the-sky plans, but instead well underway, and aimed at boosting production without needing major new steam infrastructure.
Considerations
Here’s the thing, though: Cenovus still faces headwinds. While the operational results are solid, free funds flow did dip from $1.2 billion in Q1 2024 to $983 million this quarter. The energy stock also saw a drop in cash from operating activities compared to both last quarter and the year before. Plus, turnaround costs in U.S. refining are expected to be significant in Q2, ranging from $240 to $295 million. And that $4 billion net debt goal still isn’t quite within reach.
So, if you’re wondering whether Cenovus is a good buy while it’s trading under $20, it comes down to what you want in your portfolio. If you’re looking for a cash-flowing, dividend-growing energy name with large-scale projects nearing completion, it’s definitely worth a closer look. But if you’re after short-term growth or worried about oil price volatility and maintenance costs eating into earnings, you might want to wait for a bigger margin of safety, or at least see if it drops a bit more during market dips.
Bottom line
Cenovus won’t be the energy stock that doubles overnight. It’s the kind of name that sits in your portfolio, throws off cash, and gradually improves its balance sheet while executing its long-term strategy. It’s not a gamble, it’s more of a patient play.
Whether that fits your investing style is the real question. But if you’ve got room for a resilient, well-managed energy stock that’s quietly delivering on its promises, Cenovus might just be worth scooping up while it’s trading below $20. Just make sure you’re comfortable with the oil sector’s ups and downs, and don’t forget to watch those turnaround costs in Q2.
