Cenovus Energy (TSX: CVE) extended its recovery in July, rising 13% in the month. Investors who missed the rally over the past few months are wondering if CVE stock is still undervalued and good to buy for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio focused on dividends and total returns.
Source: Getty Images
Cenovus stock price
Cenovus trades near $20.50 at the time of writing compared to $15 at the bottom of the plunge in April, but it is still way off the $29 it fetched at one point last year.
Cenovus investors have endured a wild ride over the past 15 years. The stock was around $40 in 2012 before going into an extended decline that eventually saw it drop below $5 in 2020. Contrarian investors who had the courage to step in at that point enjoyed a stellar rebound that took the share price to $30 in June 2022. Since then, the share price has bounced around in the $15 to $30 range.
Cenovus has both production and refining assets. The upstream businesses include oil sands, conventional oil, offshore oil, natural gas liquids, and natural gas operations. The refineries, located in Canada and the United States, turn crude oil into fuel and petrochemicals that are sold to commercial and retail customers.
The integrated nature of the business should make Cenovus more attractive than some pure-play producers. When oil prices fall, the refineries can benefit from lower input costs that potentially lead to higher margins on the sale of the end products. Refining is a capital-intensive business, however, and downtime due to planned or unplanned maintenance can have a big impact on expenses, efficiency, and profitability.
Opportunity
Cenovus recently completed some major capital investments, and other expansion projects are in their final stages. In the second-quarter (Q2) 2025 earnings report, Cenovus said it achieved first oil at its Narrows Lake project last month with an anticipated ramp-up in production to rates of at least 20,000 barrels per day (bbls/d) by the end of 2025. Four new boilers came online at the Foster Creek site in July. This will add 80,000 bbls/d in steam capacity to the facility, with the new production expected to begin in early 2026. In the offshore group, Cenovus is making good progress on its major White Rose project. Drilling is expected to begin by the end of Q4.
Cenovus finished Q2 2025 with net debt of $4.9 billion. Once net debt falls to $4 billion, the company intends to return 100% of excess cash to shareholders.
Time to buy?
Geopolitical risks and optimism on trade deals helped push oil prices higher in July. This, along with the anticipation of rising production at Cenovus in 2026, likely led to the extension of the stock’s rebound last month.
Near-term volatility should be expected in oil markets. The geopolitical premium is in decline, and traders are now more focused on fundamentals. OPEC plans to increase supply in the coming months. At the same time, tariffs could cause a global economic downturn next year, which would be a headwind for demand.
That being said, oil bulls might want to start nibbling on Cenovus at this level and look to add on any further weakness. If oil prices rise next year, there could be meaningful upside for CVE as new production comes online across the asset portfolio. The current dividend yield is close to 4%, so you get paid well right now to ride out some turbulence.
