Canadian investors should pay close attention to the TSX’s energy sector as year-end approaches. It has gained 16% in the last six months and the momentum should carry over into 2026. A strong buy among the sector heavyweights is Cenovus Energy (TSX: CVE).
The large-cap CVE (+40%) has outperformed the sector and the broader market (+21%) during the same period. This $44.6 billion company will soon be Canada’s second-largest oil and gas producer after emerging victorious in an intense bidding war. Industry experts think the five-month-long battle has reshaped the country’s oil patch.
On November 6, 2025, MEG Energy shareholders approved Cenovus Energy’s proposed takeover. The transaction is worth $8.6 billion. Market analysts’ recommendations are “buy” to “strong buy” following the approved merger. Many of them raised their price targets.
As of this writing, CVE trades at $25.40 per share and pays a 3.1% dividend. The 12-month high price target is $32 (+26%). A $6,985 investment (275 shares) will generate $218.63 in passive income in one year.
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Favourable transaction
The common sentiment about the transaction is that Cenovus Energy will benefit from the longer-term momentum and strong upside. Both companies believe the close proximity of their oilsands properties will result in substantial cost savings and operational efficiencies. It is a consolidation of the highest-quality resources within the oil sands.
Cenovus expects 720,000 barrels of oil equivalent (boe/d) daily oil sands production post-merger. The MEG Energy portfolio adds 110,000 barrels. Management said output could grow to 850,000 boe/d in 2028.
Strathcona, the erstwhile rival to win MEG Energy, has thrown in its support for the deal. Under a voting support agreement, the company has agreed to vote its MEG common shares in favour of the transaction. Meanwhile, Cenovus will sell certain assets to Strathcona and obtain proceeds of up to $150 million.
Financial highlights
This year has been special for Cenovus Energy, especially in upstream production and crude refining. Its Upstream production of 832,900 boe/d in Q3 2025 was the highest ever recorded by the Oil Sands segment. The U.S. Refining crude throughput of 605,300 barrels per day, with a 99% utilization rate, was also an all-time high.
Jon McKenzie, Cenovus President & CEO, said, “We delivered record volumes in both our Upstream and Downstream businesses this quarter, while maintaining our commitment to safe, reliable and cost-effective operations.”
In the three months ending September 30, 2025, revenues dipped 4.5% year-over-year to $13.2 billion, while net earnings rose 56.8% to $1.3 billion compared to Q3 2024.
“Our major growth projects are all approaching completion and our Downstream business is reaching its potential with consistently strong operating performance this quarter,” McKenzie added. Cenovus Energy will evaluate further upside opportunities.
Cenovus pays quarterly dividends and boasts an impressive track record. It has never missed a payment in 52 consecutive quarters or 13 years.
The Backbone
The oil sands business is the backbone of Cenovus Energy. Through asset development and operating strategy, it can maintain and grow its competitive advantage. More importantly, the long-life, low-decline oil sands assets provide predictable, high-margin production. This should be a major consideration for prospective investors.
