Cenovus buys Husky Energy

[pikeman06]

interesting dean2. I think once the jets and cruise ships and the world in general gets back to a similar pace as it was pre pandemic I think some oil and gas stocks would have to reflect the uptick in price in commodity prices. L.N.G will be the next thing. Just my opinion but personally getting close to jumping in on a few battered stocks like suncor, 7 gen etc. Not going in too heavy but its gotta be close to bottom....don't ya think?

[Dean2]

Originally Posted by pikeman06

interesting dean2. I think once the jets and cruise ships and the world in general gets back to a similar pace as it was pre pandemic I think some oil and gas stocks would have to reflect the uptick in price in commodity prices. L.N.G will be the next thing. Just my opinion but personally getting close to jumping in on a few battered stocks like suncor, 7 gen etc. Not going in too heavy but its gotta be close to bottom....don't ya think?

If you have read what I have been posting it should be pretty clear that I firmly believe there are way better places to make money for buy and long term hold. Even for short term flips there are far better choices like playing the swings on Tesla, Amazon, and Facebook, or Shopify. Many of the oil and gas shares will come back a ways but none of them are paying you to wait. Never try to catch a falling knife. Any increase in share price for oil and gas stocks is an opportunity to sell. I certainly wouldn't be accumulating more for a portfolio. If I want energy I would look at Utilities with a growing chunk of renewable. If I was looking for under priced shares I would have looked at Rogers at the recent $53 mark, Telus at 20-21, Royal Bank at 80, TD at 50 etc. All of these have good long term upside and no one trying to run them out of business.

[bdub]

Originally Posted by Dean2

Would appear the market feels the same way as I do about the merger. Husky up to exchange value of shares, Cenovus is off 12% so far this morning. To be fair WTI is off .$1.48 and WCS is down 90 cents, the overall TSX is off 212 points or 1.3%. All that considered, if the Cenovuus deal was considered really strong, it should be bucking the trend or at least holding even. I am inclined to believe the Cenovus shares will continue to suffer in the foreseeable future, Canadian Oil and Gas has become really unpopular due to Federal policies and the massive anti oil media campaign.

Yeah ubet, the market was obviously not impressed despite the overall brutal day for oil prices on Libya/Covid and stocks in general. Crappy timing for the announcement just ahead of a pretty steep selloff. These guys will have to prove they can do a decent job on the merger.

Oil has got to be the most hated sector in the world right now. ESG and the left wing have got anyone and everyone dumping anything oil related. If you want to be in it you want to try and own the best of the bunch for sure and be prepared for a long slog I think. Not something to be overweight in unless you love a lot of pain, suffering and sleepless nights.

On the plus side shale in the States is hurting here at under $40 Wti. A Biden win may put further hurt on US producers with the "shut down oil" policies of the Dems. Maybe more upside on the CDN nat gas side if shale production starts to really falter.

[pikeman06]

Thanks Dean I hear ya. Dang oil n gas runs thru my veins tho. Made a good living and had some very good trading days thanks to that sector. Appreciate your input.

[bdub]

Originally Posted by Dean2

Would appear the market feels the same way as I do about the merger. Husky up to exchange value of shares, Cenovus is off 12% so far this morning. To be fair WTI is off .$1.48 and WCS is down 90 cents, the overall TSX is off 212 points or 1.3%. All that considered, if the Cenovuus deal was considered really strong, it should be bucking the trend or at least holding even. I am inclined to believe the Cenovus shares will continue to suffer in the foreseeable future, Canadian Oil and Gas has become really unpopular due to Federal policies and the massive anti oil media campaign.

They are clawing back a bit of the loss today. Only 4.5%ish off the pre announcement price. Hopefully any holders on here didn't jump off the ship yesterday morning when they were down 12%.

[Selkirk]

.
And as expected ... here come the Job Cuts (Up To 25%) 👉 https://ca.reuters.com/article/busin.../idCAKBN27C27W

Selkirk

[bdub]

A couple weeks post deal and CVE is up 30% so far and 33% from the close on oct 30th. Similar performance by the other biggies like CNQ, SU.

Hopefully the bottom is in. I’m optimistic.

[bdub]

Anyone notice the moves in the sector, CVE up 44% from the lows post merger. Seems like the most hated sector in the world is finally catching a bid. I noticed lots of mention of ESG, carbon neutral, fuzzy good feeling stuff mentioned in many companies 3Q reports. Perhaps the sector is finally getting to be acceptable to large institutions, they are certainly trying to push that angle anyway.

Copy and paste From the Globe this A.M.

Cenovus Energy Inc. (CVE-T +3.89%increase
) is “bigger, better and more resilient” following its merger with Husky Energy Inc. (HSE-T), according to RBC Dominion Securities Greg Pardy.

“In our eyes, the announced Cenovus-Husky merger is strategically sound on paper, with success heavily dependent upon operational execution,” he said. “The deal will infuse much needed midstream/downstream integration into Cenovus' bitumen-weighted upstream, and should unearth value in Husky’s diverse portfolio through improved operational delivery.”

Mr. Pardy said the deal addresses Cenovus' “Achilles heel,” which he sees as cash flow volatility.

“From where we sit, the merger with Husky creates a more resilient company via an improved cost structure (including $1.2 billion of targeted synergies), downstream integration and enhanced market access,” he said. “The new Cenovus will still maintain good exposure to oil prices with a US$1 change in WTI impacting our 2021 cash flow estimate by about $290-million (7 per cent) (vs. 4-5 per cent for peers).”

“Based on our preliminary analysis, the Cenovus-Husky merger appears accretive to its cash flow and free cash flow per share under our outlook in 2021, excluding one-time integration costs. Our 2021 base outlook factors in an effective closing date of January 1, production of 748,000 boe/d, capital investment of $2.4-billion, $600-million of operating synergies, and $500-million of one-time restructuring costs. This outlook would point toward considerable deleveraging over the course of 2021 — which could be accelerated via non-core asset dispositions.”

Maintaining an “outperform” rating for Cenovus shares, Mr. Pardy raised his target to $8.50 from $7. The current average on the Street is $7.35, according to Refinitiv data.

“Cenovus is trading at a debt-adjusted cash flow multiple of 5.4 times (4.8 times excluding restructuring costs) (versus our Canadian integrated peer group average at 5.9 times) in 2021, and 4.0 times (vs. peers at 4.4 times) in 2022,” he said. “In our minds, the combined entity should trade at a discount multiple versus our Canadian integrated oil peer group reflective of its improved upstream-downstream balance and reduced exposure to Canadian heavy oil differentials, partially off-set by its above average balance sheet leverage, and need to demonstrate successful integration, including targeted synergies.”

[Dean2]

There is no doubt Cenovous and Husky are being lifted by the rising tide that is the Canadian market. As a short term trade this would have had a nice return, I still would not buy this, or any other Oil and Gas stocks for a long term hold. If I was going to hold Oil long term, this would not be my choice. Straightening out Husky is going to be a lot harder than it looks.

[bdub]

I don’t want to curse myself but over the next 18 months or so the oil patch may be a good place to be. We’ll see but Im thinking there are a few factors in play now that make it attractive. It was definitely more attractive a month ago, thats for sure.

I agree on Husky being a wreck. I used to own a little years ago. I haven’t payed much attention to them lately other to feel some relief for being out of the stock whenever I looked at the stock price. What a disaster. There are also better ones to own I think than Cenovus but I hope they can make the merger work. If they don’t, one of the others will probably scoop them up.

[Dean2]

I know what you mean bdub, my Alberta blood makes me cheer hard for the oil patch, I just can't find it in me to put any more money into that sector. I am even looking at moving out of a bunch of the pipeline stocks as they strengthen up.

For guys like you that pay lots of attention and move decisively, you can make some money in oil and gas, for most portfolios that are not as actively managed, they can lose a lot of money over relatively short periods of time. It is sort of like you buying Gold, done right, there is money in it, as a buy and long term no trade hold, not so much.

I really hope the patch gets some legs under it, at least for the next few years so guys have a chance to retrain and find longer term permanent work.

[bdub]

I hear you on putting money to work in the oil sector. Its difficult to try and look past certain biases to I have to try and come up with a framework. You got to be both right and go against the grain before things really go right. That or have some great luck. I think there are some huge bubbles out there, in bonds especially, where folks are going to get killed. They are unbelievably expensive here. We’ve never had rates like this before ever in history. I have more fear buying bonds here than I do certain oil stocks. How ridiculous does that sound lol.

[bdub]

That was a pretty quick for Cenovus stock price to double+ since the take over. Anyone adding here, or taking profits?

[fishtank]

pretty much every oil stock double since the us election ...

[Dean2]

Originally Posted by fishtank

pretty much every oil stock double since the us election ...

I sold half, now playing with just the profits. Did the same with Freehold Royalties and Whitecap. Didn't do Torc but should have.

[fishtank]

Originally Posted by Dean2

I sold half, now playing with just the profits. Did the same with Freehold Royalties and Whitecap. Didn't do Torc but should have.

i was going to say time to take some profit off the table , market been red hot since the election .

[JDK71]

we have been demoing lots of Husky remote sites and more to go

[bdub]

Originally Posted by Dean2

I sold half, now playing with just the profits. Did the same with Freehold Royalties and Whitecap. Didn't do Torc but should have.

Thanks for the reply. Never hurts to take some profits. I'm holding everything else for now and added 50% to CNQ on the quarterly report. Probably cursed myself posting.