Some thoughts on CVE It is nice to see CVE continue to move up in share price, I think there are a few things to consider for those who are saying it is lagging.
1. CVE has never been the favorite for oil investors, SU and CVE are the names in that space.
2. CVE is increasing in price while COP is putting publicly disclosed selling pressure on the stock.
3. CVE is moving up while the market in general is moving down.
When I consider these three things, I feel CVE is doing very well and is holding it's own against the competitors well.
Moving on to all that cash. CVE is generating more FCF now than ever before in it's life as CVE. I personally do not wish to see the dividend increased, I know many others do, but I want the debt reduced as much as possible. No taxes on unrealized gains, and taxes are much more friendly on realized gains than dividends.
CVE has a number of very good value add projects they are waiting to green light that could be achieved with that cashflow, such as the FCCL upgrader tie in and many others. I would rather see CVE invest cash in what will allow them to be an even lower cost operator.
Once the debt it seriously low, the capital projects are well financed, I would like to see the NCIB accelerated.
Then once the Share count is lowered, then I would have no issues with them paying a healthy dividend.
I am more of the buffet style of thinking where dividend is a waste of capital, I want the company to use that money where they can get the best return possible.
I would rather see CVE use this capital to protect it from the risks it faces.
Banks are getting less willing to lend capital to O&G projects, debt reduction reduces the reliance on banks.
Oil has shot up quickly, it can go down quickly, buy having a pristine balance sheet low oil prices won’t bite as hard. Using capital on projects that make them an even lower cost producer will also further insulate them from low oil prices, as will expansion in the refining / upgrading space.
Pipeline space, although CVE currently has great pipeline appointment, they have correctly identified a DRU as a good value add project, this will reduce the need to buy condensate and be able to get more raw barrels on rail transport.
Looking forward to the future of this stock.
Thanks,
SHayden.