Cenovus Energy Inc T.CVE.WT

TD Raise Targets

[retiredcf]

Only posted for the stocks I own. GLTA

ARX raised from $29 to $31;
CVE raised from $31 to $33;
KEL raised from $8.00 to $8.50;
TOU raised from $72 to $77;
VRN raised from $14 to $15; and 
WCP raised from $12 to $13;

Q2/24 COMMODITY PRICE DECK UPDATE

THE TD COWEN INSIGHT

We are updating our commodity deck to reflect Q2/24 actuals and expectations for 2024E/2025E+. Since strip prices for the key benchmarks have not shifted much since our last deck change, this proved a relative non-event with no ratings changes. We still consider stock selection more important than in recent years, and our constructive oil and more cautious natural-gas outlooks are largely intact.

Our 2024 WTI assumption is unchanged at US$75/bbl, while we have nudged 2025 WTI to US $72.50/bbl (US$70/bbl previously). Similarly, we have tweaked our 2024 NYMEX assumption to US$2.60/mmBtu (from US$2.50/mmBtu) but left our 2025 assumption unchanged at US $3.60/mmBtu. Finally, our 2024 NBP/TTF assumptions have been increased to US$10.00/ mmBtu from US$9.00/mmBtu. Our 2024E and 2025E CFPS estimates are up 1% and 6% on average across our coverage universe, respectively, while our target prices are up 2%.

Oil outlook: Brent/WTI prices have fallen to ~US$89/US$83/bbl, but are still up 14%/16% YTD, as heightened global demand concerns have been partially offset by elevated geopolitical tensions. We still consider stock selection more important than in recent years and our constructive oil and more cautious natural-gas outlooks are largely intact. In our view, US$70-US$80/bbl WTI remains the sweet-spot for the industry from a profitability perspective, and for consumers from an affordability perspective, and we are not too far off that range today. Focus areas remain: 1) OPEC+ supply, given ongoing steps to manage supply/pricing (~2.2mbbl/d of production cuts recently extended through Q3/24, but could edge back into the market thereafter); 2) U.S. oil and refined product inventories (now 4% below norms), with refined product demand showing signs of strength (particularly gasoline/ jet fuel) through Q2/24; 3) SPR refills, given the Biden Administration's revised US$79/bbl offer price (vs. previous US$67-US$72/bbl) and aim to replenish the SPR by YE2024 (we remain very skeptical, given the slow pace thus far); and 4) key drivers of the WCS heavy differential, including spring/summer seasonal strength, TMX start-up (reportedly running at ~80% capacity), and ramp-up of Mexico's Dos Bocas refinery (although challenged thus far— only targeting 163mbbl/d by YE2024 vs. capacity of 340mbbl/d).

Natural-gas outlook: The near-term outlook has improved since earlier this year with U.S. storage levels now well below the highs seen in March (although still relatively elevated). U.S. storage levels sit 21% above the five-year average (down from 41% mid-March) and 11% above year-ago levels (down from 21% mid-March). In our view, this is a direct result of voluntary price-related volume cuts as many large gas-focused producers cut 2024E capex and delayed volume additions. U.S. supply is now ~102 Bcf/d, ~4% below the highs seen late last year. Although U.S. supply/demand dynamics have improved over the last few months, Canadian storage levels remain very elevated and little changed on a relative basis since early 2024. As a result, we have seen elevated near-term AECO/St. 2 basis, and we anticipate little relief until flows start to move off the Westcoast once LNG Canada is completed (first commercial cargos not expected until early 2025). Similarly, we expect U.S. demand to improve through 2024+, with the startup of additional LNG export facilities. In total, we estimate 3.6 Bcf/d (nameplate capacity) of incremental N.A. projects to come on- stream by early 2025 (Plaquemines & LNG Canada) and a further ~7.3 Bcf/d through 2027.