Cenovus Power (TSX:CVE) fell as a lot as 8% January 5 earlier than recovering a part of the losses. The inventory has been on a downward pattern for practically two months.
Buyers who missed the rally in 2025 are questioning if the dip is an effective alternative so as to add CVE inventory to a self-directed Tax-Free Financial savings Account (TFSA) or Registered Retirement Financial savings Plan (RRSP) portfolio.
Cenovus share worth
Cenovus trades close to $23 per share on the time of writing. It was as excessive as $26 in November and fell as little as $22 yesterday throughout the rout within the Canadian power sector.
Buyers dumped Canadian oilsands producers after the US captured Venezuela’s president and introduced him to New York to face narco-terrorism prices. The U.S. then introduced plans to considerably increase Venezuela’s oil manufacturing within the coming years.
Venezuela’s oil is just like the oil produced in Alberta. A surge in manufacturing from Venezuela may probably change oil despatched to American refineries from Canadian producers. For this reason Canadian power shares took a success on the information.
The long-term dangers are necessary to think about. Cheaper oil coming from Venezuela would probably drive down the value Canadian producers obtain from U.S. patrons. This is able to put stress on margins and income. The market response, nonetheless, is probably going overdone.
Analysts say it is going to require an funding of as a lot as US$100 billion to get Venezuela’s oil manufacturing again to its historic peak. American oil corporations would want to have ensures that their investments will likely be protected towards nationalization. This assumes that the nation finally ends up being secure sufficient to make the investments within the first place, and that oil costs will likely be excessive sufficient to ship the required returns.
There are a variety of unknowns that might derail the plan, or no less than lengthen the timeline.
Is Cenovus inventory a purchase?
Cenovus lately received an intense bidding battle to purchase MEG Power for $8.6 billion. The deal closed in November final 12 months, instantly including 110,000 barrels per day (bbls/d) of manufacturing and strategic oilsands reserves which might be adjoining to current Cenovus websites. The shut proximity of the property ought to end in significant synergies that improve worth within the coming years.
Buyers is likely to be involved that the corporate paid an excessive amount of for MEG in mild of the brand new potential dangers from elevated manufacturing in Venezuela. Time will inform, however the MEG deal must be optimistic for traders over the long term.
Cenovus additionally has typical and offshore oil manufacturing, in addition to refineries. These property present money circulate diversification and may assist offset the potential dangers posed by the occasions in Venezuela.
Weak oil costs are possible extra of a menace to the share worth over the following 12 months. International oil provide is rising at a quicker tempo than demand. The present surplus circumstances within the oil market are anticipated to proceed for a while. This will likely be a headwind for oil costs till the market rebalances.
On the optimistic facet, there may now be an additional push by the Canadian authorities to get a brand new oil pipeline constructed to attach producers to the coast. New export capability enabling gross sales to worldwide patrons would profit Cenovus and its friends and will offset any dangers from elevated provide to the U.S. from Venezuela.
On the present share worth, traders would possibly contemplate taking a small place for a buy-and-hold portfolio and will look so as to add on any additional weak point. Close to-term volatility is anticipated, however the long-term outlook must be optimistic for CVE from this degree.
