Aegis Value Fund on Cenovus Energy Inc.
Thesis
Cenovus benefited from stronger oil prices, higher refinery crack margins and the successful integration of MEG Energy. The acquisition added the neighboring Christina Lake oil-sands assets, increasing scale and creating synergies, while first-quarter per-share earnings rose nearly 80% year over year. Cash flow is being used for debt reduction, buybacks and higher dividends. Aegis views Cenovus's refinery-integrated, long-reserve-life and low-decline asset base as an improving risk-reward proposition with additional upside if Middle East supply disruptions drive another oil-price shock.
“We continue to maintain our sizable position in Cenovus, which represented 7.35 percent of Fund assets at the end of June.”
Key risks
- Oil prices could weaken if Middle East supply disruptions normalize