Low-Cost Oil Sands Assets & MEG Deal to Support Cenovus' Growth

Cenovus Energy Inc. CVE is a Canadian integrated energy company with operations spanning the upstream, midstream and downstream sectors. The company is involved in exploration and production from its low-cost oil sands and heavy oil assets in Canada. Cenovus also owns interests in midstream infrastructure and has its own refineries, where it converts heavy oil and bitumen into refined petroleum products.

Notably, CVE’s upstream earnings heavily rely on its Oil Sands business, which typically supports low-cost production. The company has set an ambitious upstream growth target of 4% year over year for 2026. Cenovus expects total upstream production to be between 945,000 and 985,000 barrels of oil equivalent per day (BOE/d) in 2026, with the largest contribution coming from its Oil Sands assets. Further, Cenovus’ strategic acquisition of MEG Energy in November 2025 immediately adds 110,000 barrels per day of low-cost, long-life oil sands production. The acquisition also allows for the integrated development of MEG Energy’s contiguous oil sands assets in the Christina Lake region. The MEG Energy acquisition is expected to provide a boost to Cenovus Energy's production levels in 2026.

Cenovus’ upstream operations are exposed to fluctuations in the West Texas Intermediate (“WTI”) crude price. However, its downstream operations partially offset the impact of volatile commodity prices, thereby protecting its bottom-line profitability. Therefore, while earnings remain sensitive to WTI price movements, the integrated nature of the company, along with its low-cost production assets, is expected to cushion volatility and support profitability in the near future.

Other Canadian Integrated Energy Players

Canadian Natural Resources CNQ is one of the largest independent energy companies in Canada engaged in the exploration, development and production of oil and natural gas. The company boasts a diversified portfolio of crude oil, natural gas, bitumen and synthetic crude oil. Canadian Natural has set an ambitious production target for 2026, aiming for a total annual production range of 1,590 thousand barrels of oil equivalent per day (MBOE/d) to 1,650 MBOE/d. This target represents a 3% increase in production compared with 2025.

Imperial Oil Limited IMO is another leading integrated energy company headquartered in Canada. IMO’s operations span across exploration and production, refining and petrochemicals business. The company is a major Canadian oil sands producer and the largest jet fuel supplier in the country. Notably, the U.S. oil giant Exxon Mobil Corporation holds an approximately 71% stake in the Canadian operator.

CVE’s Price Performance, Valuation & Estimates

Shares of CVE have jumped 19.8% over the past year compared with the 22.6% improvement of the composite stocks belonging to the industry.

From a valuation standpoint, CVE trades at a trailing 12-month enterprise value to EBITDA (EV/EBITDA) of 5.65X. This is above the broader industry average of 6.14X.

The Zacks Consensus Estimate for CVE’s 2025 earnings hasn’t seen any revisions over the past 30 days.

CVE sports a Zacks Rank #1 (Strong Buy) at present, while IMO and CNQ carry a Zacks Rank #3 (Hold) each. You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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