Contrarian investors looking for a turnaround play have had their pick of late in the Canadian oil & gas sector, with many securities currently feeling the downward pressure of sustained lower commodity price levels with respect to crude oil. One of the companies which has seen one of the more dramatic drops compared to its peers is Cenovus Energy Inc. (TSX:CVE)(NYSE:CVE), for a number of key reasons.
Last week, Cenovus announced that its chief executive officer Brian Ferguson would be stepping down amid a period of turmoil stemming from investor uncertainty in the strategic direction of the pure-play Canadian oil sands company. The market has reflected this uncertainty in the pricing of the oil producer’s stock, with Cenovus stock plummeting nearly 55% year-to-date and more than 70% over the past five years.
The slide, which started largely as a result of oil prices which have stabilized at the $30-$50 range from highs above $100 per barrel in 2014, has been exacerbated by recent efforts by Cenovus management to double down on existing oil sands assets, acquiring the assets held by Conoco Phillips in what was a joint partnership deal between the two oil producers. The exit of multinational firms from the Canadian oil sands, coupled with increasingly dim prospects relating to the long-term sustainability of Western Canadian Select compared to Brent Crude or WTI product – varietals of oil which are generally considered to be higher quality and better for the environment – as well as the proliferation of natural gas, have continued to drive Cenovus lower.
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