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Energy Summary for March 30, 2015

2015-03-30 19:43 ET - Market Summary

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by Stockwatch Business Reporter

West Texas Intermediate crude for May delivery, the benchmark in North America, lost 19 cents to $48.68 on the New York Merc, while Brent for May, the international benchmark, lost 12 cents to $56.29 (all figures in this para U.S.). Western Canadian Select, Canada's heavy oil benchmark, traded at a discount of $12.85 to WTI ($35.83), down from a discount of $12.75. Natural gas for May, the international benchmark, added 5.4 cents to $2.64. The TSX energy index added 1.43 points to close at 218.00.

Cenovus Energy Inc. (CVE) added 85 cents to $21.53 on 5.24 million shares. It has filed its 2014 annual report. Although the report mentions a three-year business plan going forward, it does not really specify what the plan is, though presumably it revolves around Cenovus's 50-per-cent-held Foster Creek and Christina Lake oil sands projects in Alberta. These projects will receive most of this year's budget. They produced about 256,000 gross barrels of oil equivalent a day in 2014, or 128,000 net to Cenovus, and their combined capacity is expected to be boosted to 620,000 gross barrels a day over the coming years. In December, as it announced a $2.5-billion to $2.7-billion budget for 2015, Cenovus said that most of the expansions would be done in 2015 through 2017 -- a three-year plan. It kept this plan intact even though it lowered the budget by $700-million in late January. A few weeks after that, it announced a $1.5-billion bought deal to help it handle this year's expected financing gap, which it pegged at $1.3-billion. The bought deal, which closed on March 3, met with muted response and Cenovus fell below the issue price of $22.25. It is still trying to climb back to that level. Analyst bullishness may help. Last week, TD Securities raised its price target to $26 from $25, a few days after predicting that the $1.3-billion financing gap "could be overstated." Cenovus's refining business should benefit from the widening Brent/WTI spread, wrote analyst Menno Hulshof, estimating that if the spread averages $16.75 (U.S.) a barrel (compared with Cenovus's estimate of $11.75 (U.S.)), cash flow will go up and the financing shortfall will be just $850-million. Mr. Hulshof also wrote that if Cenovus defers its oil sands expansions in 2016 and 2017, "the punch-line here is that the [shortfall] could fall to as low as $800-million in 2016 and become roughly balanced in 2017." That assumes no change to the 26.62-cent quarterly dividend, which yields 4.9 per cent. The problem, of course, is that kind words from an analyst can be as common as a favourable review in a travel magazine.

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