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Energy Summary for Feb. 12, 2016

2016-02-12 20:10 ET - Market Summary

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by Stockwatch Business Reporter

West Texas Intermediate crude for March delivery added $3.23 to $29.44 on the New York Merc, its best day in seven years, while Brent for April added $3.30 to $33.36 (all figures in this para U.S.). Many attributed the jump to renewed jawboning about an OPEC output cut, but it more likely reflects short covering ahead of the long weekend. Western Canadian Select traded at a discount of $12.15 to WTI ($17.29), up from a discount of $13.25. Natural gas for March lost 2.8 cents to $1.966. The TSX energy index added 4.68 points to close at 144.72.

Cenovus Energy Inc. (CVE) added 56 cents to $14.51 on 5.83 million shares, on top of the 43 cents it added yesterday after releasing its fourth quarter financials, announcing sweeping cost cuts and lowering its quarterly dividend (as noted in yesterday's Energy Summary). The company waited until after the close yesterday to file a preliminary short-form base shelf prospectus that will allow it to sell up to $5-billion (U.S.) in equity, debt or other securities over 25 months. Proceeds will go toward general purposes such as capital spending, debt repayment or acquisitions. The filing does not require Cenovus to do anything right away, or at all. It simply provides an option to shore up the balance sheet. This is already in good shape, even with a long-term debt balance of $6.5-billion (U.S.) (as of Dec. 31) and a large free cash flow shortfall expected this year. Scotia Capital analyst Jason Bouvier, in a research note yesterday, pegged this year's free cash flow at negative $958-million, even before the dividend. "However, with $8-billion of cash and liquidity, [Cenovus] has ample time to wait for an oil rebound," he added. (Cenovus has $4.1-billion in cash and equivalents and an undrawn $4-billion credit facility. As well, its debt does not start maturing until October, 2019.) President and chief executive officer Brian Ferguson told a conference call yesterday that the "excellent" balance sheet is helping Cenovus weather the "stiff headwind in 2015 which in 2016 has gone to hurricane force." The option to raise another $5-billion (U.S.) should help Cenovus keep battening down the hatches. It could also reflect preparation for something else: During the call, after an analyst raised the possibility of acquisitions, Mr. Ferguson replied that "... we do continually assess opportunities there, but beyond that I will not comment on what we are considering." The phrasing suggests that Cenovus is considering something, but of course talk is cheaper than any acquisition, even at today's bargain prices.

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