Up 154% over the past 5 years, Cenovus Vitality (TSX:CVE) inventory has been a Canadian success story. This success follows an extended and troublesome transformation. However at this time, Cenovus has come out on prime as Canada’s premier built-in oil and gasoline firm. For Cenovus inventory, this implies good issues.

Let’s check out what’s coming subsequent.

Transition in management

Earlier this month, Chief Govt Officer Alex Pourbais introduced his retirement. This can be regarding for some, provided that it was he who bravely and efficiently took the corporate by a really troublesome interval. For instance, he championed the Canadian oil and gasoline business when everybody turned on it. He was additionally in a position to act on his convictions, going “in opposition to the herd.”

The consequence was Cenovus’s shrewdly timed acquisition of Husky Vitality. This buy was made at ultra-cheap valuation ranges, at a time when the oil and gasoline business was overcome with low commodity costs and even decrease investor sentiment. This has pushed a lot of the promise that I see for Cenovus Vitality within the years to return.

Cenovus inventory is using excessive on a powerful 2022

It’s no secret that 2022 was an incredible yr for oil and gasoline firms. For Cenovus, earnings elevated 10-fold, and adjusted funds move elevated 53% to $11 billion. Moreover, Cenovus was proving out its complete rationale for that controversial Husky acquisition — the ensuing price efficiencies and suppleness have been entrance and centre.

For instance, the Lloydminster refinery is seeing robust utilization with robust margins. Additionally, the LIMA refinery is operating reliably, whereas producing $1.1 billion in working margin and its best-ever security efficiency.

This robust efficiency has led to a pointy discount in Cenovus’s leverage and two credit score company upgrades. In actual fact, Husky lowered its web debt to $4.3 billion in 2022, $5.3 billion decrease that final yr. Additionally, Husky tripled its dividend and purchased again shares. All of that is contributing to shareholder worth, each immediately and not directly. It will, in flip, result in a decrease danger weighting being utilized to Cenovus inventory.

A number of growth regardless of decrease oil costs

Shareholders of CVE inventory have so much to stay up for. Initially, the corporate’s decrease debt ranges will do wonders for the inventory’s perceived danger degree. It will drive up its a number of. At present, Cenovus inventory is buying and selling at depressed multiples of beneath eight occasions earnings and 4.4 occasions money move. With its debt ranges considerably decrease, and its important return of capital to shareholders, demand for the inventory ought to rise, together with multiples.

Secondly, Cenovus is working exhausting on its new portfolio of downstream belongings. These former Husky Vitality refineries are the important thing worth catalysts for Cenovus’s inventory worth within the coming years. It is because Cenovus’s aim is to get these belongings working on the similar operational effectivity ranges as Cenovus’s upstream belongings. These belongings are recognized to be high quality belongings which are working at extremely environment friendly ranges.

Lastly, no dialogue of Cenovus’s future can be full with out mentioning the brand new and improved built-in enterprise that it’s at this time. Having the built-in enterprise, which incorporates the upstream and downstream companies, offers Cenovus with the pliability and fortitude to make cash in all commodity cycles. It offers Cenovus’s manufacturing entry to refineries, storage, and a complete built-in worth chain. It will allow Cenovus to be extra resilient and extra responsive. Ultimately, this can drive Cenovus’s success and Cenovus’s inventory worth larger.