It's a good time to be a Canadian oil sands producer. First, higher crude prices have boosted earnings for producers. Before the Iran war began, Brent crude was at about $73 a barrel and later shot up above $120 as the conflict escalated. The war disrupted traffic flow through the Strait of Hormuz corridor, where 20% of the global oil supply transits.
Canada's expanding crude export infrastructure is improving international market access for producers and encouraging output increases. The icing on the cake is Canada's expanding economy. The country's real GDP increased 0.8% in the second quarter, while monthly GDP rose 0.3% in June.
It turns out Cenovus Energy (NYSE:CVE) is one of the biggest beneficiaries of favorable conditions in the oil sector. The company reported its best-ever quarterly financial performance for Q2. And in a major milestone, Cenovus is transitioning into one of the world's largest producers, producing more than one million barrels of oil equivalent per day.
While favorable commodity prices lifted crude producers across the board, Cenovus Energy (NYSE:CVE) had extra tailwinds. That included strong production growth momentum. The company achieved record output levels across several sites. Its total upstream production reached 970,400 BOE/d in Q2, a 27% increase from the same period the prior year. The company's profit increased more than 200% in the quarter.
With its daily production crossing the one-million-barrel mark, Cenovus joins Canadian Natural Resources (NYSE:CNQ) as one of the few Canadian producers operating at that threshold. It is also entering an elite global group of top producers that includes Exxon Mobil (NYSE:XOM) and Shell (NYSE:SHEL).
Some 42 hedge funds held Cenovus Energy (NYSE:CVE) shares at the end of Q1. This number climbed to 49 at the end of Q2.
In terms of valuation, Cenovus offers more favorable multiples from a forward earnings standpoint. It trades at a forward P/E of 9.53 times, compared to Canadian Natural Resources' 11.20 times.
Also, Cenovus has an edge over Canadian Natural Resources in terms of investor sentiment. Cenovus also has lower short interest as a percentage of float, at 2.12%, compared with 2.94% for Canadian Natural Resources.
Cenovus Energy (NYSE:CVE) has already delivered strong returns for shareholders. The stock has climbed more than 10% over the past month and risen more than 80% year-to-date.
But even with those gains, Cenovus's growth story isn't over. Its latest results indicate that its underlying business continues to strengthen. Production levels hit a record and profit increased sharply. The company is joining the big league of global oil producers, further burnishing its profile.
Cenovus also enjoys hedge fund backing and offers a more favorable valuation and short interest compared to Canadian Natural Resources.
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