5 Best Cheap Oil Stocks to Buy in 2021

3. Cenovus Energy Inc. (NYSE:CVE)

Number of Hedge Fund Holders: 23
Total Value of Hedge Fund Holdings: $238 Million
Share Price as of April 28: $7.51

Canada-based Cenovus Energy Inc. ranks 3rd on the list of 10 best cheap oil stocks to buy in 2021. The company owns oil sand ventures in Northern Alberta and oil exploration areas in Alberta and British Columbia. In 2020, the company entered into a $23.6 billion partnership with Husky Energy Inc, an integrated energy company, to create a leader in the integrated energy sector. 

The company has a market cap of $19.0 billion. The stock has gained 146% in the last twelve months. Cenovus Energy Inc.’s revenue in 2020 came in at $9.87 billion. In March 2021, JPMorgan analyst Phil Gresh raised Cenovus Energy to Neutral from Underweight, with a price target of $13. According to the analyst, a Brent oil price in the $60s is a “sweet spot” for the Integrated Oils market, allowing demand to bounce back from COVID-19 while capital development is sustained. The collaboration resulted in cost and capital synergies of $1.2 billion, increased free funds flow production, and supported an investment-grade credit profile.

There were 23 hedge funds that reported owning stakes Cenovus Energy Inc. at the end of the fourth quarter, up from 18 funds a quarter earlier. The total value of these stakes at the end of Q4 is $238 million.

L1 Capital mentioned that they see great strategic value in the combination of high-quality and low-cost oil sands and heavy oil reserves with substantial midstream and downstream facilities following Cenovus Energy Inc.’s acquisition of Husky Energy in its Q4 2020 investor letter: 

“Cenovus Energy (long +49%) is an integrated energy company that develops, produces and markets crude oil, natural gas liquids and natural gas, primarily in Canada. Cenovus shares rose as the oil prices continued to recover and as discounts for their production compared to the WTI price narrowed, driving strong free cash flow generation in Q4 after very weak Q2 and Q3 performance. We increased our shareholding after Cenovus announced the acquisition of Husky Energy in late October 2020, to create the third largest Canadian oil and natural gas producer. We see strong strategic merit in the combination which unites high-quality and low-cost oil sands and heavy oil assets with extensive midstream and downstream infrastructure. The transaction should be highly accretive and lead to substantial synergies, increased scale, more stable cash generation and reduced group leverage.”