Cenovus Power (TSX:CVE) is up 50% from the low it hit throughout the April tariff rout. Traders who missed the rally are questioning if CVE inventory continues to be undervalued and good to purchase for power publicity in a self-directed Tax-Free Financial savings Account (TFSA) or Registered Retirement Financial savings Plan (RRSP) portfolio.

Cenovus Power share value

Cenovus trades above $22 per share on the time of writing in comparison with $15 earlier this yr. The inventory rose 8% in August. It hit a post-pandemic peak of round $30 in June 2022.

Cenovus operates oil sands, typical heavy oil, offshore oil, and pure fuel manufacturing operations. The corporate additionally has refineries.

Administration has been busy in current months positioning the enterprise for long-term progress. In August, Cenovus introduced a plan to purchase MEG Power for $7.9 billion, together with debt. The deal could be 75% money cost and 25% in Cenovus shares. Analysts broadly see the deal as match, because the MEG Power oil sands belongings are positioned near current Cenovus operations. Cenovus expects to comprehend $150 million in short-term annual synergies and $400 million per yr in synergies from the deal by 2028.

Cenovus simply introduced one other transaction. The corporate is promoting its 50% stake in WRB Refining to its associate, Phillips 66, for US$1.9 billion. Property within the deal embrace the Wooden River Refinery in Illinois and the Borger Refinery in Texas. The online refining throughput capability for Cenovus on the websites works out to 247,500 barrels per day. Cenovus mentioned it can use the proceeds to scale back debt and repurchase inventory. The deal is anticipated to shut in 2025. Traders reacted positively to the deal.

Dangers

Strathcona Assets, which Cenovus beat within the bidding course of for MEG, lately made one other provide to attempt to undo the deal. This might power Cenovus to extend its bid, or the corporate might resolve to stroll away if it thinks the worth is simply too excessive. The uncertainty might trigger some volatility within the share value till there may be readability on the result.

Oil costs stay below stress. West Texas Intermediate (WTI) sells for US$63 per barrel in comparison with US$80 final yr. Analysts broadly anticipate the worth of oil to face headwinds into 2026 as rising provide from main producers retains the market in a surplus place. Demand from China and the US, the 2 largest oil customers, might weaken if tariffs and uncertainty on commerce negotiations trigger an financial downturn.

The sale of the stake within the U.S. refineries reduces income diversification at Cenovus. Including MEG makes it extra reliant on oil costs to find out income and earnings. Refining belongings can present a pleasant hedge throughout instances when oil costs are low. Decreased enter prices for the refinery doubtlessly result in larger margins on the sale of the top merchandise.

Time to purchase Cenovus?

Close to-term volatility needs to be anticipated, however power bulls would possibly need to begin nibbling at this degree and look so as to add on pullbacks. Buying MEG Power needs to be a long-term constructive for buyers. Even with out that deal, Cenovus has good progress prospects at its current oil sands belongings and has achieved job of decreasing debt to allow the enterprise to return extra money to shareholders by way of dividends and share buybacks. The present dividend yield is an honest 3.5%.