Cenovus Energy (NYSE:CVE) is about to release earnings. Ponder this Bear Case Scenario:
All producing assets are in Western Canada which is subject to a rampant inflation. Costs are increasing and Cenovus has no where to hide.
Most downstream assets are advantageous in periods with wide heavy oil differentials, a narrowing of differentials will diminish these gains.
Pelican Lake should produce strong returns. There is a potential for rapid declines and long production lags associated with polymer flooding causing Cenovus to fail on production and operating costs.
George Gutowski writes from a caveat emptor perspective.