TSX Commentary

RBC CM has initiated coverage on the common shares of Cenovus Energy with a Sector Perform, Average Risk rating and a one-year target price of US$31. CVE will begin trading on the TSX on Dec 3 and on the NYSE on Dec 9. In RBC CM’ mind, Cenovus Energy is a unique integrated oil company which possesses a powerful combination of in-situ oil sands assets coupled with complex refining capacity in the United States. Under the leadership of President & CEO Brian Ferguson, 2010 will constitute a pivotal year for Cenovus as it enters public markets and begins a realignment process that should involve $1.0 billion of upstream dispositions over the next two years. RBC CM’ 2010 production outlook of 230,000 boe/d for Cenovus would point toward a 6% decline vis-à-vis 2009 apples-to-apples production of 245,200 boe/d, with 3% growth in 2011 and 6% in 2012 assuming an intact asset base. RBC CM’ Sector Perform rating on Cenovus has everything to do with its relative valuation in the admittedly limited ‘if, as and when issued’ market. Nonetheless, Cenovus’ relative valuation appears to be at a premium on a multiple basis vs. RBC CM’ integrated oil and oil sand peer group. Accordingly, RBC CM could become more bullish on CVE amid a pullback in its share price.