CVE went through significant change in 2017, which complicates the value analysis. CVE purchased a number of oil & gas exploration and production assets in western Canada from Conoco Phillps. The acquisitor was funded through cash, debt and the issue of new shares. The change in all these variables impacts CVE’s figures from May 2017. Therefore, the Annual Report for 2017 includes only 7 months of data for the company as it will exist throughout 2018.
All the data in the 2017 Annual Report takes account of the higher share count as a result of the acquisition of the Conoco Phillips assets. The higher share count makes the earnings per share numbers particularly impressive.
The higher debt levels creates some risk for owners of the common stock. However, management has identified deleveraging as a key financial target since the acquisition. The higher earnings as a result of the acquisition should allow debt to be reduced over a period of time.
CVE’s use of cash to fund the acquisition also creates some short term liquidity risk for shareholders and this is reflected in the current ratio calculated form the sat in the 2017 Annual Report. However, CVE has sufficient liquidity to meet its short term needs.
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