Author: [email protected]

July 25, 2025

Oilsands giant Cenovus Energy Corp. has been cited by industry watchers as one of the potential competing bidders for MEG Energy Corp., which has spurned an unsolicited offer from Strathcona Resources Ltd. and launched a formal review of alternative options.

MEG and Cenovus have neighbouring flagship oilsands projects south of Fort McMurray, at Christina Lake, that use steam wells to draw the bitumen from underground.

So from an operational perspective, it would make sense for Cenovus to want to further scale up and capture cost-savings and efficiencies, said Dane Gregoris, managing director of Enverus’s oil and gas research group.

But whether or not an acquisition would work financially is another matter given relative weakness in Cenovus’s stock, he said.

Over the past year, Cenovus shares have fallen nearly 30 per cent to trade around the $20 mark.

“It’s kind of an interesting dynamic. I think in a normal market environment where Cenovus had strong equity currency … they would definitely be the logical buyer.

Earlier this year, Strathcona offered a combination of 0.62 of one of its own shares and $4.10 in cash for each MEG share it doesn’t already own. MEG shares have been trading higher than the implied offer price, suggesting investors think a better bid will emerge.

MEG has urged shareholders to reject the bid, in part because it said combining with Strathcona would expose shareholders to inferior assets and capital market risk — assertions the would-be acquirer disputes.

The Financial Post, citing unidentified sources, reported earlier this week that MEG has set a Monday deadline for alternative bids and that Cenovus was said to be working on an offer.

Cenovus did not reply to a request for comment on Friday. MEG declined to comment.

On a call with analysts after the unsolicited bid was announced in May, Strathcona executive chairman Adam Waterous said his company and MEG have assets so complementary they are like “doppelgangers” or “brothers from another mother.”

Gregoris said operationally, Strathcona is not as compelling a fit as Cenovus would be, though there would be some synergies.

Part of Strathcona’s pitch is that a combination with MEG would increase its share float, enabling more institutional investors to get in on the stock of the combined company, Gregoris said.

In late May, Strathcona announced an equity commitment letter with Waterous Energy Fund, also led by Waterous. The fund owns almost 80 per cent of Strathcona shares, and the new investment is worth about $662 million.

MEG has raised concerns over Waterous Energy Fund owning 51 per cent of the combined company post-takeover, but Waterous has said the fund has no intention of selling its stake after a deal is completed.

It would be an “unworthy end” if MEG were to finish its more than quarter-century run through a “financial-engineering-styled transaction” at a modest premium, said Kevin Burkett, portfolio manager at Victoria-based Burkett Asset Management, whose firm owns Cenovus shares.

“A competing Cenovus bid would underscore just how strategic MEG’s contiguous oilsands assets have become in the broader consolidation story,” he said.

“It isn’t just about paying a premium, it’s about capturing immediate synergies in production, power and infrastructure that a financial buyer simply can’t replicate.

Other potential bidders floated by analysts include Suncor Energy Inc., Imperial Oil Ltd. and Canadian Natural Resources Ltd.

July 24, 2025

TORONTO — Losses in basic materials and consumer cyclicals helped drive Canada’s main stock index lower on Thursday, while U.S. markets were mixed.

“I think today’s a day where not a lot of macro stuff is coming out, so it’s been more news-driven on some of these individual stocks,” said Kevin Burkett, portfolio manager at Victoria-based Burkett Asset Management.

The S&P/TSX composite index was down 44.15 points at 27,372.26.

Teck Resources Ltd. was one of the largest downside contributors on the TSX, finishing more than 8.6 per cent lower after the Vancouver-based miner reported its second-quarter earnings and lowered its 2025 copper production guidance.

“Demand for chemicals, demand for basic materials is starting to reflect maybe an economy that’s changing gear,” Burkett said.

Meanwhile, the consumer non-cyclicals and real estate sectors were among the bright spots on the TSX.

Loblaw Cos. Ltd. finished more than two per cent higher after the company reported its second-quarter earnings, saying a slew of new discount stores helped push profit higher.

“I think what we’re seeing is that Loblaws has, for some criticism it gets from time to time, done a very good job of passing increasing costs along to end consumers, which reflects stability of end markets when you’re talking about grocery store businesses,” Burkett said.

Loblaw also announced a four-for-one stock split, citing continued affordability and accessibility of its shares for investors. Over the past year, Loblaw shares have risen more than 30 per cent to trade just above $220.

In New York, the Dow Jones industrial average was down 316.38 points at 44,693.91. The S&P 500 index was up 4.44 points at 6,363.35, while the Nasdaq composite was up 37.94 points at 21,057.96. The S&P 500 added 0.1 per cent to its all-time high set the day before, while the Nasdaq composite rose 0.2 per cent to its own record.

Alphabet climbed one per cent after the company behind Google and YouTube delivered a fatter profit for the latest quarter than analysts expected. It’s leaning more into artificial intelligence technology and said it’s increasing its budget to spend on AI chips and other investments this year by US$10 billion to US$85 billion.

An 8.2 per cent drop for Tesla kept the market in check. Elon Musk’s electric vehicle company reported results for the spring that were roughly in line with or above analysts’ expectations, and Musk is trying to highlight Tesla’s moves into AI and robotaxis.

“Tesla continues to wear fallout from a close and now fractured relationship with U.S. President Donald Trump,” Burkett said.

Stocks have broadly been rallying for weeks on hopes that Trump will reach trade deals with other countries that will lower his stiff proposed tariffs, along with the risk that they could cause a recession and drive up inflation.

Ahead of the looming Aug. 1 tariff deadline, when a pause on a slew of U.S. tariffs is set to expire, Burkett said he has concerns.

“I think everyone is surprised that it’s July 24 and we still have this tariff problem hanging over all of us,” he said.

The Canadian dollar traded for 73.37 cents US compared with 73.48 cents US on Wednesday.

The September crude oil contract was up 78 cents US at US$66.03 per barrel. The August gold contract was down US$24.10 at US$3,373.50 an ounce.

This report by The Canadian Press was first published July 24, 2025.

— With files from The Associated Press.

Companies in this story: (TSX: GSPTSE, TSX: CADUSD, TSX: L, TSX: TECK. B)

July 21, 2025

TORONTO — Canada’s main stock index lost steam throughout the trading day Monday to close just a few points higher amid a rotation into defensive sectors, while U.S. markets were mixed.

The S&P/TSX composite index was up 2.99 points at 27,317.00.

“I think you’re seeing that while the TSX is up, the way sectors and stocks are moving today is just reflecting a high level of caution,” said Kevin Burkett, portfolio manager at Victoria-based Burkett Asset Management.

Burkett added that under the surface, there is a “risk-off trade” happening on the TSX when you look at the performance across sectors. He noted that names like Alimentation Couche-Tard Inc. and NovaGold Resources Inc. performed well, where more service-oriented firms like Thomson Reuters Corp. were trading lower.

Couche-Tard, whose shares finished 1.64 per cent higher, said it’s restarting its share buyback program after it announced last week that it had ended its efforts to acquire the owner of the 7-Eleven chain. Meanwhile, NovaGold Resources Inc. gained 8.96 per cent on the day, while Thomson Reuters traded 3.08 per cent lower.

The slight gains on the TSX came as a pair of reports from the Bank of Canada said tariff-related uncertainty continued to put a damper on business and consumer sentiment in the second quarter, but previously anticipated worst-case trade scenarios seem less likely.

In New York, the Dow Jones industrial average was down 19.12 points at 44,323.07. The S&P 500 index was up 8.81 points at 6,305.60, squeaking past its prior all-time high set on Thursday, while the Nasdaq composite was up 78.52 points at 20,974.1, adding 0.4 per cent to its own record.

Burkett said U.S. markets have reached new highs amid a “quiet period” during the summer with ongoing trade uncertainty.

Many U.S. tariffs are on pause after President Donald Trump extended the deadline for talks with other countries in order to give more time to reach potential trade deals. The next big deadline, at least for now, is Aug. 1.

As the earnings season is unfolding, most big U.S. companies have been topping analysts’ expectations, as is usually the case. Companies will need to keep delivering solid profit growth to tamp down criticism that the U.S. stock market may be looking expensive again after prices reached records despite potential worries about tariffs and the economy.

“I think there’s a sense of dread, maybe, a growing sense of dread while we wait to see positive signs from discussions that we know are underway between Trump and some of their trading partners,” he said.

The Canadian dollar traded for 73.03 cents US compared with 72.89 cents US on Friday.

The September crude oil contract was down 10 cents US at US$65.95 per barrel.

The August gold contract was up US$48.10 at US$3,406.40 an ounce.

This report by The Canadian Press was first published July 21, 2025.

— With files from The Associated Press.

Companies in this story: (TSX: GSPTSE, TSX: CADUSD, TSX: TRI, TSX: ATD, TSX: NG)

July 16, 2025

July 16 (Reuters) – Giant shovels, driverless trucks and a dog-like robot have all helped Canada’s oil sands companies including Imperial Oil and Suncor become some of North America’s lowest-cost oil producers, driving down overheads even as the worst inflation in a generation pushed U.S. shale costs up.

As the global oil industry enters a downturn due to economic uncertainty related to U.S. tariffs policy and OPEC+ pumping more barrels, Canada’s oil sands industry finds itself in a position of strength.

In the years following the oil price crash of 2014-15, international oil majors including BP, Chevron and Total sold their interests in Canadian oil sands. At the time, they classified the Canadian operations as among their more expensive, and therefore less profitable, projects worldwide. They directed their capital to cheaper oil production, and favored U.S. shale for its quicker drilling time and returns.

Since then, new technology and cost-cutting efforts have driven meaningful improvement in the industry’s competitiveness that make oil sands among the cheapest producers, according to a dozen industry insiders and a Reuters analysis of the latest U.S. and Canadian company earnings.

While U.S. shale companies are responding to this year’s oil price downturn by dropping rigs, slashing capital spending and laying off workers, the oil sands’ position of strength means Canadian companies have made virtually no changes to their previously announced production or spending plans. Some Canadian politicians are now calling for a new crude pipeline from Alberta to the Pacific coast, as part of a broader effort to strengthen the country’s economy in the face of U.S. tariff threats.

The lower crude prices this year have little impact on the Canadian oil sector, Cenovus CEO Jon McKenzie said in an interview earlier this year. “This is an industry that has become much more resilient through time,” he said.

In one example, two four-legged robots— each nicknamed Spot because of their dog-like appearance — prowl Imperial’s vast 45-year-old Cold Lake operation in Alberta, conducting routine equipment inspections and maintenance such as heat exchanger optimizations, and oil/water tank interface monitoring. The Spots free up human workers for other work and save Imperial CDN$30 million ($22 million) a year, the company said.

Exxon-owned Imperial (IMO.TO) and its competitor Suncor (SU.TO) have also switched to autonomous mining vehicles, eliminating the need to hire drivers to transport oil sands ore. The switch has improved oil output productivity at Imperial’s Kearl oil sands mine by 20% since 2023, the company said.

Suncor operates a 900-tonne truck at its Fort Hills operation north of Fort McMurray, Alberta, which the company says is the world’s largest hydraulic mining shovel. Suncor CEO Rich Kruger said the shovel’s larger bucket and more powerful digging force deliver faster ore loading and less spillage.

Oil sands producers have also made improvements in equipment reliability and performance. At Kearl, for example, Imperial has reduced expenses related to turnarounds — an industry term for the costly periods of required maintenance that often involve temporarily shutting down production — by CDN$100 million annually since 2021. The company cut the time between turnarounds from 12 to 24 months in 2024, and aims to extend that interval to 48 months in future.

Suncor credits efforts including standardizing maintenance practices across mines and improving management of site water to get more production out of existing assets for contributing to the company’s US$7 per barrel reduction in its West Texas Intermediate (WTI) break-even price in 2024 to $42.90.

This long-term focus on cost-cutting means Canada’s five biggest oil sands companies can break even — and still maintain their dividends — at WTI prices between $43.10 and $40.85, according to a Bank of Montreal analysis for Reuters.

That means oil sands producers have lowered their overall costs by approximately $10 a barrel in about seven years. Oil sands had an average break-even price of $51.80/bbl between 2017 and 2019, according to BMO.

In contrast, a recent Dallas Federal Reserve survey of over 100 oil and gas companies in Texas, New Mexico and Louisiana found that shale oil producers need a WTI oil price of $65 per barrel on average to profitably drill. Back in 2017-2019, U.S. shale producers had a break-even price of between $50 and $52 per barrel.

HIGH STARTUP COSTS, BUT LONG LIFESPANS

Part of the reason that the oil sands industry has become so cost competitive is the nature of the extraction process. Producing the thick, sticky oil that is found in the sands of Alberta is in some locations more akin to mining than oil drilling.

Where the oil is very close to the surface, companies operate massive mines, scraping up huge volumes of sand and clay and then filtering out the oil. When the oil is deeper, companies inject steam underground to loosen the deposits and then use a drilling process.

An oil sands mine has big initial start-up costs but once it is operational, it can run for decades with very low production decline rates. Canadian Natural Resources (CNQ.TO), for example, at the end of 2024 had proved and probable reserves amounting to 20.1 billion barrels of oil equivalent in its portfolio, giving its oil sands mining and upgrading assets a remaining reserve lifespan of 43 years. The company’s Horizon oil sands mine has been producing since 2009.

Shale oil wells, by contrast, have low start up costs. Oil output from the wells, however, begins to decline within months. Prices have begun to climb because after years of heavy drilling in the top shale fields, the most productive areas have been exhausted. Drillers are moving onto secondary areas, so they have to drill more wells to achieve the same output and that has driven up costs.

Canadian oil sands companies have also paid down debt in the past five years, allowing them to reallocate profits away from shoring up their balance sheets and towards rewarding shareholders with dividends and buybacks.

According to the Bank of Montreal, oil sands producers Canadian Natural Resources, Suncor, Cenovus, Imperial Oil and MEG Energy (MEG.TO) currently have combined net debt, excluding lease liabilities, of C$33.9 billion after paying down a combined total of almost C$22 billion in debt between 2021 and 2024.

As returns grow, Canadian oil sands producers are an increasingly attractive investment for those looking to make money from the energy industry, said Kevin Burkett, portfolio manager with Vancouver-based Burkett Asset Management.

“(Canada’s oil sands) are not geopolitically risky, and they have some very appealing characteristics around productivity and costs,” said Burkett, who has shares of Canadian Natural Resources and Cenovus in his portfolio.

(C$1 = US$0.73)

​

May 26, 2025

Canada’s main stock index gained nearly 200 points, led by the tech and industrial sectors. 

The S&P/TSX composite index rose 193.18 points to close at 26,073.13.

One of the big gainers was ATS Corp., whose shares surged more than 20 per cent after it announced a US$135 million settlement with an electric vehicle customer over outstanding payments. 

Meanwhile, Ivanhoe Mines Ltd. dropped more than 16 per cent on the TSX as seismic activity continued to halt underground operations at a copper mine in the Democratic Republic of Congo. 

U.S. stock and commodities markets were closed for the Memorial Day holiday.

The Canadian dollar closed at 72.83 cents US compared with 72.70 cents US on Friday.

Kevin Burkett, portfolio manager at Victoria-based Burkett Asset Management, said investors are looking ahead to the Bank of Canada’s next interest rate announcement set for June 4.

Odds are betting the central bank will hold rates steady rather than cut them, he said. 

“I think the market’s generally come around to the view that in Canada we’re going to have a really hard time cutting interest rates if the U.S. isn’t themselves cutting rates.” 

Investors on both sides of the border are also continuing to track the “erratic headlines” coming out of the White House, Burkett said. 

On Monday, U.S. President Donald Trump said he would delay a threatened 50 per cent tariff of European goods until July 9. Stocks fell on Friday after Trump said talks with the European Union were “going nowhere” and that levy would take effect on June 1.

“I think overall risks remain very high that he implements these tariffs and that they have economic consequences that maybe he or his advisers underestimate,” Burkett said. 

He added he’s encouraged by recent Canadian data that suggests consumers are “a little less freaked out” than they were a month ago. 

“But I think it’s high chance that Trump continues the incendiary rhetoric of the past three months,” he said. 

To contend with the volatility, Burkett has been focused on investments geared toward consumers “needs” versus “wants.” 

That means consumer staples like Loblaw Cos. Ltd. and Dollarama Inc. are safer bets than names that rely more on discretionary spending, like BRP or Cineplex Inc., he said. 

This report by The Canadian Press was first published May 26, 2025.

Companies in this story: (TSX: GSPTSE, TSX: CADUSD, TSX: ATS, TSX: IVN, TSX: DOO, TSX: DOL, TSX: L, TSX: CGX) 

May 9, 2025

Money manager Kevin Burkett has been using the recent market downturn to pick up a few stocks he thinks will not only weather the current economic storm but also become long-term winners in his clients’ portfolios.

“We look for companies that not only generate sustainable returns on capital, but also have competitive advantages that allow them to thrive across market cycles,” says Mr. Burkett, partner and portfolio manager at Victoria-based Burkett Asset Management Ltd., which oversees about $430-million in assets.

His team became more defensive last fall, increasing its fixed-income holdings. In recent weeks, as the tariff war started to roil markets and valuations came down, Mr. Burkett and his team started to increase equities holdings, buying defensive stocks in sectors such as utilities and consumer staples.

The firm‘s balanced portfolio, which includes an approximately 60-40 split of stocks and bonds, was up 9.3 per cent over the past 12 months. Its three-year annualized return was 8.2 per cent, while its five-year annualized return was 11.4 per cent. The performance is based on total returns, gross of fees as of March 31. (Fees range from 0.40 per cent to 1.25 per cent depending on the size of a client’s portfolio.)

The Globe and Mail spoke with Mr. Burkett recently about what he’s been buying and selling:

Name three stocks you own today and why.

Stella-Jones Inc. SJ-T, the Montreal-based manufacturer of pressure-treated wood products such as utility poles and railway ties, is a company we bought in late April at an average price of $67.11 a share.

We like that its customers, such as railways, telecoms and electrical companies, are stable businesses largely independent of economic swings. This is a business we’ve owned before but sold in the middle of 2023 after a strong run-up. It’s an example of a solid company we’ve decided to buy back, given its recent drop.

Enbridge Inc. ENB-T, the Calgary-based pipeline company, is a stock we bought in late February for $61.24 a share. We tend to trade between Enbridge and Pembina Pipeline Corp. We think Enbridge is best positioned to deliver stable growth through the current business cycle. It operates long-term, fee-based contracts, which lowers cash flow sensitivity to commodity price fluctuations.

When you think about the impact of energy tariffs, it comes mostly at the cost of the shipper, so we don’t see exposure in pipelines to tariffs on cross-border energy flows. That’s a nice feature, too: Enbridge’s footprint across North America offers a competitive advantage.

Bunzl PLC BZLFY, is a British company that sells food packaging, personal protection and safety equipment to customers across industries such as health care, construction, supermarkets, retail and offices.

It has an extensive North American business as well. We originally bought it in late December and again in April. Our average cost is $20.05 a share. It’s a stable, conservative business and a great defensive company in a macroeconomic backdrop like we’re in now.

Name a stock you sold recently.

Andlauer Healthcare Group Inc. AND-T, a logistics company in the health care industry, is a stock we sold after it recently announced it was being taken over by United Parcel Service Inc. UPS-N for $55 a share.

We bought the stock in February and March for an average price of $43.50 a share. We liked that it had a stable customer base in the health care field. It’s also defensive, given the aging population, increased retail drug purchases and strong moat given the strict regulations around pharmaceutical transportation in Canada. It has also been making acquisitions in the U.S.

While we were lucky with the quick stock appreciation after the UPS acquisition, we were also a bit disappointed. We wanted to own it for a longer period of time and hoped it would do better than the UPS acquisition price. We sold our shares on April 24 for $53.42 each. We decided not to wait until the deal closed so we could put the money into another stock.

This interview has been edited and condensed.

May 8, 2025

Kevin Burkett, portfolio manager at Burkett Asset Management, shares his analysis on the market’s reaction to a trade deal between the U.S. and the U.K.

May 8, 2025

May 8 (Reuters) – Shares in Cenovus Energy (CVE.TO) jumped nearly 10% on Thursday after the Canadian oil and gas producer posted a fall in first-quarter profit but managed to beat Wall Street estimates on the back of higher output and improved refining margins.

The Calgary, Alberta-based company’s U.S.-listed shares were up 9.8% as of mid-day trading. Cenovus’ first-quarter net income fell to C$859 million ($618.79 million) from C$1.18 billion a year earlier, as crude prices declined on uncertainty surrounding the U.S. economy, tariff policies and fears of oversupply.

However, the company’s quarterly profit per share of 47 Canadian cents surpassed analysts’ average estimate of 37 cents per share, according to data compiled by LSEG.

Prior to Thursday’s beat, Cenovus’ profit had trailed analysts’ estimates for much of the past 12 months. In the fourth quarter of 2024, the company had posted a fall in profit in large part due to ongoing weakness in its U.S. refinery division.

In the first quarter, however, Cenovus saw improved reliability from its U.S. refinery operations and also benefited from the return to full operations at its 183,000 barrel-per-day (bpd) Lima, Ohio, refinery following a period of planned maintenance.

Refinery utilization in its Canadian refining segment rose to 104% from 94% a year ago, while it rose to 90% in the U.S. refining segment from 87%.

Its U.S. refinery division was able to improve its share of market capture to 62%, compared with 52% in the fourth quarter, Cenovus said.

Overall, market conditions have improved in the North American refining sector, said CEO Jon McKenzie.

He added that Cenovus’ 160,000-bpd Toledo, Ohio, refinery will wrap up a period of planned maintenance work this quarter, which should help drive continued improved results.

“We expect to see a clear runway for our U.S. refining business to deliver higher performance through the second half of the year,” McKenzie said on a conference call.

The company’s results this quarter are encouraging, but it will need to demonstrate strategic progress in the long-term if it wishes to command a premium valuation, said Kevin Burkett of Burkett Asset Management, which holds shares in Cenovus.

“That includes clearly communicated steps to improve operational consistency in downstream and better articulation of its long-term capital allocation plan,” Burkett said in an email to Reuters.

Cenovus’ total upstream production was 818,900 barrels of oil equivalent per day (boepd) in the first quarter, up from 800,900 boepd a year earlier.

Cenovus confirmed on Tuesday that it had reduced its employee headcount but declined to disclose numbers.

McKenzie also declined on Thursday to put a number on the amount of job losses, but said the company is readjusting its labour force as major capital projects come to an end, as well as to improve competitiveness.

($1 = 1.3882 Canadian dollars)

February 15, 2024

Canada’s main stock index gained 1.6 per cent on Thursday, led by strong gains in the energy sector, while U.S. markets also rose, with the S&P 500 notching a new all-time high.

The S&P/TSX composite index closed up 333.29 points at 21,222.69.

In New York, the Dow Jones industrial average was up 348.85 points at 38,773.12. The S&P 500 index was up 29.11 points at 5,029.73, while the Nasdaq composite was up 47.03 points at 15,906.17.

Mixed messages from inflation readings are driving short-term market volatility, said Kevin Burkett, portfolio manager at Victoria-based Burkett Asset Management.

On Tuesday, hotter-than-expected U.S. CPI numbers drove markets into a selloff, but much of that was recovered in the following days.

“The numbers themselves aren’t bad. I think that the issue is people’s expectations, in particular at the end of December, had become so aligned to this view that we would see imminent and steep rate cuts,” said Burkett.

“And what we’ve seen in the last two months, in particular, is people start to think more realistically about the timing with which we can expect policymakers to begin to cut rates.”

Right now there’s very little chance that either the Bank of Canada or the U.S. Federal Reserve will start cutting interest rates in March, said Burkett. As well, expectations for how many cuts the entirety of 2024 will bring have come down significantly in recent weeks, he said.

“The challenge is that with inflation stubbornly elevated, it’s awfully hard for monetary policymakers to justify cutting rates and risk undoing (the effects of) the rate hikes of the last 12 to 24 months,” he said.

Thursday saw the latest retail sales report in the U.S., with sales in January weakening by more than expected, which could remove some pressure on inflation.

Recent earnings reports in Canada have highlighted the disparity between companies that have more pricing power — like insurance or grocery companies — and those more on the discretionary side, said Burkett.

Manulife’s stock price soared by almost nine per cent Thursday after it reported higher earnings in the latest quarter.

Meanwhile, Canadian Tire reported a drop in profits in the latest quarter amid tougher economic conditions and softer consumer spending, though its stock price didn’t move significantly Thursday.

The Canadian dollar traded for 74.11 cents US compared with 73.80 cents US on Wednesday.

The April crude oil contract was up US$1.23 at US$77.59 per barrel and the March natural gas contract was down three cents at US$1.58 per mmBTU.

The April gold contract was up US$10.60 at US$2,014.90 an ounce and the March copper contract was up six cents at US$3.76 a pound.

— With files from The Associated Press