Cenovus vs. Phillips 66: Which Energy Stock Is the Better Buy?

Cenovus Energy Inc. CVE and Phillips 66 PSX are two prominent energy companies with different operating profiles. Phillips 66 is a diversified energy company engaged in refining, midstream transportation and renewable fuels. Cenovus, meanwhile, is a Canada-based integrated energy company with exposure to upstream and downstream operations.

Cenovus shares have jumped 92.4% over the past year, outperforming PSX’s 86.3% surge. However, the stock price performance alone does not provide a complete basis for an investment decision. Therefore, a closer look at the companies’ business fundamentals is warranted.

1-Year Price Chart

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CVE’s Latest Developments

Cenovus Energy’s production outlook has strengthened following faster-than-expected growth across its Oil Sands assets. Narrows Lake is producing more than 80,000 barrels per day, while Christina Lake North, Foster Creek and Sunrise are also delivering strong volumes. Consequently, CVE raised its 2026 upstream production guidance to 970,000-1.01 million barrels of oil-equivalent per day without increasing its capital investment guidance. Higher production and lower operating-cost expectations should improve cost absorption and support funds flow.

Operational efficiency is another positive development. Cenovus completed the Foster Creek enhanced sulfur recovery project ahead of schedule and within budget. The project is expected to lower chemical operating costs by 50-75 cents per barrel while supporting regulatory compliance. The company also shortened the planned Christina Lake turnaround by nine days, reducing the anticipated production loss by more than 700,000 barrels.

CVE continues to advance several growth projects. Christina Lake North remains on track to reach 150,000 barrels per day by 2028, while the sanctioned Spruce Lake DilSAP project is expected to add 5,000-10,000 barrels per day by that year. The technology could increase production while reducing steam requirements. West White Rose also remains on schedule for first oil late in the third quarter of 2026 and is expected to reach net peak production of 45,000 barrels per day in 2028.

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PSX’s Latest Developments

Phillips 66 is advancing several organic midstream projects, including the Iron Mesa and Zeus gas plants and the Coastal Bend pipeline and fractionation expansions. Iron Mesa and Coastal Bend remain on schedule and within budget, with management expecting the additional capacity to contribute meaningfully in 2027. These projects should strengthen PSX’s integrated wellhead-to-market network, support higher volumes and help the company reach its targeted Midstream earnings run rate.

PSX is also progressing the Western Gateway refined-products pipeline with Kinder Morgan and HF Sinclair. The planned system would connect cost-advantaged Mid-Continent and Gulf Coast supply with growing western markets, expanding PSX’s integrated value-chain advantage. Long-term shipper commitments covering most of the initial capacity strengthen the project’s commercial foundation.

However, Western Gateway had not reached a final investment decision at the time of the earnings call. The project requires $2.5 billion in cash contributions from PSX and is not expected to enter service until 2029. It therefore represents a sizable near-term capital commitment and has a lengthy development period before it begins generating returns.

Oil Hovers Around $84: Can CVE’s Upstream Business Thrive?

Canadian heavy crude is generally priced against Western Canadian Select, which typically trades at a discount to the West Texas Intermediate benchmark. However, Cenovus’ integrated business model helps offset heavy-oil price dislocations to some extent.

Its access to pipeline capacity and midstream infrastructure, combined with Canadian and U.S. refining operations, enables CVE to process discounted heavy crude into higher-value refined products. This integration supports downstream margins and helps reduce earnings volatility.

With oil hovering around $84 per barrel, Cenovus’ growing production, lower operating-cost outlook and brownfield expansion projects provide a supportive operating backdrop. Nevertheless, heightened geopolitical tensions in the Middle East have increased volatility in crude and refined-product prices, making future earnings more difficult to predict.

Management has also cautioned that Canada’s climate policies and regulatory framework have made the country less competitive for energy investment, discouraging major new oil sands developments. Although Cenovus continues to expand through optimization initiatives and brownfield projects, its long-term production growth will depend partly on a more competitive regulatory and investment environment.

Are High Oil Prices a Headwind for Phillips 66?

Elevated crude oil prices can pressure PSX’s refining operations because crude represents the principal input used to produce gasoline, jet fuel and other refined products. Higher feedstock costs could weigh on profitability if refined-product prices and margins do not rise sufficiently to offset them.

However, PSX’s diversified business model provides some protection from refining and commodity-price volatility. In addition to its refining operations, the company has significant exposure to midstream and chemicals, and continues to allocate capital toward its Midstream business.

Midstream assets typically generate comparatively stable cash flows because they are supported by the long-term transportation, processing and storage needs of customers. This makes the business less vulnerable to short-term commodity-price movements. PSX’s diversified operating structure therefore helps offset some of the risks associated with elevated crude prices and refining-market volatility.

CVE or PSX: Which Is the Better Stock?

The valuation comparison clearly favors Cenovus. CVE trades at a trailing 12-month enterprise value to EBITDA multiple of 5.91X, considerably below PSX’s 10.88X. This indicates that investors are assigning a higher valuation to Phillips 66, likely reflecting its diversified operations and comparatively stable midstream exposure.

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Nevertheless, CVE currently offers the more attractive relative investment proposition. Its discounted valuation is supported by growing oil sands production, improving operating efficiency, a stronger balance sheet and increased capacity for shareholder returns.

Commodity-price uncertainty and geopolitical tensions continue to create risks for both companies. Therefore, investors may want to avoid aggressively adding either stock at present. However, between the two, CVE’s lower valuation, production momentum and improving financial position provide a more favorable risk-reward profile.

CVE and PSX currently carry a Zacks Rank #3 (Hold), suggesting that existing investors may retain their positions while waiting for a clearer entry point. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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