Cenovus

Cenovus (NYSE:CVE) reported good fourth-quarter earnings Wednesday morning on higher commodity prices and production growth, and the company also grew reserves nicely in 2011.

The Canadian oil extractor’s earnings were 44 cents per share, up from 19 cents a year ago. This was shy of some estimates of 50 cents due to higher costs at CVE’s Christina Lake field as the company prepared to ramp up the next stage of the site’s expansion.

Total oil and natural gas production accelerated in the fourth quarter, growing over 10% to 144,000 barrels per day from 130,000. This growth was driven by a 23% increase in oil sands production to 75,000 barrels per day from 61,000. Natural gas production declined 4% to 660 million cubic feet per day.

CVE increased proved bitumen, or oil sand reserves, by 26% to 1.5 billion barrels, while contingent bitumen reserves (meaning likely but not yet proven) increased 37% to 8.2 billion barrels. Reserves for heavy and light oil as well as liquid natural gas increased 4%, while natural gas reserves declined 13%. Finding and development costs were very competitive at $5.95 a barrel.

This solid reserve growth at good development costs will allow CVE to increase earnings much more rapidly than the typical oil company over the next several years. Management believes it is still on course to double its net asset value between 2010 and 2015. Net asset value ended the year at $37.50, compared to the base level of $28 at the end of 2009, meaning the company will need to see asset value grow 9% over the next four years to meet the $56 goal.

Volatility in operating costs like we saw this quarter may cause some unevenness in quarterly earnings. However, the long-term potential for CVE remains strong and highly visible.

Teva Pharmaceutical

Teva Pharmaceuticals (NASDAQ:TEVA) also reported a good quarter. On the bottom line, profits declined 34% in the fourth quarter, but that was due to higher costs from two big acquisitions (Cephalon and Taiyo). Earnings of $1.59 per share were on par with estimates, and adjusted operating income increased 6.5% while revenues grew 28%.

Teva is a leader in making generic drugs, and that business continued to grow, thanks to global markets. Sales of generic drugs in the U.S. declined 5% in 2011, but overall generics revenues increased 12% to $3 billion, primarily due to growth in Russia, Israel and the Taiyo acquisition in Japan. European generics increased 3%.

For Teva’s branded products, revenues increased 77% to $2.3 billion from $1.3 billion. Cephalon accounted for $567 million of the increase, with good results across all of Teva’s branded line. Copaxone sales led the way, increasing 11% to $927 million.

TEVA got a lift Wednesday on the report and has had a solid start to the year. It remains a cheap stock based on 2012 earnings estimates of $5.60 a share, so it has more upside potential. At the same time, you should be cognizant of Copaxone’s upcoming patent expiration, which will begin to hit earnings in 2014. That’s still a ways out, but as you know, the market always looks ahead, so keep your eyes peeled.