Energy has taken a hit recently, but the outlook is looking better in the coming years. There are positive signals that are improving the future of the oil and gas sector, and the energy sector has made gains recently, rising 0.6%. Furthermore, oil prices are climbing once again, and the differential between Canadian and international oil prices are falling. If you can stomach some volatility, this could be a good position to hold longer term to get a healthy return.
⚡ Energy: Oil and Natural Gas
TransCanada Corp (TRP-T)
A major energy company out of Calgary that operates infrastructure in North America.They’ve increased dividends recently. It carries lower risk as a business since 95% of their revenues are regulated or from long-term contracts. The stock could go up greatly with the approval of the Keystone project, if it were to happen.
Sales were up 5%; earnings were up 26%. He expects a 14% ROE this year. If it gets above $61 it would be a potential break-out. (Analysts’ price target is $62.98) (Robert McWhirter)
Husky Energy (HSE-T)
One of Canada’s largest integrated energy companies. It moves with oil prices. The stock has been experiencing higher highs and lows. Recently they stepped away from taking over MEG-T which surprised many investors. They have beat their earnings, and have an excellent balance sheet. For an energy stock, this is very defensive.
He owns Suncor and CNQ in this space. Husky is well-managed with good long-term assets. He has nothing negative to say about it; he just prefers these two other oil companies. (Douglas Kee)
Imperial Oil (IMO-T)
Canada’s second-biggest integrated oil company. They are financially strong, and it could be a good time to get in, as their valuation has been reaching historic lows. Fundamentally, the company is very good, but concerns over the sector have beaten it down, making for an attractive buying opportunity.
The outlook and performance of the integrateds have done better than the oil producers. IMO yesterday postponed their Aspen Project for a year. IMO is fully valued now and he prefers CNQ or Suncor. (Bruce Campbell (1))
Suncor Energy Inc (SU-T)
A company that specializes in production of synthetic crude from oil sands. They have a lot of growth potentially and are a low cost operator. They’ve been generating a lot of free cash flow. A premiere holding in Canadian energy.
It has support around $38, and recently broke a neckline on the way up. Generally, you can't predict commodities, but oil should remain bullish for the next month or two. (Keith Richards)
Cenovus Energy (CVE-T)
An integrated oil company. They’re moving more oil by rail and the price is good. They have good exposure to WCS differentials, and the new CEO is repositioning the company. A good choice for those looking to get exposure in a large cap Canadian stock.
(A Top Pick Jan 18/18, Down 12%) It rallied on a bad report. He sold this pick in the summer and is now short on it. They have not delivered on the balance sheet enough and there is still not positive cash flow. It is a small short for him. (Jason Mann)
Gibson Energy (GEI-T)
A supplier to the oil and gas industry. They are more of a pipeline company, with a refocusing on infrastructure. If oil continues to rise, this company will go up with it.
More of a pipeline company. One thing he likes is that they are exiting the commodity business. It is expensive. They are becoming more infrastructure focused. Dividend looks nice and safe-ish. Growth starts to look better after 2019. Not his favorite at this level but good to own it at a lower level. (Greg Newman)
Encana Corp (ECA-T)
A producer, transporter and marketer for natural gas, oil and natural gas liquids. They represent the entire Canadian energy patch. They bought a U.S. company last year and a combination of successfully integrating this company, and a rise in oil prices will push this stock up. They are experiencing strong volume now.
He just bought this. This has fallen, based and is moving up now with higher highs. He's very bullish in commodities now, because it was beaten up and has alredy based. (Analysts’ price target is $9.85) (Keith Richards)
Tourmaline Oil Corp (TOU-T)
An independent natural gas producer. They are considering adding to their dividends or to buy back stocks, as they look forward to having more cash flow. Their balance sheet is good, and they have good managers. They are moving more liquid natural gas and building facilities.
Too big to be taken over, except by a major, and it's quite independent, so that's a very low chance. Pure gas play, well run, profitable, has growth. Chart is pretty good for an energy stock. But valuations are still extremely low. It's in upper 5% of names, but whole group is out of favour.…
Canadian Natural Rsrcs (CNQ-T)
An oil and gas exploration, development and production company. They have great cash flow and they are expected to increase dividends next week. They are a flexible company that is well managed. They’v been focusing their operations on upgrading and refining oil in the last few years.
They just raised their dividend by 12%. They beat cash flow per share and production. They are buying back shares agressively. Pays a safe dividend at 69% payout. He sees 2% production growth. Okay balance sheet. The only thing to not like is oil itself. Not enough railroads in Canada. Norway has announced it is…
Chesapeake Energy Corp. (CHK-N)
An American petroleum and natural gas exploration and production company. They’re shares rose by 10% yesterday as the company beat profits as they move towards oil and away from gas. They recently acquired another company and are expected to produce more crude oil in 2019.
Probably a name he would hold or avoid, simply because it is so highly levered. A good company. It has some good assets. If you see a sustained bull market in energy, this could be fairly attractive. However he doesn’t think we are going to have a bull market in energy right now, so this…
Continental Resources (CLR-N)
A U.S. shale producer. They expect oilfield service costs to remain low due to weaker oil prices, but if you are bull-is on oil, this could be a good contrarian play. Their shale field output hit a record during third quarter 2018, and are expected to continue rise as they complete more wells.
This was the poster child for the US growth machine. But now they are in one of the worst places. Cut cap X program and will likely have to cut it again. Prefers Canadian oil stocks. Thinks there will still be revisions to CLR-N’s cash flow. (Eric Nuttall)
Cabot Oil & Gas (COG-N)
An independent oil and gas company engaged in development, exploitation and exploration. Their natural gas pipeline in the states has been given another chance with approval from the courts. They’ announced a quarterly profit helped by natural gas prices and increased production.
(Top Pick March 10/14, Down 14.12%) They are a lower cost operator. He sold this a couple of months after recommending it. Their challenge has been that their industry has been wildly successful in getting production growth and now there is a severe shortage of pipelines in the region so the price they sell for…
Chevron Texaco (CVX-N)
They manage subsidiaries that engage in integrated energy and chemicals operations. They’ve been matching estimates in the recent quarters and are in the middle of receiving bids for assets in the British North Sea.
He likes this stock. His model price is $140, 14% higher than the current price. The dividend is covered by the earnings. He expects it to rise with the market through year-end, if the market rises. However, he thinks there is better value elsewhere. (Brian Acker, CA)
EOG Resources Inc (EOG-N)
A petroleum and natural gas exploration company. They are expecting to see a fourth quarter profit boost from oil and gas hedging. They are a shale oil producer that has weathered well the oil price drop. They topped profit estimates last year.
His company has this with a $130 US target on it and $145 two years out. He has this as a sector perform, even though it is high volatility because of the oil exposure. Quite a well diversified company with a lot of assets offshore. If you are looking for an international oil play, this…
Kinder Morgan Inc. (KMI-N)
The largest energy infrastructure company in North America. Strong performance in its pipeline and terminal business helped their profits surge last quarter. They’re also working on building ports in Texas, as US oil export booms.
He likes the midstream and pipeline space and the yield. There are discussions around selling the CO2 part of the business that could create noise going forward. He would like to avoid any potential drama. Yield 4.3% (Cameron Hurst)
Noble Energy Inc. (NBL-N)
An independent energy company in crude oil, natural gas and NGLs. They’ve lowered their capital expense in response to a drop in crude oil prices and are aiming to return over $500 million to shareholders by 2020.
This all depends on what oil prices are going to do. $50 oil kind of keeps them going, but the costs are much higher than they are getting at the end of the day. (David Driscoll)
Southwestern Energy (SWN-N)
An energy company in natural gas and oil exploration, development and production. They sold their Fayetteville shale asset last year in a deal valued at about $1.87B.
Very bullish outlook on gas and this will give you great exposure to gas. Well run and a tremendous track record in production growth and reserve growth. Both shale gas and conventional gas exposure. Potential take-out candidate. (Dean Orrico)
Exxon Mobil (XOM-N)
An American multinational oil and gas corporation. They recently found another giant gas reservoir in Cyprus. Their reserves are up 23% from US shale. They’vealso outperformed estimates for Q4.
He loves the value it provides. He would wait for a return to the December lows to enter -- around $66. Yield 4.47% (Analysts’ price target is $83.10) (Brian Acker, CA)