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.
There is always headline risk for pipelines. If the Keystone XL pipeline is cancelled, the stock may take a hit. However, the company is looking at growing dividends by 5-6% annually.
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.
They got out of upstream operations and has struggled since then. He's not bullish about energy, and HSE will struggle. But HSE will rise nicely when oil prices rise. Not his favourite oil stock or sector.
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.
A large cap energy producer that he used to cover. The Canadian political landscape is an impediment. They need more takeaway capacity. The current supply-demand balance is too high. Inventory is high and the balance is out of equilibrium.
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.
Shorting this has been a good play. There have been operational challenges and there were mine depletions. ESG forces are also a headwind. A well-owned company still being the largest in Canada. If oil prices inflect soon, Suncor will be a beneficiary.
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.
It's fine but they have a lot of refining exposure where there is overcapacity. It's not terribly overbought like CNQ. There may be better areas to be invested. You probably want Canadian small-cap with some natural gas.
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.
They have done a great job selling down assets and have paid down debts. They have the best balance sheet out of peers. There is also growth prospects still with contracts with oil sands companies. One of the best dividend payer in the oil patch. (Analysts’ price target is $25.65)
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.
Just beat earnings and have increased production. Cheap valuation compared to peers. But it's getting more expensive heading into 2021. There's no growth here, but that goes with the entire oil patch. The real issue is will they survive. Their balance sheet is getting better, but still high for a blue-chip name. You'll be saved…
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.
Bullish on gas for the first time in years. Outlook for gas is very strong. An easy way to play growing demand. You have scale, good balance sheet, dividend payments. Valuation is good. 15% free cashflow at $50 oil. 90% upside is possible. (Analysts’ price target is $22.52)
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.
The Painted Pony transaction is immaterial in the grand scheme of things for CNQ. CNQ is a well-run company. It could probably double from here with their cashflow break even being at $27 for maintenance cap-ex. A very well-run and cheap large cap. He just prefers small cap.
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.
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.
Oil Companies. The war between Saudi Arabia and Russia may be a concerted effort to put marginal producers out of business. It is an unpredictable battle.
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.
The unique thing is their cost profile -- it is very low compared to peers. The trouble for CVE is getting their production out of Canada. That is why he favours pipelines over producers. There is too much commodity price risk, so he would not be a buyer. You might want to consider EOG instead…
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.
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.
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.
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 has been recommending this stock in the past. He still thinks this is the best managed company out there. It has had numerous negative transits (Sell Signals). He feels we need to hear from them and they need to resize the dividend relative to what they can pay. It is almost yielding 11%. There…