This week’s drone strikes that shut down Saudi Arabia’s oil production sent many Canadian oil stocks upwards.
The energy sector seems to be picking up more steam and investors are returning to the prospects of the industry. Analysts have been enthusiastic about energy recently, citing consistent cash-flow and decent yield.
Energy sector stocks also benefit from having a lot of institutional investors, giving their share prices more stability. We’ve seen the energy sector lag behind these past couple of years, but the prices look to be recovering, especially with geopolitical uncertainty.
The North American energy sector looks poised to take off in the near future.
Suncor Energy Inc (SU-T)
Although Suncor is relatively expensive to its peers, they offer good cash flow and decent yield. The yield is over 4% and they have one of the best integrated operations and assets in Canada.
There are higher oil prices, but oil stocks are hitting lows. This is a tremendous disconnected. Seasonlity is in the first half of the year, the run-up to summer driving when the oil price peaks. This year, we're not seeing the typical rally in SU-T. The tone is pessimistic, but there is a great buying…
Canadian Natural Rsrcs (CNQ-T)
The stock is close to book value right now. In the low $30s, analysts look keen on buying it. The company is also buying back stocks aggressively with its large free cash flow.
He likes both SU-T and CNQ-T and has made it a Top Pick in the past. Both these stocks continue to be good to hold. SU-T will continue to be a core holding for him as he likes both their upstream and downstream assets.
Gran Tierra Energy Inc. (GTE-T)
The balance sheet is in good shape, and it is trading at half book value right now. They are also increasing production. Their core assets are in South America, and they are now looking at Mexico.
Baytex Energy Corp (BTE-T)
A Calgary based oil and natural gas company that received Top Pick by John Zechner. They have been paying down debt and about 60% of production gets a premium price. There are no dividends, but the company is expected to use their free cash flow to buy back lots of shares.
It's very cheap and profitable. The balance sheet has gotten better. This should trade at $4, though he can't see it happening. The current price is a good entry, but the oil sector needs a catalyst (i.e. pipelines) for this--and other energy stocks--to really move.
Husky Energy (HSE-T)
One of Canada’s largest integrated energy companies. They were trailing along at their 52-week low recently. They are expected to grow in China with more thermal projects over time. The stock is cheap and it should recover along with the whole sector.
Breaking News The unsolicited offer has been given an exemption by the ASC that avoids having to provide identical consideration to all securities holders. This means MEG will plan to waive its shareholder rights plan, but still plans to reject the offer the Husky. He feels this is an unusual decision by the ASC and…
Tourmaline Oil Corp (TOU-T)
The company is transitioning from dry natural gas into more liquids. A very well run company who is expected to trade at 2 times cash flow in a couple of years, when commodity prices rise.
(A Top Pick Mar 08/18, Down 8%) One of the biggest gas producers in Canada. He is surprised it has been as stable as it has. It has done a good job with hedging and market diversification. Still a core holding.
Cardinal Energy Ltd (CJ-T)
A mainly oil producing company. They have been using their cash flow to pay down debt and financials look good. They cut dividends as prices came down when it was dragged down along with the rest of the sector.
Their dividend payout is not sustainable at current levels. But correction in differential and $60 crude will keep the payout sustainable which he thinks will happen.
Crescent Point Energy Corp (CPG-T)
An oil and gas company out of Calgary. They recently sold some assets in Utah and southeast Saskatchewan. They had quite a rally this month, though it’s now run into some resistance.
LNG had been sinking for some time, and the stock sold way off. About a 66% discount to book value right now. Earnings forecast has turned up. There is hope that oil prices are turning around, and perhaps nat gas has found a base. If you own it, don't sell.
Diamondback Energy (FANG-Q)
A company with a focus in the US Permian. As oil prices go back up, analysts expect this company to move first. They have a great inventory of over 7000 well locations.
He tries to find companies that are good and getting better than the peer group. They’ll produce about 7000 barrels a day this year and 17,000 barrels a day next year and 25,000 barrels a day the year after that. Enormous growth. Uses technology in the Permian Basin to really grow their reserves and production.…
CNOOC Limited (CEO-N)
China’s largest producer of offshore crude oil and natural gas. It is dual listed in the Hong Kong and the New York Stock Exchange. Rising oil prices will help advance this oil stock, although there is still some concern over the US-China trade war.
Oil price advances is going to help the advances of oil stocks. Chinese economy is likely to grow at an 8/8.5% for the next decade on a compound basis. Good opportunities.
WPX Energy Inc. (WPX-N)
A petroleum and natural gas company. It is well run with assets in the Permian and the Bakker. The share price has not moved according to their fundamentals so there could be more upside when investors come back to the energy sector.
They will grow about 3 times that of a Canadian producer. He is getting a 40% growth rate, but paying an inline multiple for it. At $5 billion market cap it has not hit as many radar screens and so is a little bit cheaper. (Analysts’ target: $18.00).
Pioneer Natural Resources (PXD-N)
An American petroleum, natural gas and LNG exploration and production company. The company has very little debt with the lowest finding costs in the Permian Basin.
There are several regions that have had big growth in reserves and production in the last 2-3 years. This company has enormous land holdings in the Permian basin and the Eagleford and have pioneered Fracing of sand and getting tremendous net backs on the drilling. Doing, $60-$65 a barrel. Have about 1200 drilling targets they…
EOG Resources Inc (EOG-N)
A Fortune 500 company that specializes in petroleum and natural gas exploration. It does have higher volatility because of the oil exposure, though it is quite well diversified with a lot of offshore assets. An international oil play.
Noble Energy Inc. (NBL-N)
A petroleum and natural gas exploration and production company. They have been rising steadily over the past months. More of the service side of the business.
A good Short? This is in the service side of the business. Global consumption of crude and natural gas is going to continue to expand regardless of whether we have a mild recession or not. Don't get overly bearish.
Enterprise Products Partners L P (EPD-N)
A leading integrated provider of Natural Gas Liquids. They offer isomérisation services to produce mixed NGL products as well as their component products.
EPD-N vs. SE-N. He likes both stocks. These MLP structures are quite complicated. There is generally the General Partner and a Limited Partner. In SEP they are separate, and has SE as a general partner and SEP is the Master Limited Partnership. The market prefers a company with enterprise products where they are rolled into…
Matador Resources (MTDR-N)
An American oil and natural gas company that engages in exploration, development and acquisition of resources. It focuses on shale plays and other unconventional resource plays.
About a 3 billion-dollar market. They will come out of this year with about 22,000 barrels a day and will likely double their production over the next 2 years. They are using technology to do that. Have spent about $440 million next year on CapX. Benefiting from a big drop in the cost of drilling.…
Southwestern Energy (SWN-N)
An exploration and production company in the natural gas and petroleum sector. It has the benefit of giving you exposure to both shale and conventional gas. It is a potential take-over candidate, according to some analysts.
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.
Apache Corp (APA-N)
An independant energy company that specializes in natural gas, crude oil and natural gas liquids. It’s operations are focused in the Guld of Mexico, Permian Basin, Gulf Coast among other locations. It also has operations outside of North America.
Devon Energy Corp (DVN-N)
An independant natural gas, NGL and petroleum exploration company. They specialize in onshore exploration in North America. It has a particular exposure to the Canadian oil sand properties.
SM Energy Company (SM-N)
An American petroleum and natural gas exploration company out of Denver. An analyst said that SM Energy Company is part of the oil stocks whose prices have outrun the fundamentals with major gains.
Energy company - oil and gas producer. He is looking for companies that are good quality, selling off and with volume picking up as it turns, which this is. He is already making money on it. Stop is $47.
Continental Resources (CLR-N)
An exploration and production company for petroleum and natural gas. They specialize in crude-oil concentrated, independent oil and natural gas. Their operations are in the Rocky Mountain, Mid-Continent and Gulf Coast regions in the US.
Cabot Oil & Gas (COG-N)
A low cost operator in petroleum, natural gas and NGL. The stock price has been under pressure from the shortage of pipelines in the region.
Sitting on 25 years of drilling inventory in the Marsalis shale play. This is a play that in the past 4 years has grown from a very low production base to a current production of 13,000,000,000 ft.³ a day, which is equivalent to all of Canada. This is a reason longer-term that he is a…
Oasis Petroleum Inc. (OAS-N)
The company has gone through transition and has changed the way they operate. They did a massively diluted share offering in late 2017 and they are still proving their competency.
He likes them because they are early on in applying advancements in technology to increase recoveries in wells. They are using more sand, an important theme. They did a pretty good job of navigating the downturn. They should soon get a re-rate. They have improved their balance sheet. Sentiment is as bad a Jan/Feb of…
Chesapeake Energy Corp. (CHK-N)
Highly leveraged though it is a good company. It has some great assets, and analysts are waiting for a sustained bull market in energy. It is range bound.
If you own, you could try to sell some Calls. He would personally sell “out of the money” as he is bullish on oil stocks. He would like to own them long-term. Instead of buying the stock, you could have bought a long-term “in the money” Call to replace the stock. This would be more…
Denbury Resources (DNR-N)
A company who is primarily oil driven. They are exploring and developing assets in the Gulf Coast region.
Anadarko Petroleum Corp (APC-N)
It has performed relatively better than Canadian oil stocks. They have good properties and good reserve life. Their price is reasonable and the question is how you think the commodity prices will go.