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Top Independents Operators Oil Stocks to Buy in 2019

Melisa R. H.Melisa R. H. Posted On September 19, 2019
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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.

🛢 Oil

Canadian Stocks

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.

Suncor Energy Inc (SU-T) — Stockchase
Suncor Energy Inc (SU-T) — Stockchase

(A Top Pick Oct 01/20, Up 32.9%)Stockchase Research Editor: Michael O'Reilly Our PAST TOP PICK with SU is advancing nicely. We recommend trailing the stop up to $17.75 (currently at $13.50). This would all but guarantee a minimum return over 9%.

stockchase.com stockchase.com

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.

Canadian Natural Rsrcs (CNQ-T) — Stockchase
Canadian Natural Rsrcs (CNQ-T) — Stockchase

We have been going through a unique time when the small cap players outperform the large caps. You can own large caps with the likelihood of upside fairly large. At $50 oil, they are trading at a 16% free cashflow yield and 23% at $60. (Analysts’ price target is $33.77)

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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.

Gran Tierra Energy Inc. (GTE-T) — Stockchase
Gran Tierra Energy Inc. (GTE-T) — Stockchase

An oil producer in Colombia. They have shut-in volumes and are not spending money, but rather are paying down debt. Expect a production cut in the next two quarter and only rising in Q4. Buy this below 40 cents.

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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.

Baytex Energy Corp (BTE-T) — Stockchase
Baytex Energy Corp (BTE-T) — Stockchase

(A Top Pick Dec 19/19, Down 52%) It continues to offer meaningful leverage for rising oil prices. They hedged off 50% of their oil exposure next year. He does not own this for this reason.

stockchase.com stockchase.com

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.

Husky Energy (HSE-T) — Stockchase
Husky Energy (HSE-T) — Stockchase

HSE-T + CVE-T: Stay after the merger? He does not own either one. He understands the merger makes sense. There are a lot of cost savings that can be found. He prefers CNQ-T, PXT-T and one of his Top Picks today. He prefers these to HSE-T. If the sector bounces back you could get an…

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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.

Tourmaline Oil Corp (TOU-T) — Stockchase
Tourmaline Oil Corp (TOU-T) — Stockchase

TOU is the cream of the crop. They focus on natural gas, which has lagged, but will catch up. The balance sheet outshines its peers. Their cash can pick up more companies. Managers have been buying shares. Lots of upside. (Analysts’ price target is $26.97)

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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.

Cardinal Energy Ltd (CJ-T) — Stockchase
Cardinal Energy Ltd (CJ-T) — Stockchase

It would not be a name he would own. The number of market participants are very small. There is a certain market-cap threshold for market relevance. There is a pressure for MnA. It has higher cost, medium heavy oil company. They suspended dividends.

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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.

Crescent Point Energy Corp (CPG-T) — Stockchase
Crescent Point Energy Corp (CPG-T) — Stockchase

(A Top Pick Dec 10/19, Down 40%) Of course, he didn't foresee oil prices going negative (in April). CPG is not in a bad position here. North of $40/barrel, they can generate decent cash flow. It's decent.

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U.S. Stocks

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.

Diamondback Energy (FANG-Q) — Stockchase
Diamondback Energy (FANG-Q) — Stockchase

(A Top Pick Aug 27/20, Down 12%)Stockchase Research Editor: Michael O'Reilly We are choosing to remain disciplined and stick to our stop-loss at $35 and look for better alternatives. Now that key technical support has been breached it could try to retest lows near $25.

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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.

CNOOC Limited (CEO-N) — Stockchase
CNOOC Limited (CEO-N) — Stockchase

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.

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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.

WPX Energy Inc. (WPX-N) — Stockchase
WPX Energy Inc. (WPX-N) — Stockchase

The best valuation opportunities are in Canada, he thinks. He would sell WPX for the tax loss and buy Parsley instead, who has better exposure to Canada.

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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.

Pioneer Natural Resources (PXD-N) — Stockchase
Pioneer Natural Resources (PXD-N) — Stockchase

Energy stocks look quite attractive. There may be a bull market for energy. What caused the 2020 sell-off was triggered by the sell off in oil. It was then recognized simultaneously with covid. Without travel and work from home, energy demand fell dramatically. The valuation is quite cheap. He prefers large integrated companies like Shell…

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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.

EOG Resources Inc (EOG-N) — Stockchase
EOG Resources Inc (EOG-N) — Stockchase

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…

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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.

Noble Energy Inc. (NBL-N) — Stockchase
Noble Energy Inc. (NBL-N) — Stockchase

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.

stockchase.com stockchase.com

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.

Enterprise Products Partners L P (EPD-N) — Stockchase
Enterprise Products Partners L P (EPD-N) — Stockchase

(A Top Pick Aug 11/20, Down 9.3%)Stochchase Research Editor: Michael O'Reilly We have recommended to stop out of EPD as it has violated the $16.50 threshold we recommended. We see technical indications that the stock could retrace to $12. We will look for better opportunities elsewhere.

stockchase.com stockchase.com

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.

Matador Resources (MTDR-N) — Stockchase
Matador Resources (MTDR-N) — Stockchase

(A Top Pick April 2/14. Down 18.73%.) His job it is to watch for change and as he sees change, be able to reposition portfolios as required. Last summer, the US$ started to blast off, which happened at the same time that energy prices started to roll over. He got stopped out of virtually all…

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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.

Southwestern Energy (SWN-N) — Stockchase
Southwestern Energy (SWN-N) — Stockchase

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.

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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.

Apache Corp (APA-N) — Stockchase
Apache Corp (APA-N) — Stockchase

(A Top Pick April 18/16. Down 8.31%.) He sold this and got about 5.5% from it.

stockchase.com stockchase.com

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.

Devon Energy Corp (DVN-N) — Stockchase
Devon Energy Corp (DVN-N) — Stockchase

Stockchase Research Editor: Michael O'Reilly As COVID-19 vaccines roll out around the world, there is the expectation that economies will begin turning back up and energy demand will rise accordingly. DVN has managed to keep debt under control (with none due until after 2025), see positive cash flow over the past 12 months, and devise…

stockchase.com stockchase.com

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.

SM Energy Company (SM-N) — Stockchase
SM Energy Company (SM-N) — Stockchase

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.

stockchase.com stockchase.com

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.

Continental Resources (CLR-N) — Stockchase
Continental Resources (CLR-N) — Stockchase

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.

stockchase.com stockchase.com

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.

Cabot Oil & Gas (COG-N) — Stockchase
Cabot Oil & Gas (COG-N) — Stockchase

(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…

stockchase.com stockchase.com

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.

Oasis Petroleum Inc. (OAS-N) — Stockchase
Oasis Petroleum Inc. (OAS-N) — Stockchase

A name in transition. Used to be viewed as a leveraged way to play oil because they had financial leverage and were in the US Bakken play, which is still exceptional economics in a lot of their acreage. In the fall, they did a massively diluted share offering to purchase acreage in the Permian, paying…

stockchase.com stockchase.com

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.

Chesapeake Energy Corp. (CHK-N) — Stockchase
Chesapeake Energy Corp. (CHK-N) — Stockchase

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…

stockchase.com stockchase.com

Denbury Resources (DNR-N)
A company who is primarily oil driven. They are exploring and developing assets in the Gulf Coast region.

Denbury Resources (DNR-N) — Stockchase
Denbury Resources (DNR-N) — Stockchase

A tertiary play in that they do oil recovery after-the-fact for oilfields. Primarily oil driven.

stockchase.com stockchase.com

Mexico Stocks

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.

Anadarko Petroleum Corp (APC-N) — Stockchase
Anadarko Petroleum Corp (APC-N) — Stockchase

Tremendously high profile in the US and has held up relatively better than our Canadian oil stocks. Good properties and good reserve life. Good price. Really a question of what you think is going to happen on commodity prices.

stockchase.com stockchase.com
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