This year, the energy sector has established itself as a peerless player in the US stock market, even managing to outperform the booming cyclical consumer sector. The most popular reference in the sector, the ETF Energy Select Sector SPDR (NYSEARCA: XLE) is up 49.3% year-to-date, marking its best performance in more than a decade as oil and gas prices continue to hit multi-year highs.
The crazy rally forced some of the the biggest oil bears do an about-face while others punters already have $ 200 worth of oil in their sights.
However, the American energy market has nothing on its neighbor to the north: Canada’s famous Oil Patch.
The Canadian energy market is playing chess while everyone is playing checkers: the country’s energy benchmark, Horizons S & P / TSX Capped Energy ETF (HXE.TO), is up 71% year-to-date, 21 percentage points better than its American brethren and more than 4 times higher than the S & P / TSX Composite Index to recover.
Horizons HXE seeks to replicate the performance of S & P / TSX Capped Energy Index, net of charges. The S & P / TSX Capped Energy Index is designed to measure the performance of Canadian energy sector equity securities included in the S & P / TSX Composite Index.
In recent years, a vicious one-two-three punch has started with grim long-term prospects due to rampant divestments from fossil fuels, climate change and decarbonization policies as well as shocks. short-term but severe COVID-19 crisis has plunged Canada’s largest export industry into existential crisis. Meanwhile, the drumbeat of outflows by foreign oil companies to bail out unprofitable tar sands has added another layer of gloom for an industry that is responsible for a fifth of Canada’s exports.
But with the return of oil and gas, long-suffering Canadian energy stocks are starting to look like real bargains.
Here are 5 that were really impressive.
# 1. Tamarack Valley Energy Ltd.
Market capitalization: $ 1.16 billion
Cumulative returns: 191%
Based in Calgary, Canada, Tamarack Valley Energy Ltd. (OTCPK: TNEYF) is a junior petroleum company that acquires, develops and produces crude oil, natural gas and natural gas liquids in the Western Canadian Sedimentary Basin.
Tamarack Energy primarily owns interests in the Alberta Cardium light oil fields in the Wilson Creek, Pembina, Alder Flats and Garrington and Lochend areas of Alberta. It also owns Viking light oil fields in Redwater, Alberta.
The company’s latest results have been impressive: first quarter revenue of C $ 93.43 million (+ 41.0% year-on-year) and GAAP EPS of C $ 0.00, while revenue from the second quarter reached $ 152.17 million (+ 359.3% year-over-year) while GAAP-compliant EPS came in at $ 0.67.
Although Tamarack’s debt has increased after several accretive acquisitions, it could drop as much as 50% with energy prices currently high.
# 2. Neo Lithium Corp.
Market capitalization: $ 622.2 million
Cumulative returns: 182%
Toronto based Neo Lithium Company. (OTCQX: NTTHF) is a lithium brine exploration company engaged in the exploration and development of resource properties. The company owns a 100% stake in the Tres Quebradas project covering an area of approximately 35,000 hectares, including a solar complex of approximately 16,000 hectares located in the province of Catamarca, Argentina.
Neo Lithium shares caught fire following the discovery of a new deep brine aquifer near its existing 3Q project site in Argentina. The company reported that each new drill hole intercepted high-grade brine at a depth of up to 362 meters and outside the previous resource estimate in 2018, compared to a previous resource estimate in the high grade area north that only went 100 meters.
Neo Lithium expects to deliver a further positive resource update in the second quarter, which will include all new, deeper and off-strike drill holes in the second quarter.
# 3. Crescent Point Energy Corp.
Market capitalization: $ 3.0 billion
Cumulative returns: 120%
Another Calgary oil company, Crescent Point Energy Corp. (TSX: CPG) (NYSE: CPG) explores, develops and produces light and medium crude oil and natural gas reserves in Western Canada and the United States. The Company’s crude oil and natural gas properties and related assets are located in the provinces of Saskatchewan, Alberta, British Columbia and Manitoba.
Crescent Point shares once traded above $ 45 per share and even paid a generous dividend, compared to the current price of $ 5.15. Sadly, the collapse in oil prices in 2014 left the company struggling with plunging cash flow and high debt levels, resulting in sharp dividend cuts – and stocks never fully recovered. Even after this year’s 120% gain, Crescent Point shares are trading 80% below 2014 levels.
Fortunately, the continued rise in oil prices has allowed Crescent Point to begin generating healthy cash flow and making several strategic acquisitions. That said, this stock will likely remain volatile and any setbacks in the near future could cause stocks to crash again.
# 4. Cenovus Energy Inc.
Market capitalization: $ 22.8 billion
Cumulative returns: 87%
Canadian Oil Sands Company Cenovus Energy (NYSE: CVE) develops, produces and markets crude oil, natural gas liquids and natural gas in Canada, the United States and the Asia-Pacific region. The Company operates in the oil sands, conventional, and refining and marketing industries.
CVE shares hit a 52-week high after JP Morgan upgraded equities to overweight neutrals with a price target of C $ 14.50 (potential up 45%), citing progress in the execution of the takeover of Husky Energy last year (OTCPK: HUSKF).
Cenovus shares remain undervalued, and with WTI now above $ 80 / b for the first time in four years, the company is in an excellent position to generate enough free cash flow to buy back its stake in ConocoPhillips.
# 5. Imperial Oil Limited
Market capitalization: $ 23.8 billion
Cumulative returns: 80%
A subsidiary of Exxon Mobil Corporation (NYSE: XOM), Imperial Oil Limited (NYSE: IMO) is an integrated oil company that produces and sells crude oil and natural gas in Canada. As of December 31, 2020, the Company’s Upstream segment had 138 million barrels of oil equivalent of proven undeveloped reserves.
A few months ago, Imperial Oil announced its intention to go ahead with the production of renewable diesel in a new complex at its Strathcona refinery in Alberta. The facility is expected to produce around 20,000 barrels / day of renewable diesel when completed in 2024, which the company says could reduce emissions in the Canadian transportation sector by 3 million metric tonnes / year.
The company says the renewable diesel will be produced from blue hydrogen, involving the reforming of natural gas along with carbon capture and storage.
By Alex Kimani for Oil Octobers
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