You don’t have to be an adherent of peak oil theory to be bullish on oil and oil stocks over the next two, five, ten years. Simple math shows that the world’s energy needs are rising – even with the entrance of electric cars into the North American market. Individual stock investors are wise to have some exposure to this sector of the energy market.
Another part of the reason I focus on these types of posts is that there’s a dearth of information for US investors on international stocks and their valuations. Since I keep up on analysis of the Canadian equities markets, I’m happy to share with you what I’ve learned. I’m not a financial advisor, however, so keep that in mind and use these as suggestions for further research only.
Canada’s 5 “Blue-Chip” Oil Stocks
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When I say “best,” I mean some mixture of both the largest, the companies with the most lucrative oil patch locations, and the stocks that are most often recommended by Canadian analysts specializing in this sector. Also note that all of these are mature oil producers and they all pay dividends. I’ve listed them here according to market cap.
1. Suncor (TSX: SU)
One analyst called this the “#2 go-to name” for foreign investors. Suncor is another solid management team with steady, if not spectacular, growth prospects projected ahead. They recently acquired Canada’s #2 gasoline company, Petro-Canada, which owned a large number of gas stations throughout the country. Market Cap: $55.3 billion. Yield: 1.1%
2. Encana (TSX: ECA)
Encana has been described as one of the “bluest of the blue-chips.” Its focus is unconventional oil and gas with strengths in clean energy production, although it is weighted to natural gas. However, it has the second-largest market cap of any Canadian oil company. Market Cap: $45.4 billion. Yield: 2.8%
3. Imperial Oil (TSX: IMO)
Imperial Oil has not been getting as much attention lately, but is still clearly a major player rounding out the profile of the largest Canadian oil companies. Imperial has not only consistently won awards for being one of Canada’s top employers, but they actively work to improve their environmental record. The dividends are meagre, however. But the management team is considered solid, and if you can call an oil company “blue-chip,” this is as close as they get. Market Cap: $35.1 billion. Yield: 1.0%
4. Talisman Energy (TSX: TLM)
An independent company since 1992, Talisman is headquartered in Calgary, Alberta. It has subsidiaries operating in the UK, Norway, Southeast Asia, and North Africa. Talisman is another reputable big-cap, oil-weighted stock with gas exposure. It’s also more likely to be a buyer rather than a target of a takeover. Market Cap: $18.6 billion. Yield: 1.2%
5. Crescent Point Energy (TSX: CPG)
This is by far the hot Canadian oil stock right now, but for good reason. Not only does it seem to have the best growth and production prospects over the next ten years, but it has the best location of reserves in both southwest and southeast Saskatchewan. I have yet to see an analyst have anything negative to say about this company. Take that for what it’s worth, but I’m just saying. One factor to consider is its small market cap relative to others in the sector. It also has an unusually high yield, perhaps owing to its recent conversion from income trust status. Market Cap: $5.7 billion. Yield: 7.8%
Another company this list could probably have included is Canadian Natural Resources (TSX: CNQ). Keep in mind that this list also doesn’t include any of Canada’s many oil income trusts, or royalty trusts, as they are sometimes called. For more information on some of these see the list I compiled of the top 45 Canadian income trusts.
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{ 2 comments… read them below or add one }
No Husky Energy eh?
Husky is another good company, smaller than Imperial Oil, but one I haven’t heard being talked about so much recently, and in one case one analyst preferred a different company in this space over Husky. Also, I believe they’re partly or largely owned by some Hong Kong billionaire at this point.