By Alex Kimani
- Oil and gas stocks are back with a bang on the Toronto Stock Exchange.
- Canada’s energy benchmark, Horizons S&P/TSX Capped Energy ETF, has outperformed its United States brethren by quite some distance.
- 300-500% returns over the last 3 years are no exception in the Canadian oil patch
After a three year absence, oil and gas companies are back with a bang on the Toronto Stock Exchange’s annual list of top stocks, the TSX 30, which features the top-performers over a three-year period. Based on dividend-adjusted share price performance, a total of 14 energy companies made the 2022 list of the 30 best performing stocks on the S&P/TSX index, posting an average share-price increase of 306% the period, thanks to surging global energy demand and sky-high commodity prices.
Canada’s energy benchmark, Horizons S&P/TSX Capped Energy ETF (HXE.TO), has outperformed its United States brethren by quite some distance, returning 84.1% over the past 12 months compared to 60.3% by the Energy Select Sector SPDR ETF (NYSEARCA: XLE). Horizons HXE seeks to replicate the performance of the S&P/TSX Capped Energy Index, net of expenses. 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.
“We’re seeing an interest in the sector that we haven’t seen in years. We’re seeing companies use their cash flows to pay down debt, buy back shares, increase dividends etc. It’s a lot of positive stuff,” TSX chief executive Loui Anastasopoulos has told the Financial Post.
Over the past few years, a vicious one-two-three punch that started with a gloomy long-term future outlook due to rampant fossil fuel divestments, climate change policies and decarbonization as well as shorter-term, but severe, shocks from the COVID-19 crisis, threw Canada’s most important exports industry into an existential crisis. Meanwhile, the drumbeat of exits by foreign oil firms bailing on the unprofitable tar sands added an extra layer of gloom for an industry that’s responsible for a fifth of Canada’s exports.
But with the oil and gas comeback, long-suffering Canadian energy stocks are back in play .
Here are the five best energy companies on the TSX 30.
- Obsidian Energy Ltd
Market Cap: $698.9M
3-Year Returns: 537%
Obsidian Energy (NYSE: OBE) is a Canadian exploration and production company. OBE engages in exploration and development, and holds interests in oil and natural gas properties and related production infrastructure in the Western Canada Sedimentary Basin. Obsidian Energy also trades on the Toronto Stock Exchange under the ticker OBE.TO.
Obsidian Energy has reported Q2 Funds From operations (FFO) of $1.86 as well as strong second quarter average production of 31,575 boe/d, an increase of 28 percent over 2021.
Recently, the company raised its 2022 production guidance to 32kboe/d (midpoint), versus prior guidance of ~31kboe/d (midpoint).
The company also provided 2023 guidance at 37-38kboe/d, good for 21% production growth. Capex was also lifted to $300m (midpoint) for 2022, up from prior guidance of $146m, a huge 105% increase.
- Crew Energy Inc
Market Cap: $685.4M
3-Year Returns: 470%
Crew Energy Inc.(OTCQB: CWEGF) engages in the acquisition, exploration, development, and production of crude oil, natural gas, and natural gas liquids (NGL) in Canada. The company primarily holds interests in Septimus, West Septimus, Groundbirch/Monias, Tower, and Attachie, areas located in the southwest, south, and west of Fort St. John in British Columbia.
Last month, Crew Energy announced the completion of sale of certain non-core assets at Attachie and Portage in Northeast British Columbia for $130M. The disposition includes ~47,025 net acres of Montney rights on land north of the Peace River with no associated production or facilities, total proved reserves of 4.7M boe and total proved plus probable reserves of 34.2M boe, representing 8.5% of total corporate proved plus probable reserves, with associated future development capital of $182.9M.
Net proceeds from the sale will be used to partially redeem $128M of 6.500% senior unsecured notes due 2024, of which an aggregate principal amount of $300M is currently outstanding.
- Advantage Energy Ltd
Market Cap: $1.60B
3-Year Returns: 391%
Advantage Energy Ltd. (OTCPK: AAVVF) acquires, develops, and produces crude oil, natural gas, and natural gas liquids in the Province of Alberta, Canada. The company focuses on the development and production of oil and natural gas resources that includes 228 net sections covering an area of 145,920 net acres of Doig/Montney rights in Glacier, Valhalla, Progress, and Pipestone/Wembley.
Advantage Energy provides natural gas, oil, and natural gas liquids primarily through marketing companies. The company was formerly known as Advantage Oil & Gas Ltd. and changed its name to Advantage Energy Ltd. in May 2021.
Advantage Oil & Gas reported Q1 GAAP EPS of C$0.10; revenue of C$177.57M (+78.7% Y/Y)
and record cash provided by operating activities of C$109.2 million.
- Paramount Resources Ltd
Market Cap: $3.20B
3-Year Returns: 383%
Paramount Resources Ltd (OTCPK: PRMRF) is an independent energy company that develops, produces, and markets natural gas, crude oil, and natural gas liquids in Canada. The company’s principal properties are the Montney and Duvernay developments located in Alberta and British Columbia. Paramount Resources also invests in public and private corporations.
Back in May, Paramount Resources) declared CAD 0.10/share monthly dividend, good for a 25% increase from prior dividend of CAD 0.08. The shares now yield (fwd) 3.20%.
- Tourmaline Oil Corp.
Market Cap: $21.5B
3-Year Returns: 366%
Another Calgary-based producer, Tourmaline Oil Corp. (OTCPK: TRMLF) acquires, develops, and produces oil and natural gas properties in the Western Canadian Sedimentary Basin. It holds interests in properties located in the Alberta Deep Basin, Northeast British Columbia Montney, and the Peace River High Triassic oil complex. Tourmaline is Canada’s largest natural gas producer.
With gas prices at record highs, Tourmaline has been gushing cash and returning much of it to shareholders in the form of dividends and share buybacks. The company increased its dividend base three times in 2021 for a 29% increase and hiked again in June by 13%. While the CAD 0.225/share quarterly dividend is not that impressive (1.07% yield), the company doled out a much fatter CAD 2.00/share special dividend in July.