Posted January 13, 2011 at 5:31 am
The best Canadian energy stocks are well-known large caps, but there are a few lesser-known names in there, too. Energy’s going to be a big theme in 2011 as commodity prices rise and the energy sector as a whole is due for a comeback after lagging in 2010.
Here are my top picks for Canadian energy stocks for 2011. These are all no-brainers, but depending on the analyst you listen to, one will be favored over the other. If you can, buy them all. And as always, perhaps the largest risk with them all is oil price risk.
Suncor produces conventional and unconventional oil and owns the PetroCanada and Sunoco brands in Canada. It recently successfully completed the acquisition and integration of the old Petro Canada – and now manages all of Petro Canada’s assets. It took some time for the markets to react favorably to the integration, but Suncor is finally back in the game. The shares have already run up a good 20% over the past six months. Expect them to continue to do so if oil prices climb into the high nineties. Trust me, you don’t want to be caught in the cold when this train takes off again.
The name says it all – there isn’t a Canadian energy mutual fund that wouldn’t hold some of this, and when income trusts were still around this was always one of the top names. This is the purest play you can get on the Canadian oil sands. Suncor has access to some of it but they hold other assets, too. Canadian oil sands is 100% Canadian oil sands. That means UNCONVENTIONAL OIL production. That means you have to adjust your risk expectations accordingly. Remember, it takes about $100 a barrel to break even on oil sands production. Also: they use natural gas to produce this stuff, so the cheaper nat gas is, the more COS saves.
Crescent Point is another analyst favorite. This is a conventional oil and gas (mostly light and medium oil) producer focused on fields in southern Alberta and Saskatchewan (including the much-vaunted Shaunavon property). The corporation actively hedges against the USD/CAD exchange rate and oil and gas prices in order to produce even revenues, cash flow and dividends. Crescent Point also has a growing number of proven reserves, with much thanks to the Shaunavon – one of the largest oil pools ever discovered in Western Canada.
PetroBakken is a fully integrated oil and gas company (mostly oil, however) that explores and produces in Western Canada, but primarily Saskatchewan and Alberta. Its most exciting assets are the reserves in the Bakken fields and the Montney region in B.C. – these are what place PBN on analysts’ buy lists. The company is also engaged in frequent and strategic acquisitions. If you want to feel you have your Canadian oil bases covered without getting into too many juniors or resorting to ETFs – just load up on these four oil stocks.
Encana is not the oil and gas company it once was – it spun off its oil division early in 2009 as Cenovus (another good name to pick up if you want to add to any of the above four), while leaving Encana itself as a pure natural gas play. But if you want to invest in nat gas, Encana is your Cadillac. It’s probably the best choice out there for a large cap, extremely well-managed name that you won’t lose sleep over. You only have to be concerned with the underlying commodity price.