Natural gas and delivery have provided a degree of dividend resilience for the Canadian energy stocks on our list
SmallCapPower | March 30, 2020: Canada’s oil patch has been hit hardest during this current COVID-19 stock market selloff. This was made worst by the production dispute between Saudi Arabia and Russia. WTI crude oil is currently hovering just above US$21 a barrel, while Western Canadian Select has plunged below US$5. Many energy companies have already cut its dividend, but there are some businesses that are better able to withstand a potentially lower-for-longer energy price environment. Today we have identified three Canadian energy stocks best positioned to maintain the same level of payout to its investors.
*Returns are based on closing stock prices as of March 27, 2020
Birchcliff Energy Ltd. (TSX:BIR) – $0.65
Birchcliff Energy is an intermediate oil and natural gas company with operations concentrated within its one core area, the Peace River Arch of Alberta. Natural gas prices have held up better relative to oil and Birchcliff is about 78% weighed in natural gas production. The Company has increased production at a compound annual growth rate of 29% since 2005, while operating and cash costs have decreased by 70% and 41%, respectively, since 2008. Birchcliff Energy’s 2019 cash flow per share was $1.26, as a result of higher liquids production and lower overall costs. Its debt to cash flow is less than two times. Birchcliff had a book value of $6.38 per share at the end of 2019 along with a net asset value of $11.96 per share.
Tourmaline Oil Corp. (TSX:TOU) – $7.81
Tourmaline Oil is a crude oil and natural gas exploration and production company focused on exploration, development, production and acquisitions in the Western Canadian Sedimentary Basin and is the largest natural gas producer in Canada. The Company generated record Free Cash Flow of $144.9 million during 2019, a 27% increase over 2018. Its debt to cash flow for 2020 is projected to be 1.2 times. At the end of 2019, Tourmaline Oil had a book value of $29.40 per share and the Company has a strong balance sheet of $1.6 billion of debt versus $8 billion of equity. Tourmaline’s CEO owns 16.9 million TOU shares.
TC Energy Corporation (TSX:TRP) – $58.21
TC Energy has a network of natural gas and crude oil pipelines in Canada, the U.S., and Mexico, along with power generation, natural gas fired power plants, and storage facilities. The Company currently has more than $20 billion worth of projects under development. In February 2020, TC Energy increased its dividend by 8%, its 20th consecutive annual increase, and expects annual dividend growth of 8% to 10% in 2021 with 5% to 7% yearly thereafter. TRP investors have enjoyed 14% average annual shareholder returns since 2000.
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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