The Canadian oil and gas stocks we’ve discovered could bounce back big over the next year
SmallCapPower | April 8, 2020: A double whammy of COVID-19 and the Russia, Saudi Arabia production dispute has battered Canada’s oil patch. The economy, though, needs oil and gas and demand is expected to rebound with increased business and consumer activity following the easing of social distancing restrictions. Today we have drilled down and discovered three Canadian oil and gas stocks we think have the best upside from current levels.
*Returns are based on closing stock prices as of April 6, 2020
MEG Energy Corp. (TSX:MEG) – $2.71
MEG is an energy company focused on in situ thermal oil production in the southern Athabasca region of Alberta. The Company is actively developing enhanced oil recovery projects that utilize steam-assisted gravity drainage extraction methods to improve the economic recovery of oil. MEG Energy is somewhat protected by the fact that 55% of its 2020 production is hedged at a West Texas Intermediate (WTI) oil price of $59 per barrel. With an expected normalization of the oil price during 2021, MEG could generate $700 million of free cash flow on 33 years of proved reserves.
NuVista Energy Ltd. (TSX:NVA) – $0.79
NuVista Energy is an oil and natural gas company actively engaged in the exploration for, and the development and production of, oil and natural gas reserves in Western Canadian Sedimentary Basin. NuVista’s primary focus is on the scalable and repeatable condensate-rich Montney formation in the Wapiti area of the Alberta Deep Basin. The Company has 36% of its liquids hedged at C$76 per barrel and an additional 24% at an $11 barrel premium to the WTI price. Full-year 2019 production was a record 50,803 Boe/d, or 26% greater than 2018, while NuVista Energy reduced total annual operating expenses for the year to $9.61/Boe and achieved annual net G&A expenses of $0.91/Boe.
Crescent Point Energy Corp. (TSX:CPG) – $1.41
Crescent Point Energy is North American oil producer focused on the development of high-return resource plays in Saskatchewan and North Dakota. The Company currently has more than $2.5 billion of cash and unutilized credit capacity and over 50% of its oil production is hedged for 2020 at a weighted average price of more than C$76 per barrel. Crescent Point reduced its net debt by approximately $1.25 billion in 2019 in addition to more than $170 million of annual internal cost efficiencies.
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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