2 Energy Stocks Positioned to Withstand Falling Oil Prices

Protect your portfolio from dropping oil prices with these low cost producers

| More on:
The Motley Fool

U.S. crude futures staged a rapid ascent in early June thanks to geopolitical tensions, but these gains quickly faded. Oil has now turned lower, falling below $100 a barrel on July 15, despite continued tensions in oil producing regions.

Typically, seasonal factors should cause a rise in oil prices this time of year, as more drivers hit the roads increasing demand for fuel. However, according to data from the Energy Information Administration, not even America’s Independence Day increased energy (gasoline) demand this year, thanks in part to Hurricane Arthur’s travel disruptions.

Now, rather than sit fat and happy, oil companies may be concerned about what demand oil will face this summer. Here are two companies well positioned to profit even if oil prices languish.


Encana’s (TSX: ECA)(NYSE: ECA) relatively new CEO Doug Suttles has been hard at work since he took his post in 2013 to cut operating costs and boost the company’s profits. His efforts have already paid off.  In the most recently released earnings, Encana easily topped expectations on both revenue and profit.

Encana’s cost-cutting is adding to its market cap, and increasing the cash and cash equivalents on the company’s balance sheet. Having a healthy balance sheet is necessary for a company to survive tough times, and Encana’s CEO is taking the steps necessary to better the company’s financial position.

Canadian Natural Resources

Canadian Natural Resources Ltd. (TSX: CNQ)(NYSE: CNQ) is the country’s largest independent oil and gas producer, and a company widely recognized as a low-cost producer of heavy oil. The company posted some very stellar first quarter 2014 results, with its profit ring nearly three-fold thanks in part to higher oil and natural gas prices. The company’s adjusted profit (the figure comparable to analyst estimates) came in at $921 million or $0.85 per share. Analyst estimates according to Thomson Reuters were for a $0.79 per share profit.

Even though Canadian Natural Resources was able to churn out such impressive results thanks to higher gas and oil prices, the company is a savvy cost-cutter and is well positioned to withstand lower energy prices thanks to its assets, which are long-life low-decline assets. Another plus for investors is that Canadian Natural Resources has a very clean balance sheet and has consistently increased its dividend payments.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Leia Klingel has no position in any stocks mentioned. 

More on Investing

Silver coins fall into a piggy bank.
Tech Stocks

How to Turn a $500 TFSA or RRSP Into $50,000

Are you looking to convert a $500 TFSA into $50,000? A little discipline and patience can help you achieve it.…

Read more »

Pot stocks are a riskier investment
Cannabis Stocks

5 Things to Know About Cannabis Stocks Before 2023

Cannabis stocks like Canopy Growth (TSX:WEED) are struggling, but there are positives to draw on as well.

Read more »

Stocks for Beginners

3 Best-in-Class Stocks to Build Long-Term Wealth

Looking for stocks that might create generational wealth over the long term? Here's a top growth, value, and income stock…

Read more »

TFSA and coins
Dividend Stocks

TFSA Couples: How to Invest for $777 of Passive Income Each Month

The TFSA or Tax-Free Savings Account can be used to buy and hold a portfolio of blue chip dividend stocks…

Read more »

A close up image of Canadian $20 Dollar bills
Dividend Stocks

Investing in the Stock Market Could Turn Your $1,000 Into $100,000: Here’s How

The stock market can convert a $1,000 regular investment into $100,000 without making too risky bets. Here’s a simple strategy…

Read more »

Bank Stocks

3 Top Stocks to Buy Now in a Once-in-a-Decade Opportunity

Given their discounted stock prices, these three quality stocks offer a once-in-a-decade buying opportunity.

Read more »

Various Canadian dollars in gray pants pocket
Stocks for Beginners

Here’s an Absolutely Brilliant Way to Earn Passive Income

Here’s a simple and unique way to earn passive income that does not involve working more, buying a property, or…

Read more »

Make a choice, path to success, sign
Stocks for Beginners

Canadian Investors: 2 Once-in-a-Generation Buying Opportunities

You can grab these two once-in-a-generation buying opportunities in Canada right now to get super rich in the long term.

Read more »