Have oil prices finally bottomed? Maybe.
If we knew the answer for sure, we would all be chilling out on a beach someplace instead of pouring over income statements and reading the latest currency crisis updates.
Nonetheless, the recent rout in the oil market is serving up some sweet opportunities for long-term investors. Here are the reasons why I think Canadian Natural Resources Ltd. (TSX: CNQ)(NYSE: CNQ), Cenovus Energy Inc. (TSX: CVE)(NYSE: CVE), and Husky Energy Inc. (TSX: HSE) are worth considering right now if you have some money sitting on the sidelines.
Canadian Natural Resources
Canadian Natural has a fantastic portfolio of energy assets that includes conventional oil, natural gas, oil sands, and natural gas liquids properties. This diversification is a huge competitive advantage for the company because it provides revenue streams across several products.
Canadian Natural also owns 100% of most of its assets. This gives the company the flexibility to move capital to the most profitable operations during volatility in the various markets.
Despite the difficult conditions in the oil market, the company’s production is expected to grow by more than 10% in 2015.
Canadian Natural Resources has a strong balance sheet and will probably take advantage of the current weakness in the oil sector to acquire premium assets at fire-sale prices.
The company pays a dividend of $0.90 per share. The payout ratio is less than 30%, which means the dividend is probably safe.
Cenovus Energy
Cenovus is a low-cost oil producer that has a 50% joint interest with ConocoPhillips in some of Canada’s top oil sands properties. The advantage of having a world-class partner is that Cenovus splits the development risk on the properties.
The appeal for investors is the long-term production growth that comes with the main facilities operated by Cenovus.
The Christina Lake project produced 30% more oil in the third quarter than it did in the same period in 2013. The average daily production hit 68,000 barrels per day, but the target output for Christina Lake is 300,00 barrels per day.
The Foster Creek project is just as attractive. Production hit 57,000 barrels per day in Q3, and the design capacity for the operation is 295,000 barrels per day.
Cenovus pays a dividend of $1.06 per share that yields about 4.8%. The company recently announced a small reduction in 2015 capital spending. This should ensure the dividend is safe.
Cenovus also operates a huge refining division that helps diversify revenues during rough periods in the oil market.
Husky Energy Inc.
Husky Energy is one of Canada’s largest integrated oil companies. Upstream assets include oil sands, heavy oil, and liquids rich natural gas properties in Western Canada, as well as gas projects in Asia.
The company’s significant refining and retailing operations also provide income stability when oil prices fluctuate.
Growth opportunities in China, Indonesia, and Atlantic Canada should appeal to long-term investors who are looking for a safe dividend and strong cash flow growth.
Husky also recently trimmed its capital program for 2015. The company pays a dividend of $1.20 per share that yields about 4.7%. The distribution should be safe.
The Canadian equity market has been volatile in 2014. If you are looking for a few stable stocks to put on the 2015 watch list, the following free report is worth reading.
