2 Energy Stocks That Can Go Much Higher

Can you stand volatility? If so, Enerplus Corp. (TSX:ERF)(NYSE:ERF) and its peer may deliver tremendous upside for you.

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With energy prices rising, energy stocks experienced a nice rally on July 25. The shares of both Torc Oil and Gas Ltd. (TSX:TOG) and Enerplus Corp. (TSX:ERF)(NYSE:ERF) popped more than 5% on the day.

It’s nice to see that the WTI oil price is now hovering around the US$48-per-barrel level, which is the average sustaining capital-reinvestment breakeven price needed by the industry.

In that perspective, both Torc Oil and Gas and Enerplus are above average; they have lower breakeven prices. Torc’s is about US$45, and Enerplus’s is below US$40.

That said, if exploration capex were included in the calculation as well, it’d require a much higher WTI price for energy companies to break even.

Torc Oil and Gas

Torc Oil and Gas estimates that its full-year average production will be 20,400 barrels of oil equivalent per day.

The company focuses on per-share growth and maintains a strong balance sheet.

The fact that the Canadian Pension Plan Investment Board has a significant stake of ~25% in the company and is reinvesting the monthly dividends back into the business should be a vote of confidence and an indication that the company is worthy of a long-term investment. Insiders also own about a ~4% stake in the company.


Enerplus expects production growth of roughly 30% through 2019. Additionally, the company is in the top 25% when it comes to capital efficiencies, and it expects continual improvement through this year.

Enerplus maintains a strong balance sheet and has been disciplined in reducing its debt levels. Since the end of 2015, it has cut down its net debt by roughly 70%, which is very impressive. Another positive is that it has no major debt maturities until 2020.

Near-term returns potential of both companies

Thomson Reuters’s recent report has a 12-month mean price target of $8.54 per share on Torc Oil and Gas. This represents upside potential of almost 52% from the recent quotation of $5.62 per share. Moreover, the oil and gas producer offers a yield of ~4.3%, which implies it can deliver near-term total returns potential of ~56%.

Reuters’s 12-month mean price target on Enerplus is $14.80 per share. This implies the shares can appreciate nearly 31% from the recent trading price of $11.30 per share. Furthermore, the company offers a yield of ~1%, which implies an investment today can achieve near-term total returns of ~32%.

Investors should beware that these estimates can fluctuate quite a bit because the underlying commodity prices are quite volatile.

Investor takeaway

Investors with an above-average appetite for risk and volatility can consider these shares for strong upside potential.

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 Kay Ng has no position in any stocks mentioned.

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