Oil prices are back on the rise, and we could see commodity prices continue to increase in the weeks and months to come. Both West Texas Intermediate and Brent crude oil are around highs not seen since 2014, and there is reason to expect that those prices will continue to rise.
A big reason for that is Saudi Aramaco’s IPO is coming up, and investors in the Middle East want to see higher oil prices to support the company and help it achieve success out of the gate.
There is already a supply deal in place to help keep prices high, but news of a potential long-term agreement would be welcomed in an industry where companies have been hesitant to spend capital since the downturn.
Despite environmental concerns and more eco-friendly technologies, demand for oil isn’t going anywhere anytime soon, and that’s why, as oil prices continue to rise, you should consider staking out a position in one of the four companies listed below.
Enbridge Inc. (TSX: ENB)(NYSE: ENB) has performed well, despite the downturn, but the stock price has continued to struggle, and in the past 12 months it is down 30%. Trading at around its book value, Enbridge is a great undervalued stock that could take off right along with oil prices.
The stock also gives investors the added benefit of a strong dividend, which currently pays shareholders more than 6%; over the years, the company has a history of increasing those payouts as well.
In its most recent quarter, Enbridge’s sales were up nearly 40%, and there could still be a lot more growth to come in future periods.
Cenovus Energy Inc. (TSX: CVE)(NYSE: CVE) has also seen a lot of volatility in the past year, including a change in the CEO and the company taking on a lot more exposure to the oil sands. The share price hasn’t suffered as much as Enbridge’s has, but it too has struggled to find much momentum, dropping 13% in value in the past 12 months.
TransCanada Corporation (TSX: TRP)(NYSE: TRP) is another stock that is due for an increase. While approval of the Keystone XL and expected production of the pipeline should have resulted in at least some enthusiasm for the stock, investors have remained cautious. TransCanada’s stock has declined 12% over the past year, as it too has failed to find a bottom.
The company, however, is one of the largest and most stable that you can find on the TSX. TransCanada’s stock trades at 16 times its earnings, and that could be a great bargain for investors, especially as the company will likely see activity levels rise as the industry continues to recover. It also doesn’t hurt that TransCanada pays its shareholders a very attractive dividend of 4.6%.
Baytex Energy Corp. (TSX: BTE)(NYSE: BTE) is one of the few oil and gas stocks that has gotten a big bump this year. Year to date, the share price is up 33% and over the past 12 months, it has increased 28%. However, even with the big drop in price, Baytex is still trading well below book value and could have even more potential to increase as we continue to see oil prices rise.
