Oil prices have recovered in the past year, sending some energy stocks to new highs, while many other producers continue to trade at suppressed levels.
Suncor is known as an oil sands giant, but the company also owns refineries and more than 1,500 Petro-Canada retail locations. These downstream assets provide a nice hedge against difficult times in the production operations and are a large reason Suncor’s stock held up so well during the rout.
Suncor took advantage of the downturn to add new assets at attractive prices, including the takeover of Canadian Oil Sands. In addition, management pushed ahead with large development projects, including Fort Hills and Hebron. The decision appears to have been a wise one, as the two facilities are now complete and ramping up production, just as the oil recovery is picking up momentum.
Suncor reported strong Q1 2018 results, and the good times should continue. The company raised its dividend by 12.5% earlier this year and more gains in the payout should be on the way as production and cash flow increase. The payout currently provides a yield of 2.8%.
At the time of writing, Suncor trades at $52 per share, which is the highest the stock has been since September 2008.
Crescent Point was a $45 stock that paid a monthly dividend of $0.23 per share in the summer of 2014. Today, the distribution is down to $0.03, and investors can pick up the shares for about $10.50.
High debt levels are the main culprit. The company finished Q1 2018 with net debt of $4.4 billion, which is a lot for a company with a market capitalization of $5.7 billion. That said, Crescent Point remains well within its lending covenants, and the rebound in oil prices is helping the company get its balance sheet sorted out.
Crescent Point is selling non-core assets to reduce debt. At the same time, 2018 exit production is expected to be 7% higher than the previous year, so things are moving in the right direction.
Fans of the stock say Crescent Point owns an impressive assets base with properties located in southwest Saskatchewan, southeast Saskatchewan, Manitoba, North Dakota, and Utah. Most of the resource base consists of attractive light-oil plays.
Is one a better bet?
Both stocks should benefit as the oil recovery continues.
Conservative investors looking for an industry leader should probably make Suncor the first choice. Contrarian investors who are oil bulls might want to start nibbling on Crescent Point while the stock remains out of favour.