Energy Stocks Will Blow the Lights Out Next Quarter

Energy stocks like Cenovus Energy, Peyto, and Tourmaline are posting soaring cash flows as oil and gas prices spike higher.

| More on:

Image source: Getty Images

Soaring cash flows drive shareholder value. Of course, there are other things, but I’m talking real shareholder value. The kind that’s lasting. The kind that puts money in our pocket today and tomorrow. Right now the energy patch is a place where it’s raining cash. I mean, the sector is pumping out cash flow at a feverish pace.

So which energy stocks should you buy to benefit from this? Read on, I’ll walk you through my best picks: Cenovus Energy (TSX:CVE)NYSE:CVE), Peyto Exploration and Development (TSX:PEY), and Tourmaline Oil (TSX:TOU)(NYSE:TOU).

Cenovus Energy stock: 400% plus increase in cash flows

Cenovus Energy is the third-largest Canadian oil and gas producer. It’s also the second-largest Canadian-based refiner and upgrader. After many years of being ignored and undervalued, Cenovus Energy stock is finally in demand. Investors are buying this quality energy stock because shareholders have been making extreme amounts of money holding it.

Cenovus Energy stock

The company’s latest quarterly results included a 400% plus an increase in cash flows and a doubling of the dividend. But it won’t stop here. In fact, the oil and gas boom has only begun. The positive fundamentals keep building. In short, the momentum is strong.

Demand is high and supply is low. This is true in the oil and gas commodity world. And it’s also true with respect to Canadian energy stocks. There are not that many left out there, especially top-quality ones like Cenovus. So the ones that are left will be in increasingly high demand. The longer these companies keep growing their cash flows so rapidly, the more investors will be clamoring for the stocks. This is what I expect will happen as we see fourth-quarter results in 2022.

Peyto Stock: Natural gas leader doubling cash flows

Natural gas is a relatively low-carbon, low-emitting fuel. It’s the easiest replacement for high-carbon fuels such as coal. It will certainly be a key transition fuel as we fight to reduce our carbon footprint.  There are many Canadian energy companies that will benefit from these simple facts. Peyto is one of them.

Peyto stock price

Peyto is one of Canada’s lowest-cost natural gas producers. The company has an exceptional asset base that’s benefitting from soaring natural gas prices. Finally, Peyto’s stock price is starting to reflect this. In fact, Peyto stock has risen significantly in 2021 as natural gas prices have skyrocketed. But the best part is yet to come. In fact, once Peyto is free from the hedging contracts that locked it into lower pricing, we’ll see even stronger growth. In short, 2022 will be significantly better than 2021.

Tourmaline stock: Natural gas focus driving a 200% cash flow growth rate

Natural gas has soared 73% in the last year. This has come at a time when supply is low and demand is rising. It’s also a time of growing recognition that natural gas will still be needed for years to come. Tourmaline is well-positioned for this. Hence, its cash flows are soaring – as is Tourmaline’s stock price.

Tourmaline stock

Ultimately, these soaring cash flows are translating into rapidly increasing shareholder returns. Tourmaline’s dividend growth in the last year has been nothing short of spectacular. Its regular annual dividend has grown over 40% to $0.68 per share. And the company announced a special dividend of $0.75 per share just last month. Looking ahead, management intends to continue to pay out excess cash flow in the form of dividends. Rising natural gas prices into 2022 can be expected to continue to prop up Tourmaline stock as well as other natural gas stocks.

The bottom line

Energy stocks are finally on the upswing after being in the doghouse for so long. This has come with the simple recognition that oil and gas is still necessary to power our lives.

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 Karen Thomas owns shares of Peyto and Tourmaline. The Motley Fool has no position in any of the stocks mentioned.

More on Energy Stocks

Aerial view of a wind farm
Energy Stocks

Brookfield Renewable Stock Climbs Higher: Time to Buy?

Brookfield Renewable stock (TSX:BEP.UN) continues to climb, but remains below the $40 mark. But that share price looks in view.

Read more »

Nuclear power station cooling tower
Energy Stocks

Up 35%, Is Cameco Stock a Buy in June 2024?

When a stock is bullish, and you have missed the starting point of the trend, it can be challenging to…

Read more »

Oil pumps against sunset
Energy Stocks

4 Top Energy Stocks (With Dividends) to Buy and Hold Forever

These four energy stocks are the best way to get in on long-term income from both growth and dividends.

Read more »

Man considering whether to sell or buy
Energy Stocks

Cameco Stock: Buy, Sell, or Hold?

Cameco stock (TSX:CCO) has risen by above 80% in the last year alone, and 14% in the last month. Will…

Read more »

Dice engraved with the words buy and sell
Energy Stocks

Brookfield Renewable Stock: Buy, Sell or Hold?

Brookfield Renewable stock (TSX:BEP.UN) has surged by 31% since earnings. Does this mean you should get in, or get out?

Read more »

green energy
Energy Stocks

Is it Too Late to Buy Brookfield Renewable Stock?

Brookfield Renewable (TSX:BEP.UN) stock has had a hard time getting shares above $40, so is it time to ditch the…

Read more »

Oil pumps against sunset
Energy Stocks

Lower Loonie? This Sector’s a Gusher Anyway

If the Canadian dollar weakens, this one industry is set to make enormous profits, and investors can get in on…

Read more »

Electricity pylons against a sunset
Energy Stocks

Northland Power Stock: Buy, Sell, or Hold?

Northland Power (TSX:NPI) stock continues to climb on the back of strong earnings, but with a CEO and president leaving,…

Read more »