3 Top Energy TSX Stocks That Rose up to 250% This Year

TSX energy stocks have risen 75% in the last 12 months, against 20% growth of the Canadian markets. Here are three TSX stocks that notably outperformed peers,

| More on:
oil and gas pipeline

Image source: Getty Images

Several factors drove energy TSX stocks this year. Apart from rising oil and gas prices fueling energy companies’ financial growth, improving balance sheet strength also perked up investor sentiment. Additionally, expanded pipeline capacities in Canada catered to the increasing demand of the end user.

Top-rallying energy TSX stocks of 2021

TSX energy stocks have risen 75% in the last 12 months against 20% growth of the Canadian markets. Interestingly, some energy stocks stood way strong compared to the overall energy sector’s performance in 2021.

For example, Birchcliff Energy (TSX:BIR) stock has gained a massive 250% this year. Peers Enerplus (TSX:ERF)(NYSE:ERF) and MEG Energy (TSX:MEG) have risen 200% and 170%, respectively. We have considered companies in the S&P/TSX Energy Capped Index.

Now, as the energy markets are expected to flourish next year amid re-openings, will these small-cap superstars continue to outperform?

Let’s see whether these TSX energy stocks have any steam left.

Birchcliff Energy

Birchcliff has been the top-performing energy stock on the TSX Energy index in 2021. High energy commodity prices notably increased its free cash flows this year. In Q3 2021, the company generated a free cash flow of $150 million, approximately equal to the free cash it generated during the whole of 2020.

While talking with BNN Bloomberg, Jeff Tonken, the chief executive of Birchcliff Energy, said that he sees superior oil and gas prices for the next 12 to 24 months amid relatively less drilling and increasing demand. Birchcliff’s liquidity position notably improved as well as leverage went down in 2021.

The company expects higher cash distribution via dividends and share buybacks next year. It recently doubled its quarterly dividend after a solid financial performance during the quarter. Though the yield is not much high, it implies management’s confidence in its future financial growth.

Birchcliff is a $1.8 billion low-cost oil and gas producer that aims to produce 80,000 boe/d in 2021. If energy prices remain supportive next year, Birchcliff could continue to unlock value for shareholders.

Another mid-sized oil and gas producer Enerplus showed a similar movement and soared 200% this year. The stock is currently trading at its three-year-high levels. The management expects free cash flow to increase to $640 million next year from $540 million in 2021.

MEG Energy stock also stands tall with its 170% gain year to date. Moreover, it aims to produce 93,000 mboe/d in 2021, almost 13% higher than last year. A higher free cash flow outlook could continue MEG shares as well amid higher energy commodity prices next year. 

Energy markets in 2022

Interestingly, Canadian energy producers seem to be in no hurry to drastically increase production, despite the favourable commodity price environment. Rather, they are increasingly looking to maintain capital discipline and improve shareholder value.

Thus, it seems evident for now that if higher commodity prices persist through next year, energy companies will likely generate higher free cash flows. This excess cash most likely will go to debt repayments. And shareholders will likely see greater cash distribution in the form of dividends and buybacks. In addition, robust financial growth could drive their market performances as well.  

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.

The Motley Fool has no position in any of the stocks mentioned. Fool contributor Vineet Kulkarni has no position in any of the stocks mentioned.

More on Energy Stocks

Group of industrial workers in a refinery - oil processing equipment and machinery
Dividend Stocks

2 Top Canadian Energy Stocks to Buy Right Now

Blue-chip TSX stocks like these two Canadian energy sector giants can help you generate substantial long-term wealth growth.

Read more »

A solar cell panel generates power in a country mountain landscape.
Energy Stocks

2 Revolutionary Canadian Clean Energy Stocks to Power Your Portfolio

Going green is the energy industry’s future. Here are two Canadian energy stocks to own to become part of the…

Read more »

A worker overlooks an oil refinery plant.
Energy Stocks

Energy Sector Rebound: Is Suncor Stock a Buy Today? 

After the OPEC oil cut, oil prices are rising again. Is this a rebound in energy stocks? Is Suncor stock…

Read more »

little girl in pilot costume playing and dreaming of flying over the sky
Energy Stocks

The U.S. Stocks Every Canadian Investor Needs to Know About

Boeing, UGI Corporation, and Exxon Mobil are three U.S. stocks I'd buy today.

Read more »

Silhouette of businessman sit on chair and hold a cigar and looking at the city in night.
Energy Stocks

Passive Income: How to Make $104 Per Month Tax Free in 20 Years

By simply choosing the right stock, and investing in it on a consistent basis, you can create massive passive income…

Read more »

A worker overlooks an oil refinery plant.
Energy Stocks

Where to Invest in Oil Stocks in June 2023

Suncor Energy is a Canadian oil stock that's set up to benefit from strong oil prices, as it trades at…

Read more »

edit Sale sign, value, discount
Energy Stocks

Buy Alert: Major Canadian Energy Stocks Are on Sale in June 2023 

Did you hear of a June sale? Well, Canadian energy stocks are trading near their lows in June 2023. It's…

Read more »

Dollar symbol and Canadian flag on keyboard
Energy Stocks

Canadian Blue-Chip Stocks: The Best of the Best for June 2023

TSX blue-chip stocks such as Enbridge can help you generate steady gains and benefit from a high dividend yield in…

Read more »