Donald Trump’s win in the U.S. presidential elections came as welcome news for Canadian oil and gas stocks as he supports oil and gas over green energy. The oil and gas companies have slowed their operations because of delayed approvals and changes in laws. Now is a ripe time for the North American liquified natural gas (LNG) market to grow as demand from both domestic consumption and exports increases.
North American oil and gas stocks in the limelight
North America has become Europe’s key supplier of LNG since the Russia-Ukraine war began. Canadian pipeline companies accelerated gas pipelines and storage investments to tap the LNG export market.
TC Energy stock
TC Energy (TSX:TRP) completed the spin-off of its oil pipeline business on October 1 with the listing of South Bow. The spin-off saw a sharp 8.9% drop in TC Energy’s stock price. However, the third-quarter earnings and investor presentation revived hopes and sent the stock to its 52-week high. The company expects to grow its dividends by 3–5% by 2027 and at 5% beyond that by tapping the LNG export market.
TC Energy is now focused on natural gas pipeline infrastructure and the power and energy business. The company expects North American natural gas demand to soar by 40 billion cubic feet per day (bcf/day) to 160 Bcf/day by 2035, driven by 3 times growth in LNG exports and power generation.
Canada has almost no presence in LNG exports. Hence, TC Pipeline has been aggressively building its Coastal GasLink project even when the cost doubled to $14.5 billion from the initial cost estimate of $6.6 billion. TC Energy even wrote off the loss on its income statement. Notably, this is because this pipeline will be the first direct pipeline opening Canada’s LNG to global markets. Now, it is time to reap the reward and recover the cost. TC Energy is on track to place ~$7 billion of assets into service in 2024 and around $8.5 billion in 2025.
Enbridge stock
Another oil and gas stock that will benefit from the North American LNG export boom is Enbridge (TSX:ENB). Hosting North America’s largest pipeline infrastructure without major cost overruns is no mean feat. On October 1, Enbridge completed the acquisition of three U.S. gas utilities from Dominion Energy. Their earnings will be accretive and put Enbridge at a sweet spot in North America’s LNG boom.
Enbridge stock is also trading at its second-highest peak. The last time the stock crossed the $60 mark was in 2015, at the peak of the U.S. shale oil boom.
How to earn from oil and gas stocks
It is a significant risk to buy such range-bound stocks at their high. If you own them, now is a good time to sell a significant chunk and book profits. Such prices are rare and come once in a decade. You can buy these stocks later when they fall.
The heightened geopolitical tensions have elevated their prices. If you remember the dreaded day of February 24, 2022, when the Russia-Ukraine war broke out, all oil and gas stocks made a vertical move up to June 2022 due to uncertainty.
A similar jump is now in session, and oil and gas stocks could continue to rise till January 20, 2025, when Trump takes the presidential oath. He is likely to introduce several changes in energy policies, which could have a dual impact. On the one hand, oil production could pick up, and oil prices could go down. On the other hand, escalating geopolitical tensions could cast a shadow of uncertainty over oil prices.
You could use this peak to sell a portion of your oil and gas stocks and book profit. You could wait for the dip to buy. Many more peaks could come as the new energy story unfolds.
You could also invest $500 and buy the two stocks at the current high to cash in on the momentum. There is strong sentiment around oil and gas, and this could continue to drive the stocks up as the temperature drops and uncertainty grows. Buying the above stocks, even at their current high, makes sense only if you can sell them by February when the temperature drops to its lowest.
