After a mixed 2024 for the Canadian energy sector, 2025 could offer a fresh start. The TSX posted an 18% gain last year, but shares of many oil and gas companies lagged behind due partly to concerns about weak demand and regulatory pressures. However, U.S. president Donald Trump’s recent decision to withdraw the U.S. from the Paris Climate Agreement could mark a turning point for the industry. With potentially fewer environmental restrictions and higher demand, North American oil and gas companies may find themselves in a much stronger position.
If you’re ready to take advantage of this shift, now is the time to act. In this article, I’ll highlight two no-brainer Canadian energy stocks that look undervalued right now. Even with just $1,000, you could secure a stake in the expected rally in their share prices.
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Veren stock
Veren (TSX:VRN), which was previously known as Crescent Point Energy, is the first value energy stock you may want to consider right now. This Calgary-based oil and gas producer currently has a market cap of $4.7 billion as its stock trades at $7.72 per share after witnessing a 10.5% value erosion over the last year. At this market price, VRN stock offers a 6% annualized dividend yield.
In the quarter ended in September 2024, Veren posted an adjusted net profit of $277.2 million. This profit figure not only beat Bay Street analysts’ expectations of $202 million by a wide margin but also suggested a major turnaround from its net loss of $809.9 million in the same quarter of 2023 as the company continued to focus on improving production efficiency and optimizing costs. Similarly, its operating netback, a critical metric for oil and gas companies, stood strong at $34.09 per barrel of oil equivalent, reflecting its robust profitability despite a challenging macroeconomic environment.
Overall, Veren’s disciplined capital allocation strategy, robust infrastructure investments, and plans to return 60% of excess cash flow to shareholders clearly highlight the underlying strength of its business model.
Cenovus Energy stock
With its nearly 6% rise over the last 12 months, Cenovus Energy (TSX:CVE) stock has also underperformed the broader market, but its long-term outlook remains strong. This Calgary-headquartered company currently has a market cap of $39.4 billion as its stock trades at $21.59 per share. And CVE stock has a 3.3% annualized dividend yield at the current market price.
Last quarter, Cenovus generated $2.5 billion in cash from operations, along with $2 billion in adjusted funds flow. Although its production faced temporary declines due to scheduled maintenance, the company efficiently completed projects like the Christina Lake turnaround ahead of schedule, avoiding any potential disruptions.
Cenovus Energy is continuing to focus on the Narrows Lake pipeline project, which is expected to increase its production by up to 30,000 barrels per day. Also, its expansion efforts in Sunrise and Foster Creek could help it accelerate growth in the coming years. In addition to its strong long-term growth outlook, CVE’s strong business model and robust capital allocation make it a great stock for energy investors in 2025.
