Despite the tariff threats, market observers are bullish on the TSX’s energy sector in 2025. Canadian oil and gas producers plan to increase production this year despite a potential trade war with the U.S. and political uncertainty at home. Many industry players are also betting that oil and gas demand will remain resilient in the year ahead.
If you have the appetite to invest in the sector, the ultimate energy stock to buy is Valeura Energy (TSX: VLE). A $1,000 investment can grow tenfold, given the small-cap stock’s enormous 155.6%-plus and 1,500%-plus return in 2024 and in the last three years, respectively.
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Clear growth strategy
Valeura Energy explores, develops, and produces oil and natural gas. The $770.4 million upstream oil and gas company’s primary oil-producing assets are in the offshore Gulf of Thailand. It has an operating interest in the Thrace basin, onshore in northwest Turkey.
Management’s strategy to add shareholder value is clear and straightforward. Further develop the oil-producing assets, re-invest to sustain cash flow, and develop underexploited opportunities for organic growth. For inorganic growth, Valeura will pursue value-accretive merger and acquisition opportunities in Southeast Asia, preferably those with current or near-term potential.
The Canadian firm is now Thailand’s second-largest oil producer due to two highly accretive acquisitions in 2022 and 2023. Valuera is also debt-free after fully repaying debt in Q4 2023. It can also be a regional consolidator in Southeast Asia because few operators can match its scale and capability.
Solid platform
In the nine months ending September 30, 2024 (first three quarters), the average daily oil production climbed 46.3% to 21,722 barrels per day (bbls/d) from a year ago. Total oil revenues increased 39.9% year-over-year to US$452.6 million. According to management, higher crude oil inventory at the end of Q3 2024 and higher Q4 production should result in record sales in the fourth quarter.
Valeura will present its Q4 and 2024 results on March 25, 2025, but provided an operational update. The average oil production reached a record 26,109 bbls/d during the quarter and 22,825 bbls/d for the year. Notably, the intensity of greenhouse gas (GHG) emissions dropped 17% in 2024 compared to the previous year.
Its President and CEO, Dr. Sean Guest, said, “I am pleased to share preliminary details of our Q4 and full-year 2024 performance, which demonstrate that our business is performing as intended.” “With record oil production and sales volumes in Q4, we have strengthened our cash position to US$259 million. This creates a solid platform for our company as we start 2025,” Dr. Guest added.
For 2025, management forecasts full-year oil production to reach between 23,000 and 25,500 bbls/d. The capital expenditure budget is US$125 million to US$150 million plus approximately US$11 million for exploration drilling. Valeura will fund all spending in 2025 with cash on hand plus cash flow from ongoing operations.
Astronomical gains
Valeura Energy is not an energy titan or oil bellwether but has rewarded investors with astronomical gains. The debt-free company prioritizes generating strong cash to enhance its strong balance sheet.
