Market analysts expect the TSX’s energy sector to make a comeback in 2025. However, the threat of US President Donald Trump to impose additional tariffs on Canadian imports, including energy, has changed the outlook. On February 12, 2025, all 13 premiers met with Trump in Washington, D.C. to assure him that Canada is a secure partner for commodities like energy, metals, and critical minerals.
Volatility has increased since early February, but industry majors like Canadian Natural Resources Limited (TSX:CNQ) and Imperial Oil (TSX:IMO) should hold up well if a tariff war explodes.
Meanwhile, Scotiabank analysts see a buying opportunity as stock prices retreat and Canadian oil producers prepare to export to non-U.S. markets. The bank analysts did not include CNQ and IMO as the “most exposed” producers to Trump’s tariffs.
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Enviable position
The proposed trade tariffs will unsettle the energy industry, although CNRL is ready for any eventuality. The $90.7 billion oil and gas producer will increase capital spending by $750 million in 2025 to $6.2 billion. It plans to increase production between 1.5 million and 1.6 billion barrels of oil equivalent per day (boe/d) or 12% year-over-year.
CNRL acquired Chevron’s oilsands assets last October, and the expansion of the Trans Mountain pipeline strengthened heavy oil prices. Its President, Scott Stauth, said, “We could continue to see strong Western Canada Select (WCS) pricing for the foreseeable future and we’ve obviously taken some capacity and made sure we can move our barrels through there, so I think we set ourselves up in a pretty enviable position.”
At $42.90 per share, current investors are down -3.3% year-to-date. However, the hefty 5% dividend yield compensates for the temporary stock weakness. This large-cap stock is a dividend aristocrat owing to 25 straight years of dividend hikes.
Unique resilience
American oil giant ExxonMobil is the majority owner (69.6%) of Imperial Oil. In 2024, net income dipped -2% year-over-year to $4.8 billion, while cash flow from operating activities jumped 36.5% to $1.8 billion. “Our robust financial results in 2024 were driven by outstanding operational performance,” said Brad Corson, Chairman, President and CEO of Imperial Oil.
As of this writing, IMO trades at $100.66 per share and is up 13.6%-plus year-to-date. The Board approved the 29th consecutive year of dividend increase following the presentation of the Q4 and 2024 financial results. If you invest today, the dividend yield is a decent 2.3%. The payout should be safe given the low 25.3% payout ratio.
Corson added, “Our 20% increase in the dividend reflects confidence in our plans as we enter 2025 with strong operational momentum.” During the earnings call, Corson believed that Imperial would possess a “unique resilience” to the potential negative effects of tariffs.
The production mix of heavy and light crudes plus the strength of integration makes Imperial Oil much more resilient than others. Canada’s largest petroleum refiner plans to boost production in 2025 by about 3% year-over-year, or between 433,000 and 456,000 boe/d.
Resilient demand
Canadian majors CNRL and Imperial Oil will pursue growth and ramp up production despite tariff threats because both expect demand to remain resilient. However, if you’re investing in energy, IMO is outperforming and the best stock to buy.
