Fear has gripped the Canadian oil and gas sector since U.S. President Donald Trump signed an executive order to charge a 25% tariff on all Canadian products coming into America. On February 10, 2025, Trump included tariffs on all steel and aluminum imports.
Canada’s crude oil exports to the U.S. reached a record of 4.3 million barrels per day (bbl/d) in July 2024. According to data from the U.S. Energy Information Administration, the weekly U.S. imports of Canadian crude oil reached the highest level on record in the first week of January 2025. Trump’s 10% tariffs on energy imports from Canada will take effect on March 4, 2025.
Meanwhile, TSX’s energy sector has lost -4.1% in the last 30 days. Because of resilient demand, and notwithstanding the tariff threats, industry stalwarts Imperial Oil (TSX:IMO) and Cenovus Energy (TSX:CVE) plan to ramp up production in 2025. Both integrated energy companies with downstream refining assets could outperform and recover some lost margins.
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Resilient to potential tariffs
Imperial Oil has raced out of the starting gate in 2025. At $100.66 per share, current investors enjoy a 13.6%-plus year-to-date gain thus far on top of the 2.3% dividend yield. The $51.2 billion Canadian company is backed by American oil giant Exxon Mobil whose ownership stake is 69.6%.
Its President and CEO, Brad Corson, said the economies of the U.S. and Canada will suffer from a trade war. But if diplomacy won’t prevail and tariffs materialize, he believes that Imperial Oil can withstand the adverse effects. Management will focus on things the company can control such as ensuring the lowest supply cost. Another option is to look for other markets to place its crude and products.
Still, Imperial Oil intends to boost production by 3% year-over-year. The forecast is between 433,000 and 456,000 barrels of oil equivalent per day. Furthermore, Corson said its refineries boast exceptional infrastructure and high utilization rates. The combination contributes to the resilience and profitability of refining operations.
For income-focused investors, the energy stock’s dividend growth streak lends confidence to invest. The Board approved a 20% dividend hike following the impressive Q4 and full-year 2024 financial results. It was the 29th consecutive year of dividend increases and the largest nominal dividend increase in company history.
Partial shield
Besides the plan to increase capital spending between $4.6 billion and $5 billion in 2025, Cenovus Energy’s production guidance is a 4% year-over-year increase to between 805,000 and 845,000 boe/d. The $39.7 billion Calgary-based firm has a partial shield from tariffs. It produces oil in Canada and ships directly to its refineries in the U.S.
Jon McKenzie, President and CEO of Cenovus, said, “We’re entering the final year of a three-year investment cycle, which will drive planned production growth of 150,000 boe/d by the end of 2028 and enable significant expansion of free funds flow.” As of this writing, CVE trades at $21.73 per share (-0.28% year-to-date) and pays a 3.3% dividend.
Solid ground
Imperial Oil and Cenovus Energy stands on solid ground, although no one is sure what will happen with tariffs. However, performance-wise, IMO is the better oil stock, especially for income-oriented investors.
