U.S. President Donald Trump’s proposed 10% tariff on energy imports from Canada will take effect on March 4, 2025. A tariff war could adversely impact Canadian oil and gas companies with cross-border operations and integrated energy trade with America.
If you’re investing in the TSX’s heavyweight sector this year, Suncor Energy (TSX:SU), Valeura Energy (TSX:VLE), and Tamarack Valley Energy (TSX:TVE) are the top energy stocks to buy.
Perennial volume leader
Suncor Energy is a perennial volume leader. Trading volume is a consideration of some investors when investing in stocks because it indicates market interest, investor confidence, and security liquidity.
Fitch Rating has a stable outlook rating for the oil bellwether, which reflects the sizeable upstream production scale. In addition, the $70.4 billion company has a high degree of integration in oil refining and fuel marketing, low natural production decline rates, above-average integrated margins, and a conservative financial policy.
The rating agency also notes that part of its value chain is Suncor’s Petro-Canada, the largest fuel retail network in the country. Given the minimal net exposure to light-heavy oil differentials and integration in refining and fuel retail, Suncor’s exposure to tariff risk should be manageable.
Its CEO, Rich Kruger, said 60% to 65% of Suncor’s production stays in Canada. Moreover, the integrated nature of its assets gives it a natural hedge against tariffs. It is best positioned to withstand a trade war. SU trades at $56.74 per share (+10.6% year-to-date) and pays a 4% dividend.
Far from Trump
Valeura Energy’s oil-producing assets are offshore in the Gulf of Thailand. The $890.5 million company explores, develops, and produces petroleum and natural gas. This small-cap stock outperforms the energy sector (+3.1%) and broader market (+3.6%). At $8.35 per share, current investors enjoy a 15%-plus year-to-date gain.
Dr. Sean Guest, President and CEO of Valeura, said all Thailand fields have an economic field life lasting beyond 2030. He added that the business’ net asset value has grown to over US$1 billion. Moreover, with more production years, expect more years of future cash flow.
Steady performer
Tamarack has been steady in the last 12 months. At $4.61 per share, the trailing one-year price return is 51.6%-plus. If you invest today, you can partake in the 3.3% dividend yield. The mid-cap stock pays monthly dividends.
Management’s long-term strategic plan aims to reduce debt and deliver enhanced returns through share buybacks to drive substantial value creation (per share). In the first three months of 2024, net income climbed 323% year-over-year to $155.8 million, while free funds flow rose 69% to $297.7 million from a year ago.
Tamarack’s net debt decreased by 28% to $807.4 million compared to the same period in 2023. The Clearwater oil asset, with an expanded infrastructure partnership, is Tamarack’s growth driver. This $2.4 billion oil and gas company forecasts $325 to $425 million annual free funds flow in five years and 10% to 15% annual returns to shareholders.
Buying opportunities
Suncor Energy is a no-brainer buy, while Valeura Energy and Tamarack Valley are potential multi-baggers in 2025 and beyond.
