Canadian energy stocks such as Suncor (TSX:SU) and Canadian Natural Resources (TSX:CNQ) have created significant wealth for long-term shareholders. Since January 1995, Suncor stock has returned 4,670% to shareholders after adjusting for dividend reinvestments. Comparatively, CNQ stock has returned 10,000% in this period.
As historical returns don’t matter much to current and future investors, let’s see which TSX stock is a better investment right now.
Is Suncor Energy a good buy right now?
Suncor Energy delivered a strong performance in 2024, setting operational records across its business segments. Upstream production reached 828,000 barrels per day, an 11% increase from 2023 and the highest in company history. Its refining throughput hit 465,000 barrels daily (up 10.5% year over year), with a record 100% utilization.
Suncor achieved these impressive volume gains while reducing operating, selling, and general expenses by $324 million despite higher production, demonstrating strong operational leverage and cost discipline. Chief Executive Officer Rich Kruger emphasized that every major company-wide asset operated at greater than 100% utilization for the fourth quarter (Q4).
Suncor is already delivering on its three-year targets (2024-2026) announced last May, achieving its $8 billion net debt target in Q3. This allowed the company to shift to returning 100% of excess funds to shareholders through buybacks. For 2024, Suncor returned $5.7 billion to shareholders via dividends ($2.8 billion) and share repurchases ($2.9 billion).
Looking forward, 2025 will include significant planned maintenance, including a 91-day coke drum replacement project at the base plant starting in Q2. Despite these activities, management maintains a volume outlook similar to 2024 levels, suggesting continued operational efficiency improvements.
Is the TSX stock undervalued?
Canadian Natural delivered remarkable results in 2024, with a record annual total production of approximately 1.36 million BOE (barrels of oil equivalent) per day, including over one million barrels per day of liquids. Oil sands mining and upgrading production set a record at 472,245 barrels per day, with exceptional utilization rates of 99% despite planned turnarounds.
Cost discipline has been impressive, with primary heavy oil operating costs down 9% from 2023 and North American light crude oil and NGLs operating costs reduced by 17%.
CNQ’s reserves grew 9% to 15.2 billion BoE (proved) and 20.1 billion BOE (proved plus probable), with a 365% replacement of 2024 production on a proved basis. Approximately 74% of total proved reserves are from long-life, low-decline, or zero-decline assets, resulting in a total proved reserve life index of 33 years.
CNQ generated a robust adjusted funds flow of $14.9 billion in 2024 and returned $7.1 billion to shareholders through dividends and share repurchases. Management announced a 4% dividend increase, marking the 25th consecutive year of dividend growth, with a compounded annual growth rate of 21%.
Priced at 10.7 times forward earnings, CNQ is forecast to grow its net income at an annual rate of 20% over the next three years. Analysts remain bullish and expect the TSX stock to gain 30% in the next 12 months.
The Foolish takeaway
Canadian Natural Resources appears to be the better buy between the two companies. CNQ offers superior scale with 1.36 million BOE/day of production versus Suncor’s 828,000 barrels per day.
Moreover, CNQ has a longer reserve life and a greater dividend growth history. Additionally, CNQ has successfully integrated recent acquisitions that added approximately 93,500 barrels per day of long-life, zero-decline production, providing greater stability during market volatility.
