Canadian oil and gas stocks have been doing surprisingly well lately. After five years in the tank from 2015 to 2020, oil stocks suddenly started rallying in 2021. They reached especially high levels in 2022, when oil prices briefly reached $120. They gave up the gains after that and cooled off for a few years. This year, they reached their 2022 levels yet again–even though oil prices are lower now, investors feel that oil companies’ improved balance sheets will pave the road to future profits. In this article, I’ll share three Canadian oil and gas stocks to watch for 2025.
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Baytex Energy
Baytex Energy (TSX: BTE) is a small exploration and production (E&P) company that has given investors a very volatile ride over the years. It got absolutely crushed in the 2014/2015 oil bear market and for some years thereafter. Its problem was that it was saddled with debt while oil prices were too low for the company to pay it off. But in 2022, oil prices unexpectedly rallied to $120 due to Russia’s invasion of Ukraine, and Baytex earned windfall profits that allowed it to pay down its debt. Its stock was up 112% in under a year at one point in 2022.
Today, Baytex has its debt under control. It remains very sensitive to oil prices, as a pure play E&P – it’s down 64% from the 2022 highs. This definitely isn’t the kind of stock for Mom and Pop investors to be going into in high size, but it will rally much harder than the average oil stock in the event of another dramatic rally in oil prices. So, a small position in it, inside a well-diversified portfolio, could be a good idea.
Suncor
Suncor Energy (TSX: SU) is one of Canada’s biggest energy companies. As an integrated energy company, it’s involved in exploration, production, sales, and refining and gas stations. The company is best known to most Canadians through its Petro-Canada subsidiary- – one of the nation’s largest gas station chains. But there is much more to Suncor than that. In addition to its gas station business, Suncor also operates a refinery in Colorado, natural gas storage facilities, and so much more. It’s a pretty diversified energy business that can thrive in different oil and gas markets. Trading at 10 times earnings with earnings up 20% per year over the last five years, it is also a pretty cheap stock.
Enbridge
Last but not least, we have Enbridge Inc (TSX: ENB). Enbridge is a midstream company that transports crude oil and provides natural gas utility services in Ontario. Its pipeline network is the largest in North America, transporting about 30% of the continent’s crude. Its Ontario utility business is a vital part of that province’s energy infrastructure.
Enbridge isn’t cheap like Suncor. Trading at 22.7 times earnings, it is arguably somewhat pricey given its modest growth prospects. However, it does have a more stable business than Suncor does. Pipeline transportation does not require high oil prices to make money – as long as oil companies aren’t going bankrupt, a pipeline continues collecting tolls. Natural gas utilities are also somewhat more stable than E&P oil operations. So, ENB could be considered a “safer” type of energy stock. It’s also got a very high dividend yield (5.9%), and a long track record of dividend growth.
