This year marked the peak of oil price cyclicality as Trump’s tariffs on Canada’s oil exports significantly affected the West Texas Intermediate (WTI) crude oil price. Most Canadian oil companies took a hit as the WTI fell from US$70/barrel to US$59 on tariff announcements in February. However, the markets adjusted to the tariffs, and the WTI price returned close to US$70. Oil prices will fluctuate depending on the geopolitical scenario, but a few energy stocks could benefit from the changes.
The structural change in the energy supply chain
After the Russia-Ukraine war in February 2022, there was a remarkable shift in the natural gas supply chain. Many European countries started buying liquefied natural gas (LNG) from North America, opening a new export market for Canada.
Trump’s administration is all about drilling oil and selling it to other countries. This intent was visible in the latest US-Europe trade deal, where the European Union agreed to purchase US$750 billion of U.S. energy exports through 2028.
If the United States exports its light crude oil, it can meet its domestic oil and gas consumption by importing cheaper WTI from Canada. It remains to be seen how Canada’s oil and gas exports to the U.S. fare out in the upcoming Canada-US trade deal before August 1.
Top Canadian energy stocks to benefit from the 2025 situation
Freehold Properties (TSX:FRU) owns oil wells that it gives to energy companies to extract oil. The company earns royalties based on the oil price and volumes produced. It has 24,000 locations in the United States with 30 years of inventory. It leases some of its U.S. oil wells to ConocoPhillips, ExxonMobil, and other industry players.
Freehold earns a 43% premium price from its U.S. portfolio as it produces higher-quality light oil and has access to the Gulf Coast market. The U.S. energy deal with Europe could mean higher oil production in America and increased royalty revenue for Freehold. However, it remains to be seen if this trade deal has a negative impact on Canadian oil production. More oil production in either Canada or the United States will bode well for Freehold, making it a smart energy investment for 2025.
Enbridge stock
Enbridge (TSX:ENB) is a stock that has a competitive edge over other energy stocks. Its largest pipeline infrastructure connects Canada and America. Its gas transmission infrastructure is connected to every operating LNG export facility on the Gulf Coast. Moreover, it is within 50 miles of over 40 billion cubic feet per day of data centre and power-generation opportunities.
Enbridge has sanctioned $8 billion in projects, securing a project pipeline of $29 billion. Of this, the company expects to put into service $23 billion of projects by 2027, funding $9–$10 billion of capital per year internally.
This visibility around the growth profile makes Enbridge a low-risk stock that you can invest in at any time. Enbridge will benefit from North American LNG exports and renewable energy supply to data centres.
It could meet its medium-term guidance of 5% average annual growth in earnings before interest, taxes, depreciation, and amortization (EBITDA), distributable cash flow (DCF), and earnings per share (EPS) beyond 2026.
You could consider buying this stock for its 6% dividend yield. The stock price could rise in winter as more natural gas is consumed for heating purposes.
Final thoughts
Investing in one’s strengths is a good strategy when you are unsure where to invest. Canada’s strength is its oil sands reserves and energy exports. While tariffs and other geopolitical issues may create short-term headwinds, companies that adapt to the change thrive.
The above energy stocks could be a good investment for dividend purposes, but your portfolio needs diversified exposure to good stocks across sectors.
