Oil and gas stocks haven’t exactly been in the headlines lately, with gold and artificial intelligence (AI) taking centre stage. But make no mistake, these companies can still be some of the best investments out there. The key, though, is focusing on company-specific information, rather than oil and gas as a sector.
That’s because the world is changing. While we still need oil and gas, smaller companies are being purchased by the larger powerhouses. This is creating opportunities for the most stable oil and gas stocks. Today, we’re going to look at three of these energy stocks providing opportunities over and over again.
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CNQ
First up, we have Canadian Natural Resources (TSX:CNQ), a large, cash-generating, dividend and buyback machine. It’s low risk, but high income and value. And that’s been seen time and again through earnings. During the second quarter, the energy stock created massive cash flow and returns, with adjusted funds flow of $3.3 billion, and returned $1.6 billion in dividends and buybacks to shareholders.
Furthermore, it’s growing, with a large increase in production in part thanks to acquisitions. Yet despite the growth, its balance sheet remains strong, with low, breakeven and cost controls, and US$4.8 billion in liquidity. And even with all this great news, the energy stock still trades at just 16 times earnings, and with a 5.3% dividend yield. So, for investors seeking income and value, with lower risk to Canadian oil exposure, it’s an ideal option.
TOU
Next up, we have Tourmaline Oil (TSX:TOU), a high-quality gas growth story only growing further thanks to its LNG and expansion options. This has created growth and free cash flow, with second-quarter production coming in so well that it increased its targets. In fact, the energy stock also announced a special dividend, while maintaining base dividends. And with minimal debt, it looks in a prime position for further good news.
Some of that news should come from its long-term LNG feed agreement with Uniper. Its hedging program also smooths out its near-term cash flow. Yet again, it trades at just 11.3 times earnings, with a 3.3% dividend yield. Altogether, its disciplined spending and free cash flow focus have created a solid long-term hold.
IMO
Finally, we have Imperial Oil (TSX:IMO), an integrated, low-volatility refiner with upstream and downstream production. It’s also created renewable diesel optionality, allowing for a defensive and balanced investment. The integrated model proved its worth during the second quarter once again, with net income hitting $949 million, the highest second quarter in over 30 years!
What’s more, the energy stock started Canada’s largest renewable diesel at Strathcona. Meanwhile, it continued its 5% repurchase program and plans to accelerate repurchases — all while trading at 19.7 times earnings, and offering a 2.3% dividend yield. Altogether, it’s the perfect balance of both commodity upside and downstream stability.
Bottom line
All three of these energy stocks remain strong options, though for different reasons. You can get the high yield and large scale from CNQ, the growth and gas focus from TOU, and balanced exposure from IMO. And with all offering significant income through dividends and buybacks, these remain solid choices on the TSX today.
