Energy was the third top-performing sector on the TSX in 2025, after basic materials and financials, and in a tight race with technology. As of January 19, 2026, energy is up nearly 6% thus far, though there’s cautious optimism. The concern right now and potential long-term downside risk is the revival of Venezuela’s oil production.
The threat of increased competition is real, but the task ahead for the U.S. is enormous. Canadian producers are closely monitoring the price of a barrel, a perennial headwind. Meanwhile, a mid-cap stock focused on service intensity entered 2026 with a significant tailwind.
Strong buy
Market analysts recommend a “strong buy” for CEU Energy Solutions (TSX:CEU). CEU trades at $13.77 per share following a nearly 55% advance in the last six months. The 2024 TSX30 winner (ranked fourth) has rewarded investors with a substantial 430.22% return over the past three years.
The $2.88 billion company provides technology-driven products to help exploration and production companies drill more efficiently. Moreover, the specialized chemical solutions it provides for the entire oil and gas lifecycle, including drilling fluids, are suitable for diverse geological formations and drilling methods.
Regarding the intensity service factor, oil and gas companies require more chemicals and fluids to drill aggressively and deeper, regardless of commodity price fluctuations. For hauling and transport of its products, CES Energy owns and operates an extensive fleet of tankers, trucks, and trailers.
CES operates state-of-the-art research and development facilities, including satellite laboratories, that provide routine analytical services in service areas across North America. These satellite laboratories are equipped with essential instrumentation and certain specialized equipment, depending on formation requirements.
According to management, CES Energy’s fully integrated world-class basic chemical manufacturing capability is a competitive advantage. The increasing demand for drilling chemicals is a growth driver.
Financial performance
CES Energy is in a sweet spot because the high service intensity level today requires complex drilling fluids and production chemical technology. In the third quarter (Q3) of 2025, revenue increased 3% year over year to record $623.2 million. However, due to higher depreciation expenses, net income declined 13% to $405 million compared with Q3 2024.
The company notes that economic uncertainty and ongoing global conflicts have affected the near-term dynamics of energy supply and demand. Fortunately, energy demand remains resilient, while industry fundamentals support critical drilling and production activity in oil and natural gas.
Lastly, the asset-light business model generates significant free cash flow through all points of the cycle.
Growth plus income
Large-cap stocks Enbridge, Canadian Natural Resources, and Suncor Energy are solid investment options and generous dividend payers, but none of them can match the momentum of CES Energy Solutions. The business thrives on service intensity, not oil prices. From all indications, it is likely to outperform the energy giants in 2026.
The top-tier mid-cap stock is ideal for income and growth investing. Had you invested $7,000 in CES three years ago, your money would be worth $36,790 today. Besides the potential for massive capital gains, prospective investors can benefit from the modest but safe 1.23% dividend (19.9% payout ratio).
