It sure is cold out there. This is the kind of cold that leaves us clamouring to get inside – take cover and blast those heaters and fireplaces. In this article, I’ll discuss a Canadian energy stock that helps make this happen, Peyto Exploration and Development Corp. (TSX: PEY). Peyto is not that well-known, but it should be.
Because Peyto has a stable, long-term track record of delivering operational and shareholder value. Please read on as I go over the many reasons that this Canadian energy stock is one to own in 2026.
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Critical metals and CEM
But first, I’d like to make mention of critical metals, which has garnered a lot of investor and media attention as of late, and companies like Canadian Energy Metals (CEM). Canadian Energy Metals was incorporated in 2021. Its goal is to develop a “major critical metals discovery” in East-Central Saskatchewan.
The Canadian government has identified 34 critical minerals and metals. They are the foundation on which modern technology is built. They are used essential products such as mobile phones, electric vehicle batteries, medical devices, and defence applications. Thus, they are critical to the country and its future.
One company that is getting a lot of attention is the aforementioned Canadian Energy Metals (CEM). The company’s stated objective is to develop its large resource of critical metals – the metals targeted by CEM are those that are essential to Canada’s aerospace, defence, and sustainable energy industries. As such, they are critical.
This is a fine objective, but CEM is just beginning its journey. And, CEM is not publicly traded, so investors cannot buy into it even if they wanted to. It’s definitely something to keep our eyes on. However, I’d like to focus on an underrated and undervalued Canadian energy stock that is thriving now, Peyto Exploration and Development.
Why Peyto?
Peyto is one of Canada’s lowest cost natural gas producers. The company operates in the very lucrative deep basin of Alberta, with long-life and low-cost reserves. This helps Peyto keep costs down, and production up.
In Peyto’s most recent quarter (Q3/25), the company reported a 29% increase in funds from operations, to $199 million. This was driven by a 5% increase in production, and mostly, a 21% increase in its realized natural gas price, to $3.6 per million cubic feet (mcf). These results reflect Peyto’s success in keeping its costs down, diversifying its revenue base, and executing its hedging program, which resulted in a realized natural gas price that’s 2.3 times higher than market prices.
Outlook for this Canadian energy stock
Natural gas accounts for almost 90% of Peyto’s production. This means that this company is very exposed to the natural gas industry. And today, that’s a good thing, in my view. Because although it’s not spoken of as much as critical minerals, natural gas really is an essential resource that has a bright future.
Although natural gas prices remain volatile, there are many factors that suggest that sustained strength is coming. While recent natural gas price movements are mostly due to the cold weather snap in North America, structural changes are taking shape.
Firstly, the liquified natural gas (LNG) industry is rapidly expanding in Canada. The opening and ramping up of LNG Canada will provide a sustained increase in demand for Canadian natural gas. Also, natural gas continues to replace coal around the globe. Finally, utilities are seeing strong increases in demand as the electrification push continues.
Peyto stock performs well
Peyto is currently yielding 5.2%. Its cash flows and earnings are growing nicely and its debt load is falling. These are all good things that position Peyto to benefit from the structural shift happening in the natural gas industry.
This Canadian energy stock has risen 60% in the last year. In my view, there’s more to come as the positive realities of the natural gas industry will continue to drive it higher.
