The Strait of Hormuz has been open, closed, and open again — and as of this morning, it’s closed once more. Brent crude is back above $96. A brief ceasefire on Friday sent oil plunging 10%, and then one overnight escalation erased those losses in hours.
For Canadian oil investors, this matters. The International Energy Agency has called the Strait of Hormuz disruption the largest supply shock in the history of the global oil market. Whether or not a lasting ceasefire eventually holds, the underlying message is that global supply is fragile and the price floor has moved higher. That’s a meaningful backdrop for Canadian producers — especially ones with low-cost production, clean balance sheets, and enough operating leverage to turn a stronger oil price into real free cash flow.
So let’s look at two that fit that description.
Source: Getty Images
Baytex Energy
Baytex Energy (TSX:BTE) looks like one of the more obvious winners from rising oil prices. It’s an oil-weighted producer with a much cleaner story now after selling its U.S. Eagle Ford assets in December 2025 for net proceeds of US$2.2 billion. That deal left Baytex as a more focused Canadian producer built around heavy oil and the Pembina Duvernay — which means more direct exposure to Canadian crude prices at a moment when global supply disruption is doing the heavy lifting on price.
For full-year 2025, Baytex generated $1.5 billion in adjusted funds flow and $275 million in free cash flow. Canadian production averaged 65,528 boe/d, up 6% organically from 2024 excluding non-core divestitures, while fourth-quarter production reached 67,295 boe/d. Management also repurchased 30 million shares in 2025 for $141 million — a signal that capital discipline hasn’t been abandoned in favour of growth for its own sake.
Its 2026 budget targets production of 67,000 to 69,000 boe/d, with growth expected at 3% to 5% and Duvernay production projected to rise 35% to roughly 11,000 boe/d. The stock holds a market cap of about $4.3 billion and a 1.55% yield. At WTI near $90 and climbing, that torque matters more than a bargain multiple.
Cardinal Energy
Cardinal Energy (TSX:CJ) is a Canadian oil and natural gas producer with a low-decline asset base in Western Canada, and over the last year it became considerably more interesting because of its Reford SAGD thermal project. That project moved into production in Q4 2025 and hit nameplate production of 6,000 barrels per day in December, ahead of schedule — giving Cardinal a new growth engine that looks much more valuable when oil is trading above $90.
Cardinal posted Q4 2025 adjusted funds flow of $46.1 million and full-year adjusted funds flow of $205.1 million. Annual production averaged 21,870 boe/d, while Q4 production hit a record 23,514 boe/d. Net earnings for 2025 came in at $20.8 million, down sharply from 2024, and net debt rose to $281.9 million by year-end as the company finished building Reford 1. So this one isn’t as tidy as Baytex on the balance sheet — but it has visible production growth attached to a rising oil tape, and that combination is worth watching closely right now.
Management’s 2026 guidance calls for average production of 25,000 to 25,500 boe/d and adjusted funds flow of $208 million at US$60 WTI. With WTI currently running $25–30 above that assumption, the upside to that funds flow number could be substantial. The company also raised $104.7 million in equity in early 2026 and sanctioned Reford 2, which should support another leg of growth over the next 18 months. The trailing P/E of 85 and 6.4% yield tell you investors are paying for what comes next, not what just happened. The risk is execution — thermal projects can get expensive fast if anything slips.
Bottom line
If you’re a Canadian investor looking for income and some torque to the oil price, both of these stocks have a reasonable case right now. The situation in the Middle East is genuinely uncertain — ceasefire headlines can knock oil 10% in a day, as Friday showed. But the structural backdrop has shifted. The Strait of Hormuz is now a recurring flashpoint, Canadian producers sit outside that supply disruption entirely, and the price floor looks higher than it did six months ago.
Baytex is the cleaner, more direct bet on stronger crude. Cardinal offers a transition story with fresh thermal growth and a monthly dividend still in the mix. Neither is risk-free, and both will stay tied to the oil market’s mood — but that mood is working in their favour right now.
