Canadian energy stocks have been major beneficiaries of the Strait of Hormuz disruption. Oil prices remain over $90 per barrel. It doesn’t appear as if President Trump’s efforts to reach a deal with Iran will succeed any time soon.
Source: Getty Images
Some Canadian energy stocks could still have room to run
The market no longer appears to be overly concerned by this situation. Energy stocks have pulled back to a modest extent. Yet, energy prices could remain in a sweet spot ($75-$85 per barrel) for quite some time to come. That just means tonnes of cash flow for Canada’s lean, profitable energy companies.
If you believe this thesis, many Canadian energy stocks could appear reasonably priced today. Here are two Canadian energy stocks that might just be a bargain, even after soaring over 60% in 2026.
A top mid-cap energy stock
The first energy stock is Tamarack Valley Resources (TSX: TVE). Tamarack just announced the sale of its Charlie Lake assets to become a 100% Clearwater heavy oil producer. The Clearwater is an extremely profitable play. Many wells can pay out their capital costs in less than six months.
The disposition allows Tamarack to firstly collect a great price (70% above what it initially paid) and secondly pay down all its debt. Thirdly, Tamarack can accelerate production growth plans in the Clearwater by 15% this year. Finally, it lowers its free cash flow break even down to $38 per barrel and increased netbacks by $2–$4 per barrel.
Today, the company expects to produce around 58,000 barrels of oil per day (BOE/d), of which 92% is liquids. That gives it substantial exposure to elevated prices right now.
This energy stock is expected to end the quarter with $125 million of net cash. That provides it ample flexibility to invest in its accretive plays, or even make tuck-in acquisitions.
Even though Tamarack Valley is up 200% in the past year, its stock price is not unreasonable. TVE stock trades for only 13 times free cash flow and has a 7% free cash flow yield. It has a 1.4% dividend yield; however, that will increase with the substantial dividend increase.
If you want to make a mid-cap bet on energy, this is one of the best ideas in Canada.
A top large cap oil stock
If you are looking for something larger, Strathcona Resources (TSX: SCR) remains attractive. With a $10 billion market cap, it sits on the edge of large cap energy stocks. After a streak of acquisitions, it has become one of the top thermal and heavy oil players in Western Canada.
It produces 125,000 BOE/d. All of its production is oil. Strathcona has accumulated over 29 years of proved reserves in its portfolio. Given its strong portfolio, it has plans to grow production to 200,000 BOE/d (a 10% compounded annual growth rate) by 2031.
Generally, these are high margin, low decline assets that generate free cash flow over $45 per barrel. Its netback profile is equivalent to that of many of the best oil sands players in Canada.
Yet, Strathcona trades at a meaningful discount to those players. Today, Strathcona trades for five times fund flows from operations and a 13% free cash flow yield. It yields 2.6% today.
Given its growth profile, attractive dividend, and under-appreciated value, there appears to still be considerable room for this energy stock to deliver strong total returns for shareholders in the coming five years.
