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The energy sector is propelling the TSX higher this year, with Canada's primary stock market up 7.19% year-to-date, primarily fueled by the strong performance of TSX energy stocks. Despite this positive momentum, there are still incredibly cheap options available for investors looking to capitalize on the sector's potential.
Athabasca Oil (TSX:ATH)
Athabasca Oil (TSX:ATH) has emerged as a winning investment, delivering a remarkable overall return of 591.55% over the last three years. Investors who allocated $6,000 in May 2021 would see their investment grow to $41,492.96 today. With shares trading at $4.91, current investors have enjoyed a 17.75% year-to-date gain, and analysts anticipate a further upside with a 12-month average price target of $6.19 (+26.1%).
As a $2.74 billion energy company, Athabasca Oil focuses on developing thermal and light oil assets in Alberta's Western Canadian Sedimentary Basin. The company's operations in Montney, Duvernay, and the oil sands offer a diversified portfolio of active resource plays. Notably, its thermal oil segment boasts low-decline production, while light oil operations deliver high margins and robust returns.
In Q1 2024, Athabasca Oil reported a 7.1% year-over-year increase in revenue to $301.75 million, accompanied by a significant turnaround in net income, reaching $38.5 million compared to a net loss of $56.6 million in Q1 2023. The company's partnership with Cenovus Energy in Duvernay Energy, its latest growth driver, has commenced operations, contributing to its growth trajectory.
With strategic investments in expanding key assets like Leismer, Athabasca anticipates progressive production growth of 40,000 barrels per day over the next three years. Notably, its commitment to allocating 100% of free cash flow to share buybacks underscores its focus on enhancing shareholder value.
Tamarack Valley Energy (TSX:TVE)
Tamarack Valley Energy (TSX:TVE) presents an opportunity for enhanced shareholder returns through dividend payments and share buybacks. With shares priced at $3.69 and a year-to-date gain of 21.92%, coupled with a dividend yield of 4.07%, the company offers an attractive investment proposition. Analysts project a one-year upside potential of 99.7% with an average price forecast of $7.37.
As a $2.74 billion oil and gas company, Tamarack Valley owns assets in various oil plays, including Charlie Lake, Clearwater, Cardium, and several enhanced oil recovery opportunities in Alberta. In Q1 2024, the company reported a 4% increase in total revenue to $393.3 million year-over-year, alongside significant improvements in cash flow from operating activities and free funds flow.
President and CEO Brian Schmidt attributes Tamarack Valley's impressive quarterly results to its high-quality asset portfolio and strategic focus on core assets. Looking ahead, the company aims to further increase its oil weighting, improve pricing margins, and execute projects with multiple payouts to drive sustained growth.
The energy sector presents compelling investment opportunities for Canadian investors, with Athabasca Oil and Tamarack Valley Energy standing out as attractive options. Both companies offer visible growth potential and a track record of delivering shareholder value through strategic initiatives and robust financial performance. As investors navigate the market, these cheap options in the energy sector could offer significant upside potential in 2024 and beyond.
