Enbridge and Canadian Natural Resources: 2 Hot Oil & Gas Stocks on TSX

Summary

• Canada’s oil and gas sector suffered a double whammy earlier this year, with the oil price crisis and pandemic hitting around the same time.
• The OPEC has predicted that the world oil demand will further fall this year.
• Shares of energy companies like Canadian Natural Resource (TSX:CNQ) and Enbridge (TSX:ENB), however, continues to soar on the TSX.
• As the economy slowly gears back into motion, a rise in demand of commodities is expected.

It cannot be said enough. The coronavirus has wreaked havoc on the global energy and oil and gas sector. Canada, which was already reeling under the commodity price crash triggered by the Saudi Arabia-Russia oil price war, further suffered after the COVID-19 outbreak. The Toronto Stock Exchange (TSX) energy index dropped to its lowest point in twenty years in March. The S&P/TSX High Income Energy Index has declined 43.63 per cent year-to-date (YTD). However, energy stocks like Canadian Natural Resources and Enbridge continued to perform well, remaining in favor among Canadian investors.

The Organization of the Petroleum Exporting Countries (OPEC), in its recent monthly report, said that the global oil demand will see a much sharper fall this year than earlier predicted, dropping by 9.46 million barrels a day. Meanwhile, heavy Canadian crude witnessed a price rise in the first week of September after Calgary-based Inter Pipeline Ltd, which supplies to major oil-sands infrastructures in Alberta, was forced to shut down following a spill. Oil prices also rose on Monday (September 14) after a storm Sally hit the Gulf of Mexico forcing drillers to halt production.

Canadian Natural Resources Limited (TSX:CNQ)

Current Stock Price: C$ 23.34

With a market cap of nearly C$ 28 billion, Canadian Natural Resources is one of Canada’s biggest producer of oil and natural gas producers. Naturally, when the country’s energy sector suffered a setback amid the pandemic and the oil price crisis earlier this year, it also endured a major blow. Its second quarter results of 2020 projected a net loss of C$ 310 million, as compared to net profit of C$ 2.8 billion in Q2 2019. Its total revenue also fell to C$ 2.87 billion in Q2 2020, as against C$ 5.56 billion in Q2 2019.

However, Canadian Natural Resources’ stock price has seen a rise of nearly 14 per cent in the last six months. From its lowest point at C$ 11 on March 19, the company’s scrips have steadily climbed by almost 115 per cent so far in September. It currently has a 10-day average trading volume of 7.06 million.

In August, the Calgary-based company announced a quarterly cash dividend of C$ 0.425. It has a high dividend yield of 7.19 per cent. In the same month, it also announced that it will be acquiring Painted Pony Energy Ltd, a smaller oil company based in British Columbia, and take on its debt of about C$ 350 million.

Canadian Natural Resources has operations in Canada as well as the North Sea and Offshore Africa. In Q2 2019, it produced over 1.02 million barrels of oil equivalent a day. In the second quarter of 2020, that number climbed to 1.16 million barrels of oil equivalent per day. As lockdown restrictions continue to be lifted in Canada, production can be expected to rise further

Enbridge Inc (TSX:ENB)

Current Stock Price: C$ 41.10

Enbridge Inc, a Calgary-based natural gas distribution company, has the biggest pipeline network in all of North America. This gave the company an edge during the COVID-stricken times as the demand for a widespread pipeline capacity is hard to beat even if oil prices keep declining. Enbridge Inc is also the carrier of one-fourth of North America’s crude oil and supplies one-fifth of all the natural gas consumed by the United States.

Although the demand of energy supply has been affected by the pandemic, Enbridge had a comparatively steady cash flow that it used to build a wider pipeline network and, in turn, generate more income.

The financial results of 2020’s second quarter, however, showed a total operating revenue of nearly C$ 8 billion for Enridge. This was a massive fall from C$ 13.2 billion in Q2 2019. Its earnings also dropped from C$ 1.7 billion in Q2 2019 to C$ 1.6 in Q2 2020.

Apart from being the most actively traded stocks on the TSX in the last 10 days, the energy firm ranks high on the list of stocks with high dividend yields. Its current dividend yield is 7.88 per cent.

Enbridge stocks are down 20 per cent year-to-date. Following the March lows, the company gained back 20 per cent in the last six months.

Its current market capitalization is C$ 83.2. As per data on the TSX, it has a current price-to-earn ratio of 43.70, price-to-book ratio of 1.41 and price-to-cash flow ratio of 8.50. It’s current return on equity is 3.12 per cent.

The company distributed C$ 0.81 quarterly dividends.

As the economy slowly propels back to a post-COVID normalcy, investors’ interest in this oil stock may further intensify.