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Summary
- Oil prices revived from a three-week low after US President Donald Trump, who tested positive for COVID-19, left the hospital briefly on Sunday to meet supporters.
- Stocks of Canadian energy companies such as Suncor Energy (TSX:SU) and Canadian Natural Resources (TSX:CNQ) remain popular among investors.
- The energy industry took a major hit earlier this year due to the commodity price crisis and COVID-19 outbreak.
Oil prices rose from a three-week low after reports of US President Donald Trump, who was tested positive for coronavirus, emerged briefly from the hospital on October 4 to greet his supporters. Canadian energy stocks such as Suncor Energy (TSX:SU), Canadian Natural Resources (TSX:CNQ) and Husky Energy (TSX:HSE) were the major gainers of this movement in oil prices.
Throughout the first half of the year, the volatility in commodity prices and onset of the coronavirus pandemic inflicted turbulence in the global energy industry. It suffered a major setback due to the pandemic-caused economic downtick, operational disruptions and drop in global oil demand.
The S&P/TSX Energy Index has declined by 56.5 per cent this year and is down 2.57 per cent quarter-to-date. And not too long ago, the Organization of the Petroleum Exporting Countries (OPEC) predicted a further drop in the global oil demand than what they had estimated earlier.
Current SU Stock Price: C$ 15.95
One of the largest Canadian energy companies, Suncor Energy Inc grabbed the headlines last week for its plans to reduce the workforce by up to 15 per cent over the next few years. This decision is expected to affect roughly 2,000 non-union jobs. The company was also put under probe on the charges of securities fraud in September.
Suncor Energy has been suffering for a while now due to the decline in global oil demand and its price volatility amid the coronavirus pandemic outbreak. However, Suncor stocks saw a huge surge in demand among investors in August this year after billionaire American businessman Warren Buffett acquired a 1.3 per cent stake in the company.
The company currently has a market cap of C$24.3 billion. It has a price-to-book (P/B) ratio of 0.66, debt-to-earnings ratio of 0.6 and a price-to-cash flow (P/CF) ratio of 4, as per data on the Toronto Stock Exchange (TSX).
SU STOCK PERFOMANCE
Suncor Energy saw a decline of nearly 63 per cent year-to-date (YTD). However, since dropping to a low of C$15.07 during the pandemic-triggered market crash in March, its scrips climbed nearly six per cent in the last seven months.
Currently, Suncor Energy ranks high among stocks witnessing high trading volume on the TSX. In the last 10 days, it recorded an average trading volume of 8.3 million.
SU FINANCIAL RESULTS
In its second quarter, which ended 30 June 2020, Suncor Energy posted a net loss of C$614 million and its funds from operations were down to C$488 million from C$3 billion in Q2 2019.
(Source: Suncor Energy /Image Credit: ©Kalkine Group)
Suncor Energy’s total debt amounted to over C$21 billion and its losses stood at C$397 million in after-tax hydrocarbon inventory in Q2 2020. Its cash and cash equivalents were C$1.8 billion by the end of June.
Suncor also cut down its quarterly dividends to C$0.21 in the latest quarter. It has a current dividend yield of 5.26 per cent, as per data on the TSX.
The company’s recent decision to reduce its workforce is a part of long-term measures to cut down operating expenses and improve cost structure. The Calgary-based company currently employs 13,000 people.
Canadian Natural Resources Limited (TSX:CNQ)
Current CNQ Stock Price: C$ 23.34
Canadian Natural Resources is also one of the country’s biggest producers of oil and natural gas, with operations in Canada, the North Sea and Offshore Africa. The Calgary-headquartered company announced a quarterly dividend of C$0.425 in August and currently yields 8.1 per cent.
The company entered an agreement to acquire British Columbia-based oil firm Painted Pony Energy in August, which recently got the green light from shareholders and option-holders.
CNQ STOCK PERFORMANCE
Shares of Canadian Natural Resources plunged during the March lows like most energy companies, recording a decline of 50 per cent YTD. But since dropping to a low of C$11 on March 19, its stock price climbed nearly 90 per cent in the next seven months.
Canadian Natural Resources is currently trending on the TSX due to its attractive dividend yield and trading volume. It currently has a 10-day average trading volume of 8.4 million.
CNQ FINANCIAL RESULTS
Canadian Natural Resources’ financial results were impacted by the pandemic. It incurred a net loss of C$ 310 million in its second quarter ending 30 June, as against a net profit of C$2.8 billion in Q2 2019. The company also saw total revenue reduce to C$ 2.8 billion in Q2 2020, down from C$ 5.5 billion in Q2 2019.
Canadian Natural Resources recorded an increase in its production in Q2 2020, with 1.16 million barrels of oil equivalent per day. This was up from 1.02 million barrels of oil equivalent a day in Q2 2019.
