The Canadian energy landscape is poised for higher growth in 2024 and the addition of certain energy stocks to investors’ portfolios could enhance their total returns, according to analysts. With the help of TipRanks’ Stock Screener tool for the Canadian market, we filtered two energy stocks – Tourmaline Oil (TSE:TOU) and Topaz Energy Corp. (TSE:TPZ), which have a Strong Buy consensus rating and over 15% upside potential in the next twelve months. What’s even better is that both companies earn a Perfect 10 Smart Score on TipRanks, meaning they are most likely to outperform market expectations.
Experts predict that despite the modestly declining oil and gas prices, drilling activity in Canada is expected to pick up pace with increased investment in the sector. Also, demand is expected to remain strong and export capacity is projected to increase this year.
Having said that, a few challenges persist for the global energy sector that could impact pricing and production. These include inflationary pressures, labor issues, the government’s decarbonization targets, and geopolitical constraints, such as the ongoing Israel-Hamas war and tighter OPEC+ production rules.
With these pros and cons in mind, let us look at how the two energy companies are performing.
Tourmaline Oil (TSE:TOU)
Calgary, Alberta-based Tourmaline Oil engages in the exploration, development, and extraction of crude oil and natural gas. It is one of the largest players in the sector and the first to directly engage in the liquified natural gas business. For Fiscal 2023, Tourmaline paid quarterly cash dividends of C$1.05 per share, up from C$0.90 per share paid in the previous year.
In its latest results for Q4 FY23 reported on March 6, Tourmaline posted net earnings of C$700.20 million, up from a net loss of C$30.37 million in the prior year period. The massive jump was mainly due to an unrealized gain of C$200.6 million on financial instruments. On the other hand, total revenues collapsed 24% year-over-year to C$1.66 billion, mainly due to lower benchmark prices of crude and natural gas compared to the peaks witnessed in 2022.
Furthermore, the company’s average production for Fiscal 2023 stood at 520,366 barrels of oil equivalent per day (boe/d), up 4% compared to the prior year. For Fiscal 2024, Tourmaline projects average production in the range of 580,000-590,000 boe/d.
Is Tourmaline a Good Stock to Buy?
With 11 unanimous Buy ratings, TOU stock has a Strong Buy consensus rating on TipRanks. The average Tourmaline Oil share price target of C$78.77 implies 24.9% upside potential from current levels.
Topaz Energy Corp. (TSE:TPZ)
Calgary, Alberta-based Topaz Energy has a slightly different business model. TPZ operates and earns revenue via royalty assets and energy infrastructure assets situated in the Western Canadian Sedimentary Basin. The company focuses on generating reliable free cash flows (FCF) and pays sustainable dividends to its shareholders. Interestingly, Tourmaline Oil had a 31.2% stake in Topaz Energy as of December 31, 2023.
For Q4 FY23, Topaz’s total revenues declined by 13.4% year-over-year primarily due to lower pricing. The company generated FCF of C$71.68 million, down 15.7% compared to Q4 FY22. Meanwhile, Topaz’s board declared a 3.2% increase in quarterly cash dividend of C$0.32 per share for Q1 FY24.
For Fiscal 2023, Topaz’s average royalty production jumped over 11% year-over-year to 18,853 boe/d. At the same time, infrastructure assets contributed 22% of total revenue and other income. For Fiscal 2024, Topaz has guided for average royalty production between 18,800 and 19,600 boe/d.
Is Topaz Energy Stock a Good Buy?
With nine unanimous Buy ratings, TPZ stock has a Strong Buy consensus rating on TipRanks. The average Topaz Energy Corp. share price target of C$25.89 implies 22.9% upside potential from current levels.
Key Takeaways
The Canadian energy sector is poised to witness robust growth in Fiscal 2024. Investors could consider investing in oil and gas stocks to enhance their portfolio returns with their upside potential and attractive dividends.
