Energy is back as TSX’s leading sector thus far in 2024. Crude oil prices recently touched a five-month high, and the sector’s 24.8% year-to-date gain is due mainly to rising prices and higher production volume.
Many Canadian energy players outperform, although there are top picks in every major market-cap segment this April, depending on your size preference. The large-cap is an oil bellwether, the mid-cap is undervalued, and the small-cap is a high-growth stock.
Large-cap
Suncor Energy (TSX:SU) needs little introduction as the top-tier energy stock is a favourite of income investors. This oil bellwether boasts long-life assets and specializes in producing synthetic crude from oil sands (26-year reserve life). It also owns Petro Canada, a retail and wholesale marketing brand, with more than 1,800 locations.
The $67.7 billion integrated energy company finished strong last year, production-wise. Suncor’s oil sands performance reached a record 689,000 barrels per day, while the 745,700 barrels of oil equivalent per day (boe/d) were the second-highest in the company’s history. In Q4 2023, net earnings increased 2.9% to $2.8 billion versus Q4 2022, although for the full-year, they declined 8.6% year over year to $8.3 billion.
A non-financial highlight last year was the best overall employee and contractor safety performance in Suncor’s history. Its President and CEO, Rich Kruger, said Suncor is building momentum coming into 2024. If you invest today, the share price is $52.59 (+25.35% year to date), while the dividend offer is 4.15% following the recent 5% dividend hike.
Mid-cap
Crescent Point Energy (TSX:CPG), a $7.4 billion oil and gas company, engages in light oil production in southern Saskatchewan and central Alberta. At $11.98 per share, current investors enjoy a 31.8% market-beating year-to-date gain in addition to the 3.85% dividend yield.
In Q4 2023, net income reached $951.2 million compared to the $498.1 million net loss in Q4 2022. Crescent repurchased 8.4 million shares during the quarter, while the Board approved a 15% dividend hike.
According to its President and CEO, Craig Bryksa, Crescent Point will seek shareholder approval for the change in corporate name to Veren on May 10, 2024. He adds the new name and logo represent Crescent’s remarkable transformation over the last several years. In Latin, Veren combines truth (veritas) and energy.
Small-cap
Advantage Energy Ltd. (TSX:AAV) is a no-brainer buy for growth investors. At $10.35 per share, the small-cap stock is up 21.3% year to date. Notably, the overall return in 3 years is 252%. In the 2023 TSX30 List, the flagship program for TSX’s top growth stocks, AAV ranked 18th.
The $1.7 billion oil and gas producer operates a solid infrastructure base in its Montney fossil gas and liquids resource play. In 2023, annual average production reached a record 60,678 boe/d), while net income declined 70% year over year to $101.6 million. Management attributes the profit drop to lower natural and crude oil benchmark prices.
Higher price forecast
Morgan Stanley expects tightness in Q2 and Q3 due to OPEC supply restraints, potential lower Russian production, and a forthcoming seasonal uptick in demand. However, the multinational investment bank forecasts the Brent crude oil price to rise from the current US$89.94 per barrel to $94 by the third quarter of this year.
