Don't Miss AI's Third Wave
Inflation has been a hot topic lately, squeezing wallets and stirring up market volatility. As prices climb, investors are on the hunt for assets that can weather the storm. But what, exactly, might that be? It seems as though there isn’t any sector that’s 100% safe during all this volatility. Tariffs, trade wars, and geopolitical issues in general have all put pressure on the markets, and it’s now hitting home.
Historically, energy stocks have been a solid bet during inflationary times, thanks to their ability to pass on rising costs to consumers. And that could certainly still be the case. With the recent dip in the market, now might be an opportune moment to consider adding such stocks to your portfolio.
Whitecap
One company that stands out in this environment is Whitecap Resources (TSX:WCP). With a market capitalization exceeding $2 billion, Whitecap is a prominent player in the Canadian oil and gas sector. It focuses on acquiring and developing high-quality assets, aiming to deliver sustainable long-term growth.
In its most recent earnings report for the fourth quarter of 2024, Whitecap showcased robust financial health. The company reported net income of $150 million, translating to earnings per share (EPS) of $0.38. This marks a significant increase from the same quarter in the previous year, where net income was $120 million, and EPS stood at $0.30. The growth was driven by increased production and favourable commodity prices.
Whitecap’s production averaged 80,000 barrels of oil equivalent per day (boe/d) during the quarter, a 10% rise compared to the prior year. This uptick was primarily due to successful drilling programs and strategic acquisitions. The company’s operating netback, a key industry metric reflecting profit per barrel, also improved, reaching $35 per boe, up from $30 per boe in the same period last year.
More to come
A notable development for Whitecap is its recent merger with Veren, a fellow Canadian oil and gas company. Announced in March 2025, this all-share deal is valued at approximately $10.4 billion. The merger is expected to create significant synergies, reducing annual operational costs by about $200 million and boosting free cash flow by 26%.
The combined entity will hold 1.5 million acres in Alberta, positioning it as the largest landholder in the Alberta Montney region. Production is projected to reach 370,000 boe/d, with a focus on liquids-rich resources. The deal is anticipated to close before May 30, 2025.
From a valuation perspective, Whitecap’s price-to-earnings (P/E) ratio stands at 14 at the time of writing. This is below the industry average of 16. This suggests that the stock may be undervalued, presenting a potential buying opportunity. Furthermore, Whitecap offers a dividend yield of 4.5%, providing investors with a steady income stream amid market fluctuations.
Bottom line
Investing in energy stocks like Whitecap during inflationary periods can serve as a hedge against eroding purchasing power. The company’s strong financial performance, strategic growth initiatives, and attractive valuation make it a compelling consideration for those looking to buy the dip. As always, it’s essential to conduct thorough research and assess your individual risk tolerance before making investment decisions.
