2014: The Year of Resurgence for the Canadian Energy Sector

Canadian E&Ps like Baytex and Enerplus offer growth and yield for investors trying to take advantage of Canada's growing energy sector.

Apr 17, 2014 at 3:38PM

2014 is proving to be a year of resurgence for the Canadian energy sector, supported by strong commodity prices and a weaker Canadian dollar. Moreover, ample takeaway capacity and growing downstream heavy oil capacity should continue to provide support to heavy oil prices going forward. The sector is boasting clean balance sheets, supported by disciplined capital investments with a bias toward conventional oil and liquids-rich natural gas plays.

The Canadian intermediate E&P sector not only offers production growth and high dividend yields, it also provides investors exposure to the country's top oil and gas resource plays, including conventional light and heavy oil, oil sands, and liquids-rich gas plays. With the exception of a few names, the sector also boasts strong balance sheets. Due to the attractive sectorwide investment opportunity, companies with notable positions in key resource plays, stronger balance sheets, sustainable business models, and ability to delivery sustainable growth and income warrant premium valuations.

In my opinion, Baytex Energy (NYSE:BTE) and Enerplus Corporation (NYSE:ERF) are the best positioned stocks in the Canadian mid-cap E&P sector. Baytex is a premium name in the Canadian energy sector and is trading at a very attractive valuation. The company generates 80% of its production from three of the best plays in North America and is well positioned to deliver long-term growth in production and reserves. Enerplus, on the other hand, due to its conservative guidance, improved operational execution, and strong financial position has been a top performer among its peers over the past year. Despite all these factors, the company is trading at a discount compared to its dividend paying peers.

Baytex Energy Corporation
Baytex is a premium name in the Canadian heavy oil sector. It offers investors a high-quality asset base, strong balance sheet, and experienced management. The company recently announced that it will buy Aurora Oil & Gas (NASDAQOTH:AAGLF) for $2.6 billion, including debt, to add production from the prolific Eagle Ford shale oil region of Texas. Aurora is an Australian company whose main assets are located in the Eagle Ford shale.

The takeover, which will require Australian and U.S. government approval, is proposed to be executed by scheme of arrangement, meaning Aurora shareholders will vote on it rather than sell the company to Baytex on market. According to a recent expert review by Grant Samuel & Associates, Baytex Energy's proposed takeover of Aurora Oil and Gas is in the best interests of the target's shareholders.

Baytex is better positioned than ever to deliver long-term production and reserve growth. Following the recent acquisition, the majority of Baytex's production will come from three key plays: Seal, Lloydminster, and Eagle Ford. These three plays will be the focus of the company's production going forward.

Enerplus Corporation
Enerplus, an independent oil and gas producer, has operations in Western Canada as well as in the U.S. Enerplus' strong financial position, conservative guidance, and improved operational execution have resulted in the company's stock outperforming its peers over the last year. Based on the company's guidance, it is expected to deliver 9% growth in production in 2014 and 7% growth in funds flow. Similar to its peer Baytex, the focus of Enerplus' capital spending is expected to be its key growth assets: the Bakken and the Marcellus.

Despite its strong profile and continued outperformance, Enerplus is trading at a discount compared to its dividend paying peers, as is the case with Baytex,. However, as the company delivers on its production and cash flow growth plans, it should serve to restore the market's confidence in the Enerplus story and the stock should outperform in 2014. Enerplus also offers healthy dividend yield of 4.8%.

3 stock picks to ride North America's energy bonanza
Record oil and natural gas production is revolutionizing the United States' energy position. Finding the right plays while historic amounts of capital expenditures are flooding the industry will pad your investment nest egg. For this reason, the Motley Fool is offering a look at three energy companies using a small IRS "loophole" to help line investor pockets. Learn this strategy, and the energy companies taking advantage, in our special report "The IRS Is Daring You To Make This Energy Investment." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free. 


Jan-e- Alam has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information