Canadian Oil Stocks Beat Global Peers

The 25% rise comes as oil nears $90

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Canadian oil companies are outperforming their energy-producing counterparts as the highest oil prices in seven years provide a windfall of cash.

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The combined stocks of five of the biggest oil sands companies have outperformed the broader S&P 500 energy index in the past three months, according to data compiled by Bloomberg. The 25% rise comes as U.S. crude oil prices near US$90 a barrel for the first time since 2014.

Benefiting from relatively low operating costs, Canadian oil sands producers, including Suncor Energy Inc., Cenovus Energy Inc., Canadian Natural Resources Ltd., Imperial Oil Ltd. and MEG Energy Corp., increased their cash balances, allowing them to pay down debt more quickly. than expected and return more money to shareholders through redemptions or increased dividends.

According to a note from Manav Gupta, analyst at Credit Suisse Group AG.

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Unlike shale or conventional energy companies, oil sands producers don’t have to spend money constantly drilling new wells just to maintain production. Instead, they spend billions of dollars up front to build new mines or new thermal well sites, but once operational, these sites produce oil at relatively steady rates for decades with little new. investments.

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Enbridge Inc.’s Line 3, a new pipeline that came into service in October, is also helping Canadian producers. This bolstered their ability to export rough to the United States and also helped production hit a record high.

Canadian producer shares are rising even as the companies face a torrent of environmental opposition due to the relatively high carbon emissions from Alberta’s oil sands. The hostility has spurred divestment by major funds, including Norway’s sovereign wealth fund and Caisse de depot et placement du Quebec, which said in September they would sell billions of dollars of oil assets, including major interests in Canada’s major crude oil producers.

Steve R. Hansen