Are you looking to invest in the thriving natural gas industry in Canada? Look no further. In this article, we delve into the realm of Canadian natural gas stocks and explore the top contenders for your investment portfolio. These companies have established themselves as leaders in the sector, leveraging their expertise and market position to capitalize on the growing demand for natural gas.
From well-established integrated energy giants to nimble exploration and production firms, we present a comprehensive list of the best natural gas stocks in Canada. We evaluate each company based on its financial performance, market position, and growth potential in the current year. Whether you are a seasoned investor seeking to diversify your portfolio or a newcomer looking for lucrative opportunities, this article will provide valuable insights and help you make informed investment decisions.
Get ready to discover the potential returns and exciting prospects offered by Canada’s top natural gas stocks.
What's in the Article:
- Why Choose Canadian Natural Gas Stocks?
- The Best Natural Gas Stocks in Canada
- Tourmaline Oil Corp. (TOU.TO)
- Peyto Exploration & Development Corp. (PEY.TO)
- ARC Resources Ltd. (ARX.TO)
- Crescent Point Energy Corp. (CPG.TO)
- Vermilion Energy Inc. (VET.TO)
- Pembina Pipeline Corporation (PPL.TO)
- TC Energy Corporation (TRP.TO)
- Enbridge Inc. (ENB.TO)
- PrairieSky Royalty Ltd. (PSK.TO)
- Keyera Corp. (KEY.TO)
- What sectors are involved in Natural Gas?
Why Choose Canadian Natural Gas Stocks?
Investing in Canadian natural gas stocks offers investors several compelling reasons and opportunities. Here are some key factors to consider when choosing Canadian natural gas stocks:
- Abundant Natural Gas Reserves: Canada possesses significant natural gas reserves, making it one of the world’s largest producers and exporters of natural gas. The country’s vast resources provide a strong foundation for natural gas companies to capitalize on domestic and international demand.
- Clean and Versatile Fuel: Natural gas is considered cleaner than other fossil fuels like coal and oil. It emits fewer greenhouse gas emissions and pollutants, contributing to environmental sustainability. As the world transitions towards cleaner energy sources, natural gas will play a pivotal role in the energy mix, making Canadian natural gas stocks an attractive long-term investment.
- Stable Demand and Infrastructure: Natural gas has many applications, including power generation, heating, and industrial processes. The stable demand for natural gas and a well-established pipeline infrastructure ensures reliable transportation and distribution, creating a favourable market for Canadian natural gas stocks.
- Geographical Advantage: Canada’s proximity to the United States, a major natural gas consumer, provides a strategic advantage for Canadian natural gas companies. The North American market represents a substantial growth and export potential opportunity, enabling Canadian companies to access a large customer base and potentially higher market prices.
- Technological Advancements: Technological advancements in drilling techniques, such as horizontal drilling and hydraulic fracturing, have unlocked vast reserves of natural gas previously considered uneconomical. These advancements have significantly improved the efficiency and cost-effectiveness of natural gas extraction, benefiting Canadian natural gas companies.
- Dividend Potential: Many Canadian natural gas companies have a history of offering attractive dividend yields to shareholders. These dividends can provide investors with a steady income stream, making natural gas stocks appealing to income-oriented investors.
While investing in any sector carries inherent risks, Canadian natural gas stocks offer long-term growth and income generation potential. As the demand for cleaner energy sources continues to rise, Canadian natural gas companies are well-positioned to benefit from their abundant reserves, established infrastructure, and commitment to sustainable operations. However, investors must conduct thorough research, analyze financial performance, and consider their risk tolerance before making investment decisions.
The Best Natural Gas Stocks in Canada
Here is a list of top natural gas stocks in Canada and the outlook for the oil and gas industry in 2023. These 10 company stocks traded on Canadian exchanges and will provide great exposure to natural gas in Canada and reasons why they could be considered suitable investments:
Tourmaline Oil Corp. (TOU.TO)
As one of Canada’s largest natural gas producers, Tourmaline is an attractive option for investors. With a low-cost production strategy and long-life reserves, the company has a resilient business model that can weather volatile gas prices. A key differentiator is its investment in infrastructure, reducing dependence on third-party providers, further driving down costs and increasing operational flexibility. Furthermore, Tourmaline has consistently demonstrated strong financials, with steady revenue growth and healthy operating margins.
Peyto Exploration & Development Corp. (PEY.TO)
Peyto is a pure-play natural gas company with assets primarily located in Alberta’s Deep Basin. The company is known for its low-decline assets, efficient operations, and long-life reserves, providing a stable production and cash flow base. Moreover, Peyto has been investing in developing proprietary resource technologies that could significantly enhance its reserve recovery rates in the future.
ARC Resources Ltd. (ARX.TO)
ARC is one of Western Canada’s leading oil and gas companies, with a balanced portfolio of high-quality, long-life oil and natural gas assets. Its commitment to strong corporate governance and sustainability initiatives, along with its focus on cost-efficient production and investment in strategic projects, makes it a worthwhile consideration for investors.
Crescent Point Energy Corp. (CPG.TO)
Although Crescent Point has a heavier focus on oil, it still offers significant exposure to natural gas. The company’s strong operational performance, promising exploration and development projects, and disciplined capital allocation strategy underpin its potential for growth.
Vermilion Energy Inc. (VET.TO)
Vermilion has a diversified asset base across North America, Europe, and Australia, with significant natural gas exposure in Canada. Its geographical diversity provides a hedge against regional market fluctuations. The company’s commitment to sustainability and dividend payments are also attractive to investors.
Pembina Pipeline Corporation (PPL.TO)
Pembina’s role as a transporter and processor of oil and natural gas provides it with steady cash flows and less direct exposure to commodity price volatility. This pipeline stock has a substantial dividend yield and growth potential from strategic acquisitions and infrastructure projects, making it appealing.
TC Energy Corporation (TRP.TO)
Known for its natural gas pipelines, TC Energy offers strong exposure to natural gas. Its focus on long-term contracts provides stability in earnings. TC Energy’s diversified business, robust project pipeline, and consistent dividend payments underscore its investment potential.
Enbridge Inc. (ENB.TO)
Although predominantly involved in oil transportation, Enbridge also has a substantial natural gas business. Its long-life assets, strong contractual setup, and significant portfolio of growth projects offer strong future prospects.
Enbridge also is interested in renewable and alternative generation capacity and continues to develop wind, solar and geothermal energy. Enbridge is Canada’s largest natural gas distribution company and operates and owns it. It serves residential, commercial, and industrial customers in Ontario, Quebec, New Brunswick, and New York.
PrairieSky Royalty Ltd. (PSK.TO)
As a royalty-focused company, PrairieSky has minimal operational risks and strong margins. Its extensive, diverse portfolio of royalties from oil and natural gas properties provides investors with broad exposure to the sector.
Keyera Corp. (KEY.TO)
Keyera operates one of the largest midstream oil and gas networks in Canada. It offers substantial exposure to natural gas through its gas processing plants and associated infrastructure. Its strong track record of dividend growth and healthy balance sheet make it a solid investment.
Please note that investing in the stock market always carries risk, and it’s essential to do your own research and consider getting advice from a qualified professional before making any investment decisions.
What sectors are involved in Natural Gas?
Natural gas is a versatile energy source involved in numerous sectors and subsectors, some of which include:
- Electricity Generation: Natural gas plays a significant role in generating electricity. It’s a cleaner-burning alternative to coal, and its flexibility allows it to balance intermittent renewable sources such as wind and solar. Power plants can quickly ramp up or down natural gas generation based on electricity demand and renewable energy availability.
- Industrial Sector: Natural gas is heavily consumed by the industrial sector. It’s used for heating, power generation, and as a raw material for chemical products like plastics, fertilizers, and other synthetic materials. For instance, in Singapore, the industrial-related sector was the major consumer of natural gas in 2021.
- Residential and Commercial Sectors: Natural gas is commonly used for space heating, water heating, and cooking in residential and commercial buildings. It’s also used for generating electricity and heat in combined heat and power systems.
- Transportation: Compressed natural gas (CNG) and liquefied natural gas (LNG) are being increasingly used as cleaner alternatives to traditional transportation fuels.
- Chemicals & Resources: Natural gas is a key feedstock in the chemical industry. It’s used to produce ammonia for fertilizers, methanol, and other chemical feedstocks. Natural gas is a naturally occurring hydrocarbon gas mixture of methane containing varying amounts of other high alkanes, low carbon dioxide, nitrogen, hydrogen sulphur and helium.
- Oil and Gas Industry: Within the oil and gas industry itself, natural gas is involved in several subsectors, including production (taking raw natural gas from underground formations), gathering and processing (removing impurities to produce pipeline-grade natural gas), and transmission (delivery of natural gas from the wellhead to end users).
- Environmental Sector: In the context of decarbonization, aside from Canadian carbon capture stocks, natural gas is seen as a ‘bridge fuel’ in the transition to a low-carbon future. It emits fewer greenhouse gases than coal when burned, making it a popular choice in power generation. You might be interested in investing in hydrogen for the same purpose.
However, this bizarre situation will not last long, as Canadian oil and gas stocks, like many of their global counterparts, have reached an all-time low. Moreover, Canadian valuations have fallen due to deep and long-standing problems transporting crude oil cargoes from the oil-rich landlocked province of Alberta and the port of British Columbia to lucrative East Asian markets and logistical and capacity problems that will take longer to resolve.
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