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After rallying for several months and creating immense value for shareholders, Canadian oil and gas stocks have taken a hiatus in the last few months. However, they still offer handsome growth prospects for long-term investors. Considering their earnings expansion, improving balance sheets, and energy market fundamentals that point to higher oil prices, they offer sizeable shareholder value. Earnings growth and deleveraging Energy companies saw their earnings and free cash flows multiply this year, as oil prices breached the US$130-a-barrel level in the second quarter (Q2) of 2022. This recovery was remarkable given the massive earnings drop producers saw in 2020 when oil prices tumbled below US$20 a barrel amid the pandemic. What’s notable about the post-pandemic earnings surge is the capital discipline. Instead of allocating incremental capital to production growth, oil and gas producers earmarked funds for debt repayments and shareholder returns. While Canadian energy companies, on average, had a net debt-to-EBITDA (earnings before interest, taxes, depreciation, and amortization) ratio beyond three before the pandemic, it has now fallen close to 0.7. This suggests a substantial balance sheet improvement and improved profitability for the future amid lower interest expenses. For example, Cenovus Energy ( TSX:CVE )( NYSE:CVE ), the […]
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