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3 Top TSX Energy Stocks to Buy Right Now

Oil pumps against sunset
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Written by Christopher Liew, CFA at The Motley Fool Canada

Energy stocks have had an incredible bull run in 2022, despite high inflation and rising interest rates. The year-end loss would be higher than what it is now (-8.93% as of this writing) if not for the favourable commodity pricing environment.

If you’re investing in the red-hot sector right now, Tourmaline Oil (TSX:TOU), Crew Energy (TSX:CR), and Step Energy Services (TSX:STEP) are great year-end buys.

Fantastic business performance

Market analysts covering Tourmaline Oil are bullish. Based on their price forecasts, the current share price of $71.15 (+95.98% year to date) could climb 38.33% to $98.42 in 12 months. The overall return should be higher if you include the 1.36% dividend. Also, in the fourth quarter (Q4) of 2022, the quarterly base dividend will increase by 11%.

The $24.05 billion company is Canada’s largest and most active natural gas producer. Management’s primary objective is to produce the lowest-emission and lowest-cost natural gas in North America. This year has been fantastic for Tourmaline, operationally and financially.

In the nine months that ended September 30, 2022, natural gas production increased 16% to 2,314,655 mcf/d (one thousand cubic feet per day). After three quarters, net earnings reached $4.52 billion, representing a 339% year-over-year increase. Notably, cash flow from operations rose 78% to $3.48 billion from a year ago.

According to management, Tourmaline will continue to focus on returning the majority of free cash flow (50-90% in 2023) to shareholders through base dividend increases, special dividends, and share buybacks.

TSX30 winner

Crew Energy ranked third in the 2022 TSX30 List, the flagship program for TSX’s 30 top-performing growth stocks. It’s also one of 14 names representing Canada’s energy and natural resources sectors in this year’s edition. At $5.67 per share, current investors are up 98.25% year to date.

This $888.37 million company is a growth-oriented natural gas-weighted producer operating in the world-class Montney play in British Columbia. In the nine months that ended September 30, 2022, total sales and net income climbed 101% and 25% year over year to $461.62 million and $192.92 million, respectively.

After three quarters, Crew’s cash from operating activities rose 247% to $254.77 million. Its president and chief executive officer Dale Shwed is confident the strong momentum will continue in 2023 due to the outperformance heading to Q4 2022.

High flyer

At only $4.85 per share, Step Energy’s year-to-date gain is 201.24%. Had you invested $5,000 in this small-cap energy stock at year-end 2021, your money would be worth $15,062.61 today. Market analysts recommend a buy rating with a 12-month average price target of $10.46 (+115.67%).

The $346.62 million company isn’t an oil producer but provides vital services such as coiled tubing, fluid & nitrogen pumping, and hydraulic fracturing solutions. STEP’s net income after three quarters in 2022 reached $78.09 million compared to the $21.91 million net loss in the same period in 2021. Its free cash flow ballooned 559% year over year to $89.42 million.

Cash rich

Expect cash-rich Tourmaline Oil, Crew, and Step Energy to continue winning in 2023. All three are worth buying today and should deliver enormous gains, notwithstanding the threat of recession.

The post 3 Top TSX Energy Stocks to Buy Right Now appeared first on The Motley Fool Canada.

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Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.