Canadian Oil And Gas Equities: Recent Performance And Yield Review

by: Zvi Bar
Basic materials and natural resources were some of this week’s worst performing investments, both in commodity and equity form. Foreign investments in nations whose currencies are backed by commodities suffered a double whammy, or perhaps a triple, as individuals exited commodities and equities, while fleeing into U.S. dollars.

Nonetheless, many believe oil and gas continue to be good investments, as oil hovers above $80 a barrel. Several individuals believe further money printing will occur within the United States and Europe, helping to support both commodity prices and demand for petroleum. Additionally, potential further instability within oil producing nations could cramp supply, while global oil demand continues to grow, even if at a reduced rate of growth.

Canada is the largest foreign supplier of energy to the United States. Canadian-based companies pay their dividends in Canadian currency, which has natural resource backing. Over the last two years, Canadian currency has been strong against the U.S. dollar, but it has weakened over the last few months.

The following is a list of Canadian oil and gas equities that trade within the United States, listed in alphabetical order. Four of these companies pay their above-average dividends monthly. I have also included their 1-week (5-day), 1-month and 2011-to-date performances.
  1. Baytex Energy Corp. (NYSE:BTE)
  • Yield: 5.4%
  • 1-week: -11.65%
  • 1-month: -14.78%
  • 2011-to-date: -9.33%
  1. Cenovus Energy Inc. (NYSE:CVE)
  • Yield: 2.6%
  • 1-week: -10.69%
  • 1-month: -13.89%
  • 2011-to-date: -9.57%
  1. Enbridge Inc. (NYSE:ENB)
  • Yield: 3.2%
  • 1-week: -3.56%
  • 1-month: -3.39%
  • 2011-to-date: 9.10%
  1. Enerplus Corporation (NYSE:ERF)
  • Yield: 8.4%
  • 1-week: -9.05%
  • 1-month: -10.92%
  • 2011-to-date: -20.17%
  1. Pengrowth Energy Corporation (NYSE:PGH)
  • Yield: 8.7%
  • 1-week: -9.97%
  • 1-month: -14.08%
  • 2011-to-date: -26.98%
  1. Provident Energy Ltd. (PVX)
  • Yield: 6.4%
  • 1-week: -8.26%
  • 1-month: -2.43%
  • 2011-to-date: 0.50%
  1. Penn West Petroleum Ltd. (NYSE:PWE)
  • Yield: 6.4%
  • 1-week: -12.64%
  • 1-month: -10.33%
  • 2011-to-date: -33.24%

Over the last week, several of these Canadian oil and gas companies lost about ten percent of their market valuation. The 2011-to-date chart, below, shows that all of these companies have been under pressure over the last few months.

(Click chart to enlarge)

The worst performing listed company is Penn West, which has lost one-third of its value within 2011. Conversely, Enbridge is up over nine percent over the same term, and has also fallen considerably less the last few weeks. Several of the other companies are at their lows for the year.

Most of these companies have not adjusted their dividends since oil was below or around $80. Most did not raise their dividends since, and it appears likely that they will not lower their dividends so long as oil can continue to trade around $80, and provided their production is not hindered.

Formerly, many Canadian oil and gas companies were Royalty Trusts ("CanRoys"). These trusts were similar in design to U.S. MLPs, in that they avoided corporate taxes by passing most of their income to their shareholders. Canada has eliminated these trusts, and most of them have since converted into corporations.

Disclosure: I am long PGH.

Disclaimer: This article is intended to be informative and should not be construed as personalized advice as it does not take into account your specific situation or objectives.