The Best Canadian Oil Stocks – Top Energy Stocks for September 2023

Posted on September 24, 2023 by Dan Kent
best Canadian oil stocks

See what founder Dan Kent is investing in right now

Dan is on blossom with over 20,000 Canadian investors sharing insights and real-time trades:

Canadian oil and gas stocks, whether Canadian pipeline companies, oil producers or natural gas producers, were faced with economic conditions that had never been seen before.

COVID-19 wreaked havoc on all Canadian energy companies as oil demand plummeted, and cash flow was severely impacted.

And as these once-popular Canadian stocks fell, dividend yields rose, and they became attractive opportunities. Many who knew the industry was beaten down loaded up on oil and gas stocks and are seeing some excellent returns even into 2023.

But now, with fears of a recession, many wonder if Canada's oil and gas stocks are still a strong opportunity.

So, are Canadian oil companies and Canadian pipeline stocks still worth it today?

In short, yes, they are. There are numerous options for Canadian energy companies with a strong focus on oil.

Although we are expected to hit peak demand by 2030, according to some experts, as the transition to renewable energy companies continues, we will still produce the commodity for the foreseeable future.

With this, we will need oil companies to produce the commodity and pipelines to ship it.

As such, you'll see a mix of Canadian pipeline and oil stocks, and our winner on this list is a Canadian natural gas producer.

These oil stocks are still trading at discounts because of the current volatility in oil. They're also still facing significant volatility themselves as producers. If you're new to buying stocks, volatility is simply the overall velocity of the movements in a stock's price.

**Bonus** - An alternative option for those looking for Canadian energy stocks in XEG.TO

Yes, this post is supposed to be a list of the best Canadian oil and gas stocks. However, there is no doubt that it may be wise to gain broad exposure to the energy industry rather than buying individual producers and hoping they're successful.

So how do you get this exposure on a producer level? Buying the iShares S&P/TSX Capped Energy Index ETF (TSE:XEG) is one of the most popular ways. This ETF tracks some of the largest oil producers in the country, including integrated oil company Suncor Energy, Cenovus, Tourmaline, Imperial Oil, Canadian Natural Resources and more.

The ETF has $1.9B in assets under management and has fees of 0.61%. You'll have no problem trading shares, as daily volume often exceeds 2.3 million shares.

You won't get any pipeline exposure out of this ETF, so it is important to keep reading this post, as it does include some!

That said, let's move on to the top oil and gas stocks on the Toronto Stock Exchange today.

What are the best Canadian oil stocks to buy today?

  • Parkland Fuel (TSE:PKI)
  • Canadian Natural Resources (TSE:CNQ)
  • TC Energy (TSE:TRP)
  • Enbridge (TSE:ENB)
  • Tourmaline Oil (TSE:TOU)

5. Parkland Fuel (TSE:PKI)

parkland fuel dividend

The energy sector is broad, and one segment that investors often forget about is the distribution and marketing of fuels and lubricants. Best to pay attention, as some strong companies are in this industry.

One such company is Parkland Fuel (TSE:PKI). Parkland is one of the country's largest independent suppliers and marketers of fuel and petroleum products. It also has a leading network of convenience stores, and refinement capabilities with a refinery in British Columbia.

Parkland has been one of the best energy sector growth stocks over the last decade.

However, in the post-pandemic and high-rate environment, it has struggled, which is good for those looking to buy stocks cheaply.

Over the past five years, it has grown revenue and earnings by an annual average of 20% and 50%. How was the company achieved such an impressive growth record?

Parkland is a serial acquirer and has been scooping up the competition significantly. Over the past three, it has closed on six transformative acquisitions.

Unfortunately, the pandemic impacted the company's bottom line. There was less travelling, and working from home has impacted the demand for fuel. Once we exited the pandemic, the company had another headwind: rising interest rates by policymakers in an attempt to tame inflation.

It trades at a steep discount (33%) to analysts' estimates with a unanimous 'buy' and 'outperform' rating and an average one-year target of $40 per share.

The short-term pricing pressures are likely a result of the company's high debt levels and the difficulties at its refinery. However, we expect the high-rate environment to be short. With interest coverage ratios of 2.2X, the company should weather the storm in the short term.

Simply put, this rebound play doesn't quite have the "reopening" priced into it.

As investors wait for the rebound, they can also enjoy a safe and reasonable 4% dividend yield from this Canadian Dividend Aristocrat, which has raised the dividend for seven consecutive years.

4. Canadian Natural Resources (TSE:CNQ)

CNRL stock

We understand – it is tough to invest in oil producers. During the pandemic, there was a notable shift to renewables and the demand for oil cratered. However, demand has now rebounded and declining production will support prices.

There are similarities between the current oil commodity crisis and what transpired with gold in the early 2010s. At that time, gold stocks were highly leveraged, which led to significant write-downs, dividend cuts and bankruptcies.

Sound familiar? The winners in the years that followed were those with low leverage and low costs.

There is arguably no better operator in the oil industry than Canadian Natural Resources (TSE:CNQ). The company is one of the lowest-cost producers and gas exploration companies. It can maintain positive cash flows despite low oil prices. Canadian Natural also produces various products, including heavy crude oil, bitumen, natural gas, and NGLs.

On a corporate level, CNQ's break-even part is around ~$40/barrel – the lowest among Canadian oil sands producers.

What does this mean exactly? It means the dividend is sustainable at WTI prices above this price point. The company came out with a dividend raise in early March of 2021, a double-digit raise of 10.6%. Why are we mentioning this now? When numerous junior producers and even one of the largest producers in the country, Suncor, were cutting dividends, Canadian Natural was boosting it.

It operates in Western Canada, including the Alberta Oil Sands, the North Sea, and Africa.

The company is now yielding in the mid 4% and navigated the crisis without a cut, unlike some majors. It also has a 23-year dividend growth streak, which makes it one of the best income stocks in the country.

The company plans to reduce debt levels to $8B. From there, it plans to return 100% of its free cash flow to investors. So, we can expect some special dividends from Canadian Natural and a lot of buybacks.

If oil continues to hover around US$80/barrel, CNQ is one of the best options in the industry. If oil continues to rise? In this case, Canadian Natural would benefit significantly.

Simply put, this low-cost, disciplined operator is one of the best producers in the industry.

3. TC Energy (TSX:TRP)

TC Energy Logo

Regarding energy stocks, some of the best in the industry are midstream companies. Why?

They are less susceptible to the price of oil. Although they are vulnerable to lower throughput volumes and bankruptcies from some of the smaller oil & gas companies, earnings are still underpinned by long-term contracts. One of the industries best is TC Energy (TSE:TRP).

During the pandemic in 2020, TC Energy was shaping up to be the best-performing pipeline of the year until it fell drastically in price to close out the year.

This was primarily from the cancellation of the Keystone pipeline, which has been all but an albatross for the company for some time now. In my eyes, the cancellation doesn't mean much. The company still has over $27 billion in projects in its pipeline, pun intended.

Furthermore, it is one of the best-performing pipelines in the country. The company's status as one of the premier midstream plays has been solidified even further due to its navigation of the pandemic and the fact it operates one of the largest natural gas pipelines in North America.

Furthermore, the outlook remains unchanged as 95% of EBITDA is underpinned by regulated assets and long-term contracts.

Despite thoughts to the contrary, TC Energy is also expected to grow at a decent pace. Through 2023 it expects to spend $37B on critical infrastructure across North America.

Currently, issues with its CGL project, including rising costs and delays, have put TC Energy in "the penalty box" when it comes to pipelines. It's a great time to accumulate this reliable company at cheaper valuations.

The company is also one of the premier income stocks on the TSX Index. It pays an attractive yield north of 6%, which is underpinned by strong cash flows.

Post 2022, it expects the dividend to grow at a compound annual growth rate of 6% at the mid-range. Without a doubt, TC Energy deserves mention whenever we talk about the top energy stocks in the country.

2. Enbridge (TSE :ENB)

Enbridge dividend

We could have just as easily swapped Enbridge (TSE:ENB) and TC Energy in our rankings. We want you to remember that both of these pipelines are interchangeable in our eyes. So don't fret about one ranking higher than the other.

Much like TC Energy, Enbridge is one of the best midstream companies in the country. What gives Enbridge the slight edge? The dividend.

At 27 years, Enbridge has one of the longest dividend growth streaks in the country. It also currently yields a hefty 6%+, which is above historical averages. Is the dividend safe?

The dividend accounts for only 70% of distributable cash flow, which aligns with the company's target. As such, there is no reason for concern here.

Into 2023, Enbridge expects the dividend to grow in line with distributable cash flow, which is expected to grow by 5-7% annually. Rising debt and interest rates are an issue, but one I feel is short-term and manageable.

Enbridge is currently trading at only 17 times forward earnings and 1.9 times book value. Both are considerably below the company's five-year average of 23 and 2.33, respectively. It trades at a double-digit discount to analysts' one-year price target of $58 per share.

The company generates considerable cash flow and is expected to grow in the high single digits. Can it achieve this growth?

Considering the company has only missed expectations once in the past three years, Enbridge is also one of the most reliable energy stocks on the Index in terms of execution.

1. Tourmaline Oil (TSE:TOU)

Tourmaline Oil dividend

Tourmaline is one of the largest natural gas producers in the country and is almost a commodity pure-play (~80% of production).

Natural Gas Liquids (NGLs), Condensate and Oil account for the remainder of volumes. Notably, oil prices have been the most impacted energy commodity. Since oil accounts for a low single-digit portion of production at Tourmaline, it wasn't impacted by record-low oil prices during the pandemic.

It is, however, still faced with low natural gas prices. Fortunately, it has been dealing with low natural gas prices for years. It is one of the industry's lowest-cost producers.

The company's disciplined approach has targeted a leverage ratio of 1.0-1.5 times cash flow, with excess free cash flow used to raise dividends and buyback shares.

Furthermore, natural gas fundamentals are improving. Experts believe we should see steadily improving supply/demand dynamics through 2023.

Tourmaline has faced heavy drawdowns due to the volatility and drop in natural gas prices. Once they stabilize, we wouldn't be surprised if there was upside from today's price levels.

The market dynamics for natural gas appear to be more stable than that of oil. Tourmaline is positioned to continue its strong performance relative to its energy peers. It should return a significant amount of cash flow to shareholders over the next few years.

See what founder Dan Kent is investing in right now

Dan is on blossom with over 20,000 Canadian investors sharing insights and real-time trades:

Disclaimer: The writer of this article or employees of Stocktrades Ltd may have positions in securities listed in this article. Stocktrades Ltd may also be compensated via affiliate links in this post. Stocktrades Ltd will run advertisements on our posts. These advertisements do not represent an endorsement by us.

Dan Kent

About the author

An active dividend and growth investor, Dan has been involved with the website since its inception. He is primarily a researcher and writer here at, and his pieces have numerous mentions on the Globe and Mail, Forbes, Winnipeg Free Press, and other high authority financial websites. He has become an authority figure in the Canadian finance niche, primarily due to his attention to detail and overall dedication to achieving the highest returns on his investments. Investing on his own since he was 19 years old, Dan has compiled the experience and knowledge needed to be successful in the world of self-directed investing, and is always happy to bring that knowledge to readers and any other publications that give him the opportunity to write. He has completed the Canadian Securities Course, manages his TFSA, RRSPs and a LIRA at Qtrade, and has compiled a real estate portfolio of his primary residence and 2 rental properties, all before his 30th birthday.