Canada’s Long Term Oil Opportunity: Canadian Natural Resource Ltd (USA) (CNQ)

Out of all of the Canadian oil companies, Suncor is one of the best. Its mix of upstream and downstream assets gives the company an important hedge against market volatility. Its total debt to equity ratio of 0.26 is healthy, and does not suggest any balance sheet issues. Currently, the company has a return on investment of 9.6%, which is acceptable for a large oil firm. Investors looking for a dependable way to investing oil will find a fit with Suncor.

Cenovus Energy Inc (NYSE:CVE) has some natural gas, but it’s mainly focused on oil. It has a large number of oil sands projects between Foster Creek, Cristina Lake, Narrows Lake, and a few more. Cenovus expects these projects to be fully brought online by 2020, although first production will be much earlier. It also has downstream assets that can refine 235,000 to 255,000 barrels of heavy oil per day. The current midstream constraints have forced the company to use rail to transport a portion of their production.

Its total debt to equity ratio of 0.46 shows that the company has the highest amount of debt of any of the firms here. It hopes to grow its bitumen production from 2012 levels around 100,000 barrels per day to 400,000 in 2021. Cenovus’ return on investment of 9.4% and profit margin of 7.9% are very similar to the numbers posted by Suncor. Over the long term, Suncor appears to be the stronger option with less debt.

Where to Invest

In 2020, North America’s energy sector will look very different, with more midstream infrastructure and expanded oil stream production. Suncor is a good option for conservative investors looking for stability. Suncor may not grow as quickly as some of their competitors, but it offers a broad mix of assets. Canadian Natural Resources has large reserves and should see very strong growth over the coming decade. This company is a tad more speculative, but as long as natural gas does not hold it back, it will continue to expand.

The article Canada’s Long Term Oil Opportunity originally appeared on Fool.com and is written by Joshua Bondy.

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