Investing.com — Canadian energy stocks have underperformed oil prices and the broader market since the Iran conflict began in late February, according to Raymond James analysis covering the period from February 27 to April 17.
All but three stocks in Raymond James’ Canadian energy coverage universe underperformed the WTI commodity strip during this period, with nearly 60% posting negative total returns while also trailing the TSX. Many equities completed a full round trip over the past two weeks as ceasefire discussions began, despite expectations for a stronger oil price environment than anticipated before the conflict.
Oil exploration and production companies and large cap integrated energy firms continue to trade at double-digit sustaining free cash flow yields based on $70 per barrel WTI, with potential for higher returns above that price level. Raymond James analysts calculate that current equity valuations imply long-term WTI prices of $60 to $65 per barrel, with many stocks pricing in levels below $60.
The firm cited oil inventory depletion, uncertainty around traffic normalization through the Strait of Hormuz, and supply restraint from North American exploration and production companies as factors supporting $70 WTI pricing. North American rig counts have not increased during this period.
Raymond James maintained its recommendation for investors to remain overweight energy equities. In the large cap and integrated sector, the firm highlighted and . Among oil exploration and production companies, , , and were noted. In gas exploration and production, , , and were mentioned.
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