Oil and gas dominate TSX list of best stocks over past three years
Oil and gas companies have come roaring back onto the Toronto Stock Exchange's annual list of top stocks after a three-year absence.
Fourteen energy producers made the 2022 list of the 30 best performing stocks on the S&P/TSX index over the past three years, posting an average share-price increase of 306 per cent over that period.
Obsidian Energy Ltd. (formerly Penn West Petroleum Ltd.), a mid-size oil and gas company focused on light oil in central Alberta, led the energy pack after its dividend-adjusted share price rocketed 537 per cent since 2019, according to TMX Group Ltd.'s fourth annual ranking. Only Aura Minerals Inc. did better.
Energy companies and one oilfield service company leapfrogged conventional growth stocks on this year's list, as shares rallied alongside surging oil prices.
“We're seeing an interest in the sector that we haven't seen in years,” said TSX CEO Loui Anastasopoulos. “We're seeing companies use their cash flows to pay down debt, buy back shares, increase dividends etc. It's a lot of positive stuff.”
Anastasopoulos added: “You can't ignore the geopolitical situation with the invasion of Ukraine by Russia and the destabilization of global oil that's come as a result of that — that has refocused investors' attention on energy security.”
Meanwhile, e-commerce giant Shopify Inc. dropped off the rankings entirely after three years in either first or second place. Other pandemic-era darlings, such as Mississauga, Ont.'s Cargojet Inc., which soared on the boom in online shopping during COVID-19 lockdowns, also sank back to earth.
Energy's only rival was mining, which continues to perform well in 2022. Aura, a mid-tier gold and copper miner focused on Latin America, led the table for the second straight year, as its stock price is up 638 per cent over three years.
For the first time since TMX Group began the rankings, Alberta was home to half of the Top 10 companies on the list. Alberta executives from top-performing energy and natural resource companies were set to celebrate Thursday in a virtual market opening ceremony.
The chief operating officer for Birchcliff Energy Ltd. — 13th on the 2022 ranking — said oil and gas companies are finally reaping some rewards after a protracted period of depressed prices that forced companies into “survival mode” when crude futures were briefly negative in 2020.
Birchcliff, which was unhedged when prices plummeted during the pandemic, was forced to take on debt and cut costs wherever possible to continue operating. “We really looked at scale,” said Chris Carlsen. “Instead of previously drilling, say, four wells at a time, you would have two drilling rigs on one pad, drilling seven wells each for a 14-well pad — so you have all these services on one pad and you're then getting the benefit of that scale, that repeatability of the operations.”
Carlsen added: “That drove a whole new ability of us to survive and thrive during the pandemic. I think that now has put the business in a way stronger position coming into a high commodity price environment.”
Birchcliff reported record adjusted cash flow in the second quarter of 2022 and the company said it's on track to reach zero debt by the end of this year.
Anastasopoulos said this year's list reflects a rotation from growth stocks to value stocks, and showcases companies demonstrating strong performance through recent macroeconomic and geopolitical uncertainty.