Energy Sector: Rumors of my death have been greatly exaggerated**

 Last time we talked about electric vehicles. Using electricity for transportation can reduce oil consumption by 40% [1]. What does this mean for investors?

Oil-producing companies have always been considered a safe investment. Will this change soon?

Yes, there are several signs that the future will see a decrease in oil use.

The energy sector has been the third largest sector in Canada for 20 years, yet in 2020 it has become the fourth [2].

Figure 1. Share of each sector in the S&P/TSX Composite Index. Source: Manulife Investment Management, Macrobond, as of March 12, 2021.

Should we expect the energy sector to disappear? Possibly, but not as quickly as one might think.

Indeed, a conservative prognosis (Figure 2 below) predicts that the energy sector will grow by 8% by 2030 [3]. Moreover, the U.S. EIA (Energy Information Administration) estimates that oil consumption will increase by 16% by 2050 [4].

Figure 2. Canada's energy sector GDP. Source: Statistics Canada, RBC Economics Research

This shows that it is not conceivable that producers and exporters will leave the market, since it promises secure profits. So there are opportunities for investors. Even in 2020, one of the most difficult years for oil producers and where oil futures fell below zero, many oil and gas companies in Canada managed to post profits.

For example, here are 3 Canadian companies whose 2020 performance improved by over 200%!

1.Touchatone Exploration (TXP)

A Canadian company that produces oil in Trinidad. One of the reasons for this growth is the contract signed in December 2020 to produce natural gas for the National Gas Company of Trinidad [5]. 

Share price: 1.76*.

Growth over the past year: 0.48-1.76

2. Reconaissance energy (RECO)

A company that holds a license to exploit oil in the Okavango region between Namibia and Botswana.

Share price: 6.10

Growth over the past year: 1.82-6.10

3. Headwater exploration HEX.TO

Truly Canadian, this company will begin oil exploration in the Marten Hills region of Alberta.

Share price 4.06

Growth over the past year: 1.11-4.06

For those more interested in more established companies, here are some companies that pay very high dividends:

4. Orca Energy Group Inc. (ORC-B.V)

An international company operating in Tanzania, extracting natural gas from the Songo Songo field.

Dividend yield: 7.08%.

Ex-dividend date March 30, 2021

5. CNOOC Limited (CEO)

A Chinese company with assets in the Americas, Oceania, Europe and Asia. Share price 8.43

Dividend yield: 5.34%.

Ex-dividend date June 03, 2021

Will you invest in energy? In what area? Tell us in the comments.

 (1) https://www.energy.gov/articles/hows-and-whys-replacing-whole-barrel#:~:text=For%20many%2C%20a%20barrel%20of,plastics%20and%20many%20industrial%20chemicals.

(2) https://www.manulifeim.com/institutional/ca/en/viewpoints/equity/canadian-equities--facts-and-future?cid=CA-EN_MIM_IN_SM_LinkedIn_Focus_AlwaysOn___________CdnCore_CdnCoreEq&utm_source=SM&utm_medium=LinkedIn&utm_campaign=Focus_AlwaysOn&utm_term=CdnCore_CdnCoreEq&utm_content=CA-EN_MIM_IN__________

(3) www.nrcan.gc.ca/science-data/data-analysis/energy-data-analysis/energy-facts/crude-oil-facts/20064

https://orcid.org/0000-0002-1725-0837

(4). http://www.rbc.com/economics/economic-reports/pdf/other-reports/Energy%20Report%202018.pdf

(5) https://www.newswire.ca/news-releases/touchstone-enters-into-a-natural-gas-sales-agreement-with-the-national-gas-company-of-trinidad-and-tobago-847929729.html

*Price before market on 19 April 2021, in USD

**This blog does not provide any financial advice