China Knows Best When it Comes to Investing in the Canadian Energy Sector
Since 2008, the Chinese have been investing in the North American oil sector at a rate of almost $1 billion a month. Much of those funds have been directed into the Canadian oil and natural gas industry, such as the $11 billion purchase of Nexen by CNOOC (NYSE: CEO). Investors would be wise to follow the Chinese into entities operating in the Canadian oil and natural gas sector such as Suncor Energy (NYSE: SU), Canadian Natural Resources (NYSE: CNQ) and Octagon 88 (OTC: OCTX).
According to a recent Wall Street Journal article by Russel Gold, “Chinese Energy Deals Focus on North America,” there is a premium placed on the technology and political stability of Canada and the United States. That is what is leading Repsol (OTC; REPPY), the Spanish oil giant, to hunt around for up to $10 billion in North American holdings. Surely Royal Dutch Shell (NYSE: RDS-A) and Occidental Petroleum (NYSE: OXY) will be motivated that way, too, after having to sell assets in the Middle East and North Africa due to turmoil in those areas.
Canadian Natural Resources Limited and Suncor Energy are major oil firms, while Octagon 88 is a small cap. While Suncor Energy and Canadian Natural Resources have been off in recent market action, Octagon 88 has surged due to positive reports about its holdings in Alberta, the heart of the Canadian oil and natural gas company. Production is planned soon, which has Octagon 88 performing well.
For those seeking income, Suncor Energy and Canadian Natural Resources Limited have strong dividend frameworks. The average dividend yield for a member of the S&P’s 500 Index is around 1.9 percent. For Suncor Energy, the dividend is 2.18 percent. It is 1.48 percent for Canadian Natural Resources Limited.
Each has a history of dividend growth. The recent decline in the share price results in a higher dividend yield for those savvy enough to buy on the decline.
It is only a matter of time, however, before Canadian Natural Resources Limited and Suncor Energy rally.
A recent report by the United States Energy Information Administration projected that global energy demand would increase more than 55 percent by 2040. From that, the share prices of oil and natural gas rims will rise again. As the Chinese have demonstrated, there should be a strong desire for those firms operating in the Canadian energy sector such as Suncor Energy, Octagon 88 and Canadian Natural Resources Limited.
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