My Top Pick From The “Texas Of Canada” Is Poised To Surge Even Higher

Since early January, I’ve dedicated a good chunk of my time to researching and writing about the energy space.

And for good reason… I went on the record saying that oil prices were heading much higher and that investors would be wise to load up on energy stocks.

Of course, I couldn’t predict the Russia/Ukraine conflict. Nobody is that good. But as I wrote recently, the oil & gas sector is a boom-and-bust business. Based on what I was seeing, production still had a long way to go before oversaturating the market – which means that the boom was likely to last much longer than some might think.

Either way, I hope you took advantage, because I offered several ideas for investors to profit from… such Buffett’s favorite pick, for example, or even a high-upside natural gas pick.

If you haven’t, that’s okay. Like I said, there is still time.

That’s why today I want to discuss a pick I recently made that’s a little different than the usual suspects.

You see, most picks I’ve discussed recently have some sort of operation in the Permian Basin in Texas. And rightly so… you can’t talk oil in the big picture without talking about the Permian.

But this week’s idea takes us to Alberta, Canada.

Energy Profits From The “Texas of Canada”

Also known as the “Texas of Canada,” many people outside the oil industry may not realize is that Canada is brimming with oil. In fact, it has more oil reserves in the ground — at 168 billion barrels — than Iran, Iraq, or Russia.

98% of that oil is in Alberta… hence the name the “Texas of Canada.” And Alberta-based Suncor Energy (NYSE: SU) controls more of those reserves than any other company.

Suncor Energy — and most of Canada’s oil — is in the form of “oil sands.” Unlike sweet West Texas oil, the end product from Canada’s oil sands is a “heavy,” less-desirable form of oil. It requires more processing to make into high-value products.

So, naturally, it sells at a discount to West Texas crude oil.

But the oil sands are fascinating. To extract the oil, they scoop out the oil sands and load it into a giant dump truck that can hold 400 tons. For reference, a typical dump truck you’d see on the road can carry just 14 tons.

The dump truck takes it to the plant where a special process extracts a thick, dense form of crude oil, called bitumen.

On the production side of things, the biggest difference between extracting oil sands versus drilling for oil in Texas is the lifespan. In Texas, they drill for oil and can easily pump out oil. That is until the well is dry. With oil sands, once the infrastructure is in place, you just keep feeding the sands into one end and taking oil out of the other end. This gives oil sands a significantly longer lifespan.

So, Suncor is the largest oil player in Canada… but it doesn’t just make money pulling oil of out the ground… It owns more than 1,850 gas stations across Canada (with the Petro-Canada name). It’s also been building electric vehicle charging stations from coast to coast in Canada. It owns refineries. It owns wind power projects. Suncor is what they call an “integrated” oil company — involved in energy at every step, from yanking it out of the dirt to refining it to selling it to the end-user at their own gas stations.

Numbers To Know…

In 2021 Suncor generated $39.1 billion in revenue, a big 58.7% jump over the prior year (thanks in large part to higher oil prices). Operating income came in at just over $5 billion, compared with the $2.6 billion loss it posted in 2020.

Net income popped to $3.2 billion, while operating cash flow — our favorite metric — came in at nearly $9.4 billion. That’s a whopping 339.8% improvement over the roughly $2 billion it generated in 2020.

The stock offers an enticing dividend of $1.68 per share, giving the company a strong yield of 3.7%.

But outside of the strong financials, the stock’s true momentum is coming from higher oil prices. And that will continue to be the driving factor for this stock (as well as the other energy recommendations I’ve made over the past few months).

As you can see, that momentum has pushed shares to 52-week highs:

Closing Thoughts

I do want to note that activist investor Elliott Investment Management is pushing for a shakeup of board members and management while also looking to “unlock shareholder value.” This typically means selling some assets and improving operational efficiency.

We’ll see what happens with this, but like I said, the stock’s momentum will ultimately live and die by the price of oil.

Remember, as with all of the picks I’ve made in the energy space recently, I think the likelihood for more upside is good. But you may want to use a sell signal (like a trailing stop) to avoid watching a big chunk of your gains evaporate whenever the momentum in this trade starts to fade.

In the meantime, my colleague Nathan Slaughter may have found a pick with even more upside than SU…

Located on the West Texas prairie, one tiny company is sitting on the largest oil reserve in history… with enough “black gold” to independently power America for the next 49 years…

You won’t see this covered on the nightly news… But some heavy hitters are making big investments in this area — and this little-known company stands to profit the most. Go here for details now.