Raymond James' sector review covering the period from February 27 to April 17 indicates Canadian energy equities have underperformed both oil prices and the broader market since the Iran conflict began in late February. According to the firm's analysis, all but three stocks in its Canadian energy coverage lagged the WTI commodity strip during that interval.
The report notes that nearly 60% of companies in the coverage universe generated negative total returns while also trailing the TSX. Raymond James observed that many energy shares completed a near full round trip over the two weeks after ceasefire discussions picked up, even though analysts expect a stronger oil price environment than existed before the conflict.
On fundamentals and valuation, the firm reported that oil exploration and production companies and large-cap integrated energy firms in Canada are trading at double-digit sustaining free cash flow yields when modeled at $70 per barrel WTI. The analysts add that returns could be higher if WTI moves above that threshold.
Raymond James' valuation work suggests current equity prices imply long-term WTI in the $60 to $65 per barrel range, and the firm observed that many stocks are priced as if long-term WTI will be below $60. To support a $70 WTI assumption, the analysts cited several market drivers: depletion of oil inventories, uncertainty around the pace of traffic normalization through the Strait of Hormuz, and ongoing supply restraint from North American exploration and production companies.
The note also highlights that North American rig counts have not risen during the review period, which the firm views as consistent with limited near-term incremental supply growth from the region.
Reflecting this assessment, Raymond James maintained an overweight recommendation on energy equities. In its large-cap and integrated coverage the firm called out Cenovus Energy (TSX:CVE) and Suncor Energy (TSX:SU) as highlighted names. Within oil exploration and production, the analysts identified Athabasca Oil (TSX:ATH), Whitecap Resources (TSX:WCP) and Surge Energy (TSX:SGY). For gas-focused explorers and producers the firm mentioned Advantage Energy (TSX:AAV), Kelt Exploration (TSX:KEL) and Paramount Resources (TSX:POU).
Separately, the article referenced an investment tool and posed a question about investing in one of the gas names, noting that a screening product evaluates companies across many metrics and flags names based on risk-reward characteristics. The promotional material described the tool as using automated analysis to identify stock ideas and gave examples of past winners, while offering readers a prompt to check whether a particular gas producer appears in current strategies.