Canadian fossil fuel stocks, already in trouble due to plunging oil prices, look like an even worse bet with the election of Prime Minister-Designate Justin Trudeau’s Liberal Party, analyst Daniel Dicker opined last week on The Street.
“What is immensely clear is Canadian oil companies that have a significant part of their production engaged in oil sands are going to experience extra difficulty in doing business, on top of the very difficult market conditions that all oil companies are already dealing with,” Dicker writes. “That makes Canadian companies including Suncor, Encana, and Cenovus very difficult to recommend, even at their very low price valuations.”
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Those challenges “just got even more difficult” with a new PM who has promised to cancel Enbridge’s Northern Gateway pipeline, and wants to move the Canada-U.S. relationship beyond the tensions associated with TransCanada’s controversial Keystone XL project.
Oil companies across the board “are feeling the pinch of lowered profits” due to falling oil prices, “but perhaps none are feeling the pain quite as much as the Canadian oil companies dedicated to oil sands extraction and processing,” Dicker adds. “They remain on the bottom of my list of recommended stocks.”
Last week, a former TransCanada executive said carbon pricing might be the last chance for Trudeau to gain approval for Keystone from U.S. President Barack Obama.
“Carbon pricing was the last alternative at accommodation that could have been tried. It’s still available, perhaps, for our new prime minister,” Dennis McConaghy told CBC. “I would hope that (Trudeau) would quickly engage with the president on that point. Because there’s no pipeline that would be more valuable to Canada than XL.”
