Barlow’s Research Roundup: CIBC analyst’s top picks in oil and gas stocks ahead of earnings

Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow

Energy

CIBC analyst Dennis Fong published his top picks in the domestic oil and gas sector,

“Canadian oil equities showcased strong performance in the first quarter, driven by geopolitical conflict in the Middle East. Oil prices and U.S Gulf Coast (USGC) crack spreads have increased by 78 per cent and 200 per cent during the quarter, respectively, helping improve realizations for liquids-focused producers and integrateds. We expect the WCS-WTI basis to remain wider due to higher global demand for light oil, declining supply, competitive friction from Strategic Petroleum Reserve (SPR) releases, and Venezuelan crude putting pressure on the heavier benchmark. For natural gas, warm winter conditions in Western North America have kept Western Canadian natural gas storage inventories above the five-year high; however, we expect inventories to move toward more normalized levels as LNG Canada exports are sustainably higher, which should support AECO-NYMEX differentials later in the year. Our top ideas for Q1/26 include CVE, KEL, SU, TVE, TNZ, and WCP … Under our conservative oil price expectations, we see value in the oil- and liquids-weighted companies, especially those with significant resource duration (oil sands and resource plays). This has driven an increase in our long-term oil price forecast to US$70/Bbl WTI (from US$65/Bbl).

“Excess FCF Being Allocated To Balance Sheet. Our conversations with management teams suggest that incremental cash flow from higher oil prices is being prioritized for balance sheet strengthening, with accelerated deleveraging potentially supporting increased FCF returns to shareholders on a more gradual basis”

E&P

Scotiabank analyst Kevin Fisk previewed earnings season for the oil exploration and production sector and significantly raised target prices on specific stocks,

“Generally, our estimates are similar to consensus; however, our Q1/26 CFPS [cash flow per share] for ATH, IPCO, and ARX are higher than consensus while our Q1/26 production estimate for IMO is lower … Most of our coverage companies are unlikely to make any significant changes to their 2026 capex budgets with Q1/26 results and firms will assess the commodity price outlook during spring breakup. We also expect the status of negotiations between the Federal government, Alberta government, and Industry on carbon taxes, Pathways CCUS, and pipeline egress to be topical as an agreement was expected by April 1 … Our cash flow estimates are now shown on strip [oil futures] pricing as of March 31, 2026. Our 2026 and 2027 CFPS estimates increased by 87 per cent and 41 per cent on average, respectively, while our NAVPS estimates increased by 10 per cent.. The change in our cash flow estimates reflect a 61 per cent and 23-per-cent increase in our 2026 and 2027 WTI assumptions. Further, we have updated our target prices, which have increased 4 per cent on average. Notable target price changes include VET (up 19 per cent), BTE (up 13 per cent), and ATH (up 11 per cent)”

Momentum

BMO analyst John Gibson sees momentum building for domestic oil and gas services earnings,

“We recently updated estimates in tandem with our Commodity Price Update, and as such, changes to Q1 numbers and targets are minimal. While we caution around near-term financial results (particularly in Canada), our longer-term thesis remains positive for the group given expectations for higher-for-longer crude pricing and potential budget expansions into 2027. Our top pick remains Enerflex, which is experiencing strong natural gas and data center related tailwinds across its Engineered Systems business. Precision Drilling kicks off Canadian Oilfield Services reporting on Wednesday, April 29 (after market)”

Bluesky post of the day

Diversion

“The Internet’s Favorite Lawyer Says We’re Living Through ‘Multiple Watergates per Week’” - Wired