Energy stock Canadian Natural Resources (TSX:CNQ)(NYSE:CNQ) is certainly a stock that brings out the fear in most these days. As a result, the stock trades below book value and at a measly three times cash flow. Yes, the oil and gas industry has real issues. Yes, some of those issues are long term in nature. But this top-quality oil and gas company is also unparalleled in its reserve quality, its costs, and its financial strength. While many other oil and gas companies continue to go bankrupt (which reduces production and therefore increases oil and prices), Canadian Natural Resources remains.
Energy stock Cenovus Energy (TSX:CVE)(NYSE:CVE) is also seeing record-low demand for its stock, as investors shun this high-quality company. It trades at a small fraction of its book value, and the popular belief is that it is doomed. But Cenovus is armed with top-quality operations and reserves. It will also remain standing as other competitors go bankrupt.
For its part, Canadian Natural Resources is making long-term plans to cut emissions dramatically over time, and with new technologies, this is possible. Beyond this, Canadian Natural Resources has shown an ability to generate cash flows, even in difficult periods. This should sustain the company until better times come along. This Warren Buffett quote calls for investing in great companies, and Canadian Natural Resources is just that.
As for Cenovus Energy stock, it too can survive the difficulties that plague the oil and gas industry. Before the oil price crash, Cenovus Energy was in a great position. Free cash flow in 2019 was $1.35 billion. The company’s oil sands operations are low cost and top quartile, and it has exposure to refining operations in the U.S.
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