Oil prices fell from their July 2008 peak of $148 U.S. a barrel to just under $40 U.S. in February 2009. Prices have roughly doubled since then, and oil now trades at about $84 U.S. a barrel.
We think oil prices could rise even further if the global economy continues to rebound, as we expect. Even so, we continue to advise against overindulging in oil stocks. That’s because the Resource sector (including oil) is highly volatile, and no one can accurately predict future oil prices.
However, you can profit nicely over long periods by investing a reasonable portion of your portfolio in well-established or well-managed Canadian oil stocks, especially those with high-quality reserves and rising production. These companies are well-positioned to profit during periods of high oil prices, and are able to at least partly offset price declines by producing more oil.
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This Canadian oil stock’s production is rising
One oil producer that has been focusing on increasing its reserves and production lately is Crescent Point Energy Corp. (symbol CPG on Toronto). Crescent Point is one of the Canadian oil stocks we cover in Canadian Wealth Advisor, our newsletter for safety-conscious investors.
Crescent Point produces oil and natural gas in western Canada. Its production is weighted 88% toward oil and 12% to natural gas. The company remains focused on its Bakken light-oil development in Saskatchewan, which is one of western Canada’s largest oil fields. However, it has been steadily adding to its reserves over the past year.
In January 2010, Crescent Point completed an asset swap with Penn West Energy Trust (symbol PWT.UN on Toronto), another oil and gas firm we cover in Canadian Wealth Advisor. Under the deal, Crescent Point received oil-producing lands in southwestern Saskatchewan from Penn West in exchange for oil-producing interests in Alberta and $434 million in cash.
In September 2009, Crescent Point bought privately held Wave Energy for about $665.3 million in stock. It also bought producing assets from Provident Energy Trust for $258.5 million in cash. In total, these acquisitions added about 16% to Crescent Point’s production.
The company plans to spend a total of $450 million on exploration and development in 2010. That’s a 38% increase over 2009.
You can get our latest buy/sell/hold advice on oil stocks that may be appropriate for the part of your portfolio you devote to resource investments in Canadian Wealth Advisor. What’s more, you get one month free when you subscribe today. Click here to learn how.