After a bumper year of share buybacks and dividends, BMO Capital Markets analysts predict that debt-light Canadian oil and gas producers are poised to reward shareholders even more in 2023
- Dec 13, 2022, 6:00 PM CSTBMO Capital Markets expects cashed-up Canadian oil companies are set to continue rewarding shareholders in 2023.The U.S. energy sector has enjoyed bumper profits in the current year, with Big Oil companies setting records left, right and center. And Wall Street is saying the party is set to continue in the coming year. According to a recent, U.S. industry earnings will stabilize overall in 2023, but remain relatively high.
Moody’s estimates that the U.S. energy sector’s EBITDA for 2022 will clock in at $$623B but fall to $585B in 2023. The analysts say that low capex, rising uncertainty about the expansion of future supplies and high geopolitical risk premium will, however, continue to support cyclically high oil prices. Meanwhile, strong export demand for U.S. LNG will continue supportingWith some of the strongest earnings in the market, U.S. energy companies are likely to remain good buys in the coming year.
BMO estimates that the top 35 energy companies will generate C$54 billion in free cash flow in 2023, 16% lower than this year. However, the analysts say that the portion of cash that flows to shareholders is likely to be higher because companies will spend less on debt repayment. According to the analysts, most large- and mid-size producers expect to be net-debt-free in the second half of 2023. Net debt represents a company's gross debt minus cash and cash-like assetsis up 45.4% in the year-to-date, not far from the 49.8% return by its United States brethren, theBMO notes that Canadian energy stocks have lately come under heavier pressure than their U.S.
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