Shares of Suncor Energy Inc (SU.TO) and Canadian Natural Resources Ltd (CNQ.TO) could gain more than 25 percent in the next year, helped by valuable asset bases that may attract activist investors, Barron's said in its February 25 edition.
Suncor is producing significant free cash flow in part from lucrative refining operations and a big presence in the Alberta oil sands, where its production exceeding 350,000 barrels a day accounts for 60 percent of its energy output, the newspaper said.
It said Canada's largest energy company by market value could double its 1.4 percent dividend yield - well below yields at Chevron Corp (CVX.N), Exxon Mobil Corp (XOM.N) and Royal Dutch Shell Plc (RDSa.L) - and still have more than C$1 billion ($977 million) of excess free cash flow to buy back stock or cut debt.
Meanwhile, though Canadian Natural Resources is a less safe bet for equity investors, it stands to benefit if U.S. President Barack Obama approves the Keystone XL pipeline, offering a means to transport landlocked Canadian crude, the newspaper said.
If Canadian oil prices rise, Canadian Natural Resources could add to its expected $500 million of free cash flow this year, allowing it a chance to address concerns of a "restive investor base" that has been demanding larger share buybacks, the newspaper said.
In Friday trading in Toronto, Suncor shares closed at C$31.95, and Canadian Natural Resources shares at C$30.37. Barron's said both stocks could rise to the C$40s in the next year, citing price targets from a Macquarie energy analyst.
(Writing by Jonathan Stempel in New York; Editing by Dale Hudson)