To The Moon

Toronto gas prices are soaring, and Brent crude is above $84—are CNQ and ENB the Canadian energy picks to beat?

CNQ’s low-cost reserves + 25-year dividend growth, or ENB’s inflation-linked toll revenue + 31-year dividend hikes—which high-dividend giant are you betting on amid Middle East tensions?

Share your thoughts on these TSX energy leaders below!

If you drove past a Toronto gas station this morning, you might have thought you were seeing things—overnight, gas prices jumped 6 cents, with regular-grade gasoline generally hitting $1.439 per liter. The war in the Middle East has directly reached the fuel tanks of Canadian drivers.

As the Israel-Iran conflict enters its fifth day, Iran announced plans to block the Strait of Hormuz—a narrow waterway that carries approximately 20% of the world’s oil and natural gas supply. Following the news, international benchmark Brent crude prices briefly topped $84 per barrel on Tuesday, surging more than $10 since the conflict erupted; U.S. WTI crude also jumped 4.7% to close at $74.56 per barrel.

What’s more worrying for Toronto drivers? This may only be the beginning.

The Logic Behind the Gas Price "Rally": More Than Just Geopolitics

Dan McTeague, President of AffordableEnergy.ca, warned of this increase earlier in the week, and his current prediction is even more unsettling—another 6-cent hike could come this Thursday.

Why? Because if the Strait of Hormuz is blocked, it will disrupt not just one oil-producing country’s exports, but one-fifth of global crude oil flow. While U.S. President Trump stated on Truth Social that "the Navy will escort tankers if necessary," the market clearly trusts the reality of "shutdowns" more than the promise of "escorts."

From an investment perspective, rising oil prices are never just bad news. When supply is disrupted, price signals redistribute benefits along the industrial chain. Amid this "rally," two types of Canadian energy companies are becoming the focus of capital: producers with low-cost reserves and pipeline operators with pricing power.

Opportunity 1: $Canadian Natural Resources(CNQ)$– The "Ballast" of Low-Cost Reserves

In times of oil price volatility, investors first ask: Can this company withstand the fluctuations?

CNQ’s answer is in the data. Headquartered in Calgary, this energy giant boasts a vast asset portfolio in Western Canada, the North Sea, and offshore Africa. Its key advantage lies in its low-risk, high-value reserve structure—proven reserves exceed 5 billion barrels of oil equivalent, with a reserve life index of 32 years, ranking second among global peers.

More importantly, CNQ’s break-even point has been pushed extremely low through efficient operations and strict cost control. This means the company can maintain profitability even if oil prices pull back; in the current environment of rising oil prices, its profit elasticity is amplified.

For investors seeking stable cash flow, CNQ’s most striking feature is its 25 consecutive years of dividend growth, with an annualized growth rate of 21%. It currently pays a quarterly dividend of $0.5875, corresponding to a dividend yield of 3.89%. Amid the dual pressures of inflation and oil price volatility, this ability to "increase dividends as prices rise" is a moat in itself.

Financially, it is equally solid: the ratio of debt to adjusted EBITDA is only 0.9x, with $4.3 billion in liquidity reserves. This provides ample ammunition for the company to expand or acquire at the bottom of the industry cycle. Notably, CNQ plans to invest $6.4 billion in capital expenditures this year to further enhance production capacity—expanding when others are cautious is a statement of confidence in its long-term prospects.

Opportunity 2: $Enbridge(ENB)$ – The "Toll Road" Business of Pipeline Networks

If CNQ is betting on oil price heights, Enbridge is betting on traffic certainty.

As a behemoth in North American energy infrastructure, Enbridge’s business spans crude oil and natural gas transportation, three U.S. natural gas utilities, and a growing portfolio of renewable energy assets. But what truly sets it apart amid the oil price rally is the uniqueness of its revenue structure: approximately 98% of adjusted EBITDA comes from long-term take-or-pay contracts or regulated assets, with around 80% of cash flow linked to inflation.

What does this mean? Simply put: whether oil prices rise or fall, as long as oil and gas flow through its pipelines, Enbridge collects "tolls." Moreover, as inflation pushes up operating costs, tolls automatically adjust—this is a classic countercyclical attribute.

For dividend enthusiasts, Enbridge’s track record is legendary: it has paid dividends for over 70 consecutive years and increased them for 31 straight years. Its current forward dividend yield stands at an attractive 5.22%, particularly appealing in the current low-interest-rate environment.

The growth story is far from over. Management disclosed that the company has secured $50 billion in secured growth projects through the end of the decade, planning to invest approximately $10 billion annually to advance these initiatives. As new capacity gradually comes online, management expects adjusted EBITDA, earnings per share, and distributable cash flow to achieve mid-single-digit growth in the coming years. On the liquidity front, $10.8 billion in available funds as of the end of last year provides sufficient "ammunition" for this grand plan.

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