Why Jerome Hass Says Canadian Energy Stocks Are "Cheap"
How Fiscal Discipline, Long-Life Assets, and Unbeatable Valuations Are Setting the Stage for Western Canada’s Energy Sector Renaissance
Canadian oil and gas has spent years standing in the cold, but the underlying arithmetic is becoming far too compelling for smart money to ignore.
While daily swings in West Texas Intermediate (WTI) crude can turn on a dime, prompted by presidential social media comments or a sudden volley of overseas drones, the long-term foundational setup for Canadian producers is looking increasingly bullish.
According to Jerome Hass, Portfolio Manager at Lightwater Partners, Western Canada’s energy patch has quietly found financial religion. After a decade of strict fiscal discipline, balance sheets across the sector have shed bank debt and dramatically reduced overall leverage. Unlike global peers struggling with shrinking drilling inventories and depleted reserve lives following years of under-investment, Canadian operators sit on vast, long-life assets capable of pumping steady cash flow for decades. Couple that with a more conciliatory political tone out of Ottawa, where discussions around new West Coast pipeline capacity and a revived Keystone XL are gaining traction, and the stage is set for a sector re-rating as institutional capital flows back home.
For investors seeking structured growth, stable cash flows, and capital returns, Hass highlights three primary engines driving the thesis forward.
Gibson Energy (TSX: GEI): The Tollbooth of Western Crude
For predictable, fee-based exposure, Gibson Energy (TSX: GEI) stands out as a critical infrastructure backbone. Moving roughly one out of every four barrels produced in Western Canada through its terminals, storage networks, and pipelines, the company operates with virtually zero direct natural gas exposure.
Because Gibson Energy (TSX: GEI) relies almost entirely on contracted, take-or-pay structures, its cash flow remains protected even during commodity price pullbacks. The infrastructure firm currently pays a steady six per cent dividend yield. Management’s target of expanding annual earnings before interest, taxes, depreciation, and amortization (EBITDA) by seven per cent per year creates a combined 13 per cent total target return profile.
Cardinal Energy (TSX: CJ): Thermal Execution Done Right
Conventional producer Cardinal Energy (TSX: CJ), where billionaire investor Murray Edwards stands as the largest individual shareholder, offers a compelling blend of low-decline production and thermal growth. Producing approximately 25,000 barrels of oil equivalent per day with an enviable ten per cent decline rate, the company recently defied sector skepticism by delivering its flagship Redford small-scale steam-assisted gravity drainage (SAGD) project in Saskatchewan both on-time and on-budget.
The Redford asset is already operating ten per cent above its 6,000 barrels of oil equivalent per day nameplate capacity, with construction on Redford 2 already underway. Celebrating the milestone alongside Saskatchewan Premier Scott Moe, Scott Ratushny, Chairman and Chief Executive Officer of Cardinal Energy (TSX: CJ), emphasized the collaborative regulatory tailwinds supporting the asset:
"Cardinal would like to thank Premier Moe and the Saskatchewan government for delivering a supportive regulatory and business environment that enabled us to complete this project on time and on budget. The constructive engagement that the government extended to our Company gives Saskatchewan a clear competitive advantage in developing projects like Reford."
Trading at 5.5 times enterprise value to debt-adjusted cash flow (EV/DACF) and offering a 9.3 per cent free cash flow yield at $80 WTI alongside a 6.2 per cent dividend yield, Cardinal Energy (TSX: CJ) stands out as a high-conviction cash generator.
Surge Energy (TSX: SGY): The Underappreciated Sparky Powerhouse
Holding the largest single position in the All-Canadian Oil & Gas ETF, mid-cap conventional operator Surge Energy (TSX: SGY) represents what Hass calls one of the most underappreciated producers in Western Canada. Focused heavily in the Sparky basin and Southeast Saskatchewan, the company boasts an 11-plus year reserve life, top-tier Saskatchewan drilling results, and a manageable 24 per cent decline rate supported by aggressive waterflooding initiatives.
Under the leadership of President and Chief Executive Officer Paul Colborne, Surge Energy (TSX: SGY) executes an acquire-and-exploit strategy targeting large oil-in-place conventional reservoirs with low recovery factors. By utilizing waterflood and enhanced oil recovery techniques, the company continues to reduce decline rates, extend reserve life, and maximize predictable free cash flow across its core assets.
While its $1 billion market capitalization keeps it somewhat under the radar of mega-cap global funds, Surge Energy (TSX: SGY) presents eye-watering value. Trading at 3.2 times 2026 EV/DACF with a 15 per cent free cash flow yield, a five per cent share buyback program, and a six per cent dividend yield, Hass projects the stock could reach $13.50 at four times 2027 EV/DACF, representing a 35 per cent capital upside.
Sources
- BNN Bloomberg Staff / Market Call Top Picks: Jerome Hass, Lightwater Partners (August 5, 2026).
- Cardinal Energy Ltd. Ceremonial Opening News Release & Executive Commentary from Chairman Scott Ratushny and Saskatchewan Premier Scott Moe.
- Surge Energy Inc. Corporate Disclosures, Operational Strategy Overview, and Executive Leadership Statements from CEO Paul Colborne.
Disclaimer
Neither the author of this article nor JuniorStocks holds equity, stock options, or any other financial positions in Gibson Energy Inc. (TSX: GEI), Cardinal Energy Ltd. (TSX: CJ), Surge Energy Inc. (TSX: SGY), or any other companies mentioned in this publication. This content is published by JuniorStocks strictly for informational and educational purposes, was prepared independently without company compensation, and utilized AI assistance for text editing, formatting, and content generation. While the Canadian oil and gas sector presents compelling long-term market opportunities, energy stocks remain subject to commodity price volatility, regulatory shifts, and operational risks. This article does not constitute investment, financial, tax, or legal advice. Investors are strongly advised to conduct their own thorough, independent due diligence and consult with a qualified, licensed financial professional before making any investment decisions.