This Canadian Energy Play Just Moved Onto My Buy List

A Canadian energy stock earns a spot on a buy list when it stops acting like a trade and starts behaving like a business. I want low-cost production, a clean balance sheet, and a plan that still works if oil or gas prices cool off. I also want management to prove it can return cash in a disciplined way, through a base dividend, occasional specials, debt reduction, or smart buybacks. The final test is simple: it should look mispriced versus its ability to generate free cash flow across a full cycle, not just in a hot quarter.

TOU

Tourmaline Oil (TSX:TVE) checks a lot of those boxes as it is one of Canada’s largest natural gas producers, with a meaningful liquids mix that can support cash flow. It operates mainly in Alberta and British Columbia, and it focuses on scale, low costs, and drilling inventory that can last for years. That combination matters in 2026 since Canadian gas has more moving parts than people think, with LNG expectations, pipeline constraints, and weather all tugging on pricing.

Over the last year, the story around Tourmaline has largely revolved around discipline and positioning. Gas markets stayed choppy, but Tourmaline kept leaning on its cost structure and scale to stay resilient. Investors also watched the broader Canadian gas narrative pick up again, as the country edges closer to more LNG export capacity and as North American power demand keeps rising. Tourmaline tends to benefit from that long runway, but doesn’t need a single catalyst to survive. It just needs time and a reasonable commodity tape.

Earnings support

Now to earnings, and I’ll keep it practical. Tourmaline’s recent results usually hinge on three things: production volumes, the price it receives for natural gas and liquids, and how much cash it keeps after capital spending. In its most recent quarterly report, it reported strong operating cash flow and free cash flow relative to peers, supported by its low-cost structure and scale.

The future outlook comes down to whether Canadian gas gets a better exit ramp and whether demand keeps firming. LNG export growth matters, but so does the steady pull from power generation and industrial demand, especially as data centres and electrification keep expanding. Tourmaline’s advantage is that it can keep drilling through the cycle without stretching the balance sheet. That gives it staying power if prices stay soft for longer than expected, and torque if prices rebound.

Valuation is where “moved onto my buy list” becomes real. When investors get frustrated with gas, these energy stocks can slide even while the underlying assets keep compounding. Tourmaline often looks most attractive when you can buy it at a conservative cash flow multiple and still collect a dividend while you wait. Right now, it trades at just 18 times earnings, with a solid 3.2% dividend yield. That can bring in ample income, even with $7,000.

COMPANYRECENT PRICENUMBER OF SHARESANNUAL DIVIDENDANNUAL TOTAL PAYOUTFREQUENCYTOTAL INVESTMENTTOU$62.35112$2.00$224.00Quarterly$6,983.20

Bottom line

The risks are not subtle, and you should name them before the market does. Natural gas prices can stay lower for longer, especially if supply grows faster than demand or if warm winters hit consumption. Regulatory and political risk never fully goes away in Canadian energy. Operational risk exists too, as drilling and processing always carry execution and cost surprises. Still, Tourmaline’s low-cost base and scale help it absorb those hits better than most.

If you want a Canadian energy play that feels like it has quietly improved, Tourmaline can fit the bill. It offers scale, low costs, and a shareholder-return mindset that tends to look better the longer you hold it. The opportunity comes from buying it when sentiment around gas stays heavy, then letting disciplined cash generation do the work. If your timeline runs in years, not weeks, this is exactly the kind of name that can earn a spot on a serious buy list.

The post This Canadian Energy Play Just Moved Onto My Buy List appeared first on The Motley Fool Canada.

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Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.