Energy Stocks Are Shaky: Here’s My Top TSX Pick

Energy stocks feel shaky right now, as oil markets keep getting tugged in opposite directions. Traders see uneven demand signals, rising supply in pockets, and a steady stream of macro headlines that can flip sentiment in a day. So, if this continues, is there an energy stock that still looks strong?

BTE

Baytex Energy (TSX:BTE) looks like a practical pick in that kind of market, as it does not rely on one tiny niche. It produces oil and natural gas across Western Canada and the U.S., with a mix that includes the Eagle Ford and heavy oil, plus its growing Pembina Duvernay position. That blend matters when different basins behave differently and when differentials jump around. It can shift capital to where it sees the best returns, which helps when the macro picture changes mid-quarter.

Over the last year, the story focused on sharpening the portfolio and pushing higher-return barrels. In its third-quarter (Q3) 2025 update, it highlighted record Pembina Duvernay production and operational execution in the Eagle Ford, including a noted improvement in drilling and completion costs versus 2024. Those details sound wonky, but land where investors care: lower costs and more repeatable results.

Into earnings

Now look at the earnings, because that is where the shakiness either shows up or fades. In Q3 2025, Baytex reported cash flows from operating activities of $472.7 million. It also reported adjusted funds flow of $422.2 million and net income of $32 million. Those numbers reflected lower realized pricing, yet the energy stock still generated meaningful cash, which matters a lot when oil prices do not cooperate.

The other key piece is scale and output. In Q3 2025, it produced 87,283 barrels of oil equivalent per day (boe/d). That production base gives it operating leverage when oil rebounds, but it also gives it room to fund the plan when oil stays choppy, as long as costs stay controlled and the balance sheet stays steady.

Future outlook looks straightforward, and that is exactly what you want in a chaotic sector. For 2026, it guided to production of 67,000 to 69,000 boe/d and exploration and development spending of $550 million to $625 million. It also plans to keep commercializing Pembina Duvernay, with a plan to bring 12 wells on stream in 2026 versus eight in 2025, and it expects Duvernay production to rise about 35% to roughly 11,000 boe/d on average. That kind of growth can support cash flow even if other parts of the portfolio tread water.

Foolish takeaway

Valuation does not look stretched for an energy name that still prints cash, but you must keep expectations realistic. The energy stock trades at 17.2 times earnings, with a 1.85% dividend. That tells you Baytex wants flexibility first, not a huge yield that forces tough choices when prices dip. Still, here’s what even $7,000 can bring in.

COMPANYRECENT PRICENUMBER OF SHARESANNUAL DIVIDENDANNUAL TOTAL PAYOUTFREQUENCYTOTAL INVESTMENTBTE$4.821,452$0.09$130.68Quarterly$6,998.64

So, could this be a buy for others when energy headlines keep getting messy? It could, because it pairs a clearer 2026 plan with real cash generation, and it has specific growth levers like the Duvernay ramp that do not depend on perfect macro conditions. The bear case still matters: oil can stay weak longer than anyone expects, differentials can widen, and execution must stay tight when the energy stock ramps up activity. If you can handle the volatility and you want an energy name that can play offence without betting the farm, Baytex looks like a credible “shaky-market” pick.

The post Energy Stocks Are Shaky: Here’s My Top TSX Pick 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.