NEW YORK (TheStreet) -- I was talking to Stephanie Link today about the relative weakness of Canadian oil stocks and whether now was the right time to buy.
For the last year and a half, shares of large Canadian exploration and production (E+P) companies like Suncor (SU), Canadian Natural Resources (CNQ) and Cenovus (CVE) have gone nowhere, while U.S. E+P's have soared.
At some point, the value of oil production in Canada is going to look awfully cheap compared to oil production here in the US. The difference is that while most of the growth in U.S. oil production is coming from shale plays in the Eagle Ford, Permian and Bakken, the production growth that Canadian E+Ps will see is mostly going to come from oil sands in the Athabasca.
Oil sands production has gotten a very bad rap, mostly because of controversy surrounding the Keystone Pipeline, designed to bring oil sands from Western Canada to the Gulf Coast. I believe the controversy and the delay in approving Keystone has been an important psychological reason why Canadian E+Ps have so vastly underperformed other E+Ps.
Yet, oil prices remain steady at close to $100 a barrel, making some of these Canadian companies, at least on the face, some of the best values in energy. Some of the oldest "alternative" technologies in retrieving oil have been working on recovering oil sands for years but continue to get more efficient and cheaper.
One of these technologies is called SAGD for Steam Assisted Gravity Drainage. Oil sands is a viscous, almost rubbery compound that needs to be liquefied in some way in order to be separated from the sandy rock that surrounds it. SAGD injects hot steam deep underground, melting the bituminous rock and bringing it up to the surface with the cooling water.
Of the many companies that employ this rather old technology, Cenovus is one of the most innovative and remains my favorite of the Canadians.