U.S. Investors Flock to Canadian Oil as Sector Returns Cash

The Canadian oil sector is increasingly capturing the attention of U.S. investors, driven by a combination of government-friendly rhetoric and strong returns for shareholders. Analysts describe the trend as a “rotation,” with U.S. funds gradually taking a larger stake in Canadian oil and gas companies, while domestic ownership slightly declines.

Jeremy McCrea, managing director at BMO Capital Markets in Calgary, said many portfolio managers now see Canadian energy stocks as a more attractive option than U.S. counterparts, despite lower global oil prices. “If we have to hold energy, we'd rather hold Canadian energy today,” he said. U.S. investors currently own around 59% of Canadian oil and gas firms, up from 56% last year, while Canadian ownership fell from 37% to 34%.

CEOs in Calgary’s oilpatch are witnessing the trend firsthand. Grant Fagerheim, CEO of Whitecap Resources, noted that roughly 66% of his company’s institutional investors are now based in the U.S., up from 60% last year. Similarly, Brian Schmidt, CEO of Tamarack Valley Energy, highlighted that U.S. investors are far less hesitant than Canadian pension funds when investing in oil and gas.

This surge in interest started about a year ago, coinciding with federal political shifts and promises to boost Canada’s oil and gas sector. Although the Liberal Party was re-elected, Prime Minister Mark Carney’s pledge to make Canada an energy “superpower” appears to have reassured investors. The completion of the Trans Mountain Pipeline expansion has further strengthened investor confidence by increasing export capacity.

Economically, Canada’s oilsands offer a more appealing long-term investment compared with U.S. wells, which require costly new drilling once depleted. Oilsands projects, while expensive initially, can generate low-cost output for decades. Many Canadian producers now focus on returning cash to shareholders rather than expanding, a strategy attracting global attention.

David Samra, a portfolio manager at Artisan Partners in Boston, praised Canadian oilsands companies for their shareholder-friendly approach. “We see these companies generating a lot of cash and returning almost all of it to shareholders. That future is very attractive,” he said.

BMO’s McCrea added that the overall trend looks promising, though its future growth remains uncertain. Fagerheim believes this investor interest is spreading beyond the U.S., with Europe and Asia increasingly eyeing Canada’s oilpatch. “The world has taken notice as well,” he noted.