Common and fundamental factors in stock returns of Canadian oil and gas companies

We assess the financial determinants of Canadian oil and gas company stock returns. We find that the return of Canadian energy stock is positively associated with the Canadian stock market return, with appreciations of crude oil and natural gas prices, with growth in internal cash flows and proven reserves, and negatively with interest rates. Surprisingly, however, production volume and a weakening of the Canadian dollar against the US dollar have a negative impact. This latter impact is more pronounced for oil producers than for integrated energy companies. Finally, we find that the influence of the exchange rate, the market return and prices of natural gas on Canadian oil and gas stocks changes significantly over the years 1995-1998 and 2000-2002. (C) 2005 Elsevier B.V. All rights reserved.