The energy sector ($SREN) is on an absolute tear, clocking in a 14.7% surge on a YTD basis and outperforming the broader S&P 500 Index's ($SPX) 6.4% gains over the same time frame. The driving force behind this momentum is OPEC+ production cuts, rising oil prices, and optimistic demand forecasts, highlighted by the Energy Information Administration's (EIA) recent upbeat revision to oil price forecasts for 2024.

Adding to the positive outlook, June crude oil futures (CLM24) bounced sharply in Tuesday's session. The weak dollar has been a boon for energy prices, while the overall strength of the stock market has fueled optimism about the economy, thereby supporting energy demand and crude prices. However, the gains in crude were somewhat tempered by the reduced tensions between Israel and Iran, with Iran appearing less likely to retaliate after Israel's strike on Apr. 19.

Given this backdrop, here are two Canadian energy stocks, Crescent Point Energy Corp. (CPG) and Obsidian Energy Ltd. (OBE) - both trading under $10, with analysts giving them a big thumbs-up with "Strong Buy" ratings. The stocks are outperforming the broader SPX's returns, as well as the SPDR Oil & Gas Exploration & Production ETF's (XOP) 13.2% gains on a YTD basis.

Even though these energy names are already outperforming the broader market, their cheap valuations suggest there's still plenty of room for these stocks to stretch those muscles and grow some more. Here's a closer look at these value-packed energy stocks.

Energy Stock #1: Crescent Point Energy

Crescent Point Energy (CPG) is a leading exploration and production company operating in Canada and the U.S. Focusing on crude oil, tight oil, natural gas liquids, shale gas, and natural gas reserves, it has established itself as a key player in the energy sector. The company has materially enhanced the long-term sustainability of its business by increasing its premium drilling inventory to over 20 years.

Valued at $5.5 billion by market cap, shares of Crescent Point have surged 27.7% on a YTD basis. The company offers an annualized dividend of $0.35 per share, resulting in a dividend yield of 3.92%.

Crescent Point stock trades at 7.43 times forward earnings, lower than the oil and gas exploration and production industry average. 

On Feb. 29, Crescent Point reported Q4 earnings results, with net income amounting to $708 million, or $0.27 per share, on revenue of $461.8 million. Its operating cash flow stood at $1.6 billion as of Dec. 31, 2023.

The company achieved an annual average production of 159,411 boe/d in 2023, within the company's annual production guidance range of 156,000 to 161,000 boe/d. Management expects fiscal 2024 annual average production to be between 198,000 and 206,000 boe/d.

Analysts tracking Crescent Point expect its fiscal 2024 EPS to reach $1.17, up 9.4% year over year, and increase further by 6.8% in fiscal 2025 to $1.25. The company is expected to announce fiscal Q1 2024 earnings results on May 10.

Crescent Point stock has a consensus “Strong Buy” rating overall. Out of the 12 analysts covering the stock, 10 rate it a “Strong Buy,” and two advise a “Moderate Buy” rating.

The average analyst price target of $10.27 indicates an upside potential of around 16% from current levels. However, the Street-high price target of $13.80 suggests that the stock could rally as much as 55.9%.

Energy Stock #2: Obsidian Energy

Obsidian Energy Ltd (OBE), boasting a market cap of $654.4 million, is involved in the exploration, production, and development of oil and natural gas (NGK24) properties in Western Canada. 

Obsidian Energy stock has surged 24.6% on a YTD basis. 

OBE stock currently trades at 6.22 times forward earnings, lower than the industry median. 

In late February, Obsidian Energy reported fiscal Q4 2023 net income of $25.3 million, or $0.31 per share. Its sales surged 132% year over year to $127.3 million. The company generated an operating cash flow of $261.3 million and a free cash flow of $44.6 million.

Activity in Obsidian's Peace River, Willesden Green/Pembina (Cardium), and Viking areas contributed to a 5% surge in average annual production to 32,275 boe/d, reaching 34,000 boe/d in December 2023.

Analysts tracking Obsidian Energy expect fiscal 2024 earnings to reach $1.30 per share, up 36.8% year over year, and increase further by 2.3% in fiscal 2025 to $1.33 per share. The company is expected to announce fiscal Q1 2024 earnings results on Thursday, May 2.

Obsidian Energy has a consensus “Strong Buy” rating overall, compared to a "Moderate Buy" rating three months ago. Out of the three analysts covering the stock, two give it a “Strong Buy” rating, and one advises a “Moderate Buy.”

The average analyst price target of $12.01 indicates an upside potential of around 41.3% from current levels, while the Street-high price target of $14 suggests that the stock could rally as much as 64.7%.