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Low commodity prices are forcing oil and gas companies to make tough decisions, cut dividends or find a way to fund them with assets sales or tapping capital markets.Antoine Antoniol/Bloomberg

Beaten-up Canadian energy stocks are either primed for a rebound or among the most dangerous investments you can make right now – and it looks as though Ottawa holds the answer to this dilemma.

The issue arose, of course, after the federal government killed the $6-billion deal between Canada's Progress Energy Resources Corp. and Malaysia's state-owned Petronas on Friday. Progress shares tanked on the news, and were spotted down nearly 11 per cent in early afternoon on Monday.

The decline also weighed on a number of other energy stocks – particularly, Nexen Inc., which is in the middle of its own takeover deal with China's CNOOC Ltd. – with investors now wary of Ottawa's influence.

So which way are stocks headed next – straight up as investors realize Ottawa isn't a no-machine or straight down as they realize Ottawa is? Right now, the market looks reasonably optimistic. While Progress shares are down 11 per cent on Monday, they're up 67.5 per cent since Petronas first offered to buy the company at a hefty premium. Similarly, Nexen shares are down nearly 5 per cent on Monday, but up more than 38 per cent since CNOOC appeared at the gas producer's door with money in hand.

Stéfane Marion at National Bank Financial hasn't weighed in on Progess directly. But he does argue in a brief note that attracting foreign state-owned enterprises (SOE) is in Canada's best interests, which sounds bullish for energy stocks.

His argument rests on U.S. energy production. According to projections from the Energy Information Administration, the United States is set to become a net exporter of natural gas within a decade.

"It is therefore in our country's interest to quickly build the proper infrastructure that will give us access to new markets," Mr. Marion said. "Given the costs involved and the time required to develop such infrastructure, we think that patient investors with deep pockets should continue to be welcomed. Ottawa must become more comfortable with SOEs as investors. Asia [has] become critical to our energy future."

If Ottawa is thinking along the same lines, Monday's selloff might be a decent buying opportunity. But the downside is big if Ottawa has other ideas.

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