Ride The Oil Spike With Canadian Manufacturers, Says the Chief Energy Officer

Far from the Ukrainian war, safe from Houthi rockets, and less troublesome than broken shale resources, Canadian oil fields - including Alberta sands - are an ideal place to invest in 2022. "People do not understand how to generate so much free money," Nuttall said.

The favorite to hold Nuttall's Ninepoint Energy ETF's $ 1.5 billion, MEG Energy, which covers oil in a 1,000-foot deep sand dune near Alberta's Fort McMurray. MEG uses an in-situ method; that involves injecting a high-pressure oil that lubricates the oil and pushes it up into the source material.

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MEG does not have to worry about testing; has sufficient reserves to support 35 years of production at its current level of 100,000 barrels per day (BPD) and can make even $ 50 of oil. MEG trades about 5 times the expected cash flow, and after the company pays off a debt of up to $ 1.2 billion this year, 50% of its total surplus will buy stock.

Nuttall has managed a portfolio of energy since 2005 and merged Ninepoint with the former Toronto gem investment investor Sprott. Unless his fund has increased by 160% last year and 49% a year for 3 years, he is convinced that there is no end to oil efficiency.

Indeed, there are many reasons why oil producers are so cheap right now. First and foremost, it is possible that a large portion of Russia's 7 million exported barrels per day is barred from entering the market. Russian sales fell by 600,000 barrels a day last week, according to Cowen & Co. In a month or so exports will be further reduced, by 3 million BPD, according to the International Energy Agency.

Changing that offer will be a challenge. Even before the war, the 100-million-dollar oil market per day was in dire straits. OPEC, after reducing its output during the epidemic, is now likely to increase its supply back, but in recent months it has dropped by 800,000 BPD or significantly fell to its 30 million BPD quotas. Nuttall does not think the tank - now a for-profit one could even replace Russian oil in the near future. “OPEC has never invested again. We will see the end of OPEC backup capacity in six months. ”

In the best-case scenario, the world will see another 700,000 BPD from Iran this year, and maybe 300,000 BPD from Venezuela. American shale frackers may grow up to 1 million BPD. But that is far from confirmed, Nuttall said. Given the shortage of manpower, building materials, and advanced metals, "shale will be fortunate to replace its production."

Among U.S. companies they love Oklahoma City, an Okla-based fracker. Devon Energy, with sufficient funds to allow for 18 years of production. Devon trades in business value less than 5 times the 2022 Ebitda target of $ 9 billion. "Despite the pressure, they will grow reasonably well if investors want to."

The U.K. and the U.S. impose restrictions on importing Russian oil. Many companies have done the same. But Russia still has willing buyers. German Chancellor Olaf Scholz said in March that Europe would still need to receive a portion of its pre-war 2.4 million BPD from Russia. "Europe 's supply of heat, transportation, electricity and industry is currently not secure in any way," Scholz said. Germany has already shut down fertilizer and chemicals and metal production due to record-high energy costs.

United Arab Emirates oil minister Suhail al-Mazrouei, speaking in Dubai this week, said there was no substitute for Russian goods at the moment and it would be suicidal if the world stopped buying Russian power when there was nothing to replace it.

India is a nation that faces that reality, as it imports 85% of its petroleum needs. India maintained strong ties with the Soviet Union during the Cold War both in order to obtain reliable oil and the necessary balance with China. Prime Minister Narendra Modi has refused to vote for any UN resolution condemning Putin's anger. India this week reportedly has a new shipping contract covering 8 million barrels.

But selling more oil in China and India will not sink all of Putin's excess oil. To reduce potential buyers, Russian oil companies reportedly have to offer deep discounts, with an order of $ 25 per barrel.

Nuttall prefers to have companies that can sell for a fee, such as ARC Resources (Toronto: ARX), which produces about 350,000 barrels a day of so-called natural gas condensates from Montney ports between Alberta and British Columbia. ARC, which doubled in size last year in conjunction with Seven Generation, has almost two decades of development in its existing projects. With a market value of $ 11.7 billion, ARC has approximately 4 times the amount of operating revenue Nuttall expects the company to produce this year. With current prices, it could quickly repay its $ 1.7 billion debt.

He likes other Canadian independent operators like Cenovus Energy, Pipestone Energy, and Baytex Energy. The world's largest oil companies are of little interest, largely because they have been “disturbed by the decision to allow their major oil and gas production to decline gradually while re-investing in renewable energy.”

American politicians like Seninja Elizabeth Warren who have been battling fraud in recent weeks have threatened to inflate interest rates on companies that are not performing well enough. It's enough to make a guy proud to be in Canada. “They are very understanding, but in the end, you cannot live in this world. You can't downplay the industry and ask them to increase productivity. ”

But the funny thing happened on the bridge of the future with low carbon power: "Fear of high demand leads to the reality of high supply."

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