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Saturday, December 2, 2023

“The macro backdrop for oil has by no means been as constructive in my profession”

Amidst these world forces, Nuttall believes Canadian heavy oil producers are among the many finest alternatives for advisors going into This fall and 2024. He believes that as a result of he’s bullish on the worth of oil, but in addition as a result of if US shale peaks buyers could very properly rotate out of shale and into oil sands producers. The oil sands are the longest dated investable reserves on this planet, and Nuttall sees that truth as engaging for US shale buyers given the shorter longevity of these reserves.

Maybe most significantly, Nuttall sees basic power amongst Canadian oil producers. He notes that many of those firms are boasting their strongest stability sheets in historical past, they’re producing the very best quantity of free money stream of their historical past, and they’re marching in direction of their last debt targets. When these targets are achieved—which Nuttall thinks might be over the following two quarters—these firms have promised to return between 75% and 100% of that free money stream again to buyers, within the type of dividends and vital share buybacks.

Whereas a $90 barrel of oil is constructive information for these firms, Nuttall sees the maths understanding simply as properly at $80. Due to these firms’ stability sheets, he sees enormous alternative for advisors in Canadian oil equities whether or not costs rise or not.

“We see firms rewarding us by as a lot as 20% subsequent yr at $90 oil,” Nuttall says.

Nuttall admits that whereas he’s bullish on oil costs and Canadian oil producers, there are at all times short-term components on this area that advisors want to clarify to their purchasers. Volatility is a continuing in a commodity like oil, and it will possibly generally be a problem to clarify to purchasers why an power inventory is lagging the worth of crude. He believes in an actively managed mutual fund technique as a instrument advisors can use to provide their purchasers oil publicity.

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