Energy companies need to become buyers of their stocks: Eric Nuttall
A Canadian money manager who focuses on energy says the amount of capital available to invest in the sector is dwindling.
“It’s been a game of survivor for energy fund managers in Canada. And frankly, there’s two of us left. And so the availability of capital to invest in the energy sector, generally speaking, has massively shrunk, ” Eric Nuttall, partner and senior portfolio manager at Ninepoint Partners, told BNN Bloomberg’s Amber Kanwar Friday.
“When you look at the energy sector, it’s so bloody complex that a generalist guy working at X, Y, Z fund managing $1 trillion – what are they going to buy? They buy Suncor. And they buy [Canadian Natural Resources]. So there’s just been an implosion in valuations in the mid-cap space.”
Canadian heavy crude fell back into bear market territory Thursday as the price of Western Canada Select dropped more than 20 per cent from its April 9 peak, along with other types of crude as global trade tensions deepened.
WCS hit record lows last year but prices began to march steadily higher after the previous Alberta government mandated production cuts at the start of this year. The ongoing volatility has kept investors at bay when it comes to buying Canadian energy companies.
While Nuttall sees opportunity in the space, he said that there’s been less investor appetite for the sector and more people are looking to invest in cannabis and technology companies. In this environment, Nuttall said it’s up to oil firms themselves to buy their own stock, which he said should drive up their share prices.
“There comes a point where you have to recognize that what you are doing is not achieving the desired result,” Nuttall said.
“If they’re not willing today to step up and use their free cash flow to buy their own stocks – why the heck should I, and why should the people watching? Now is the time for significant buybacks.”