Eric Nuttall’s Top Picks for Dec. 10, 2025

Eric Nuttall, Partner and Senior Portfolio Manager, Ninepoint Partners

Focus: Energy stocks

Top picks: Peyto Exploration, Expand Energy, Whitecap Resources

MARKET OUTLOOK:

Energy stocks have had a spectacularly 2025, outperforming almost all major indices in North America despite oil having fallen by 18 per cent year-to-date. Why is this?

We think the sector has benefited, especially in Canada, from funds flows returning to a very out of favour yet very profitable sector at a time when the market is beginning to realize that oil forward balances look very tight and that given the twilight of U.S. shale, that there is scarcity value in long-dated reserves such as the Canadian oilsands. The recent improvement in tone from the federal government is helping as is the likely incremental increase of oil takeaway capacity of approximately 800,000 barrels per day by 2028.

Natural gas has also been strong, rallying off of a structural increase in demand from LNG capacity increases, massively increasing power demand, and potentially the coldest December in 10 years. We are bullish natural gas stocks, given approximately 11 per cent to 14 per cent free cashflow yields at the strip price, which we also believe is the marginal cost of production. Should weather continue to cooperate we see the potential for $5/mcf which would nearly double free cashflow yields offering significant upside optionality for free.

We believe 2026 will be another solid year for energy investors: balance sheets are strong, the macro for oil will have improved by the second half of 2026, companies continue to buy back their stock with significant free cashflow, and finally and importantly, the tone is starting to shift from oil abundance to oil scarcity.

In short, “we remain bullish.”

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TOP PICKS:

Whitecap Resource (WCP TSX)

Whitecap has 25+ years of premium stay-flat inventory, a market cap ($13.5BN) large enough to be relevant to shareholders, a dividend yield of 6.3 per cent sustainable down to approximately $50, and trades at a material discount to its peers (5.0X EV/CF at $60WTI/$4gas).

We believe fair value is seven times 2027 CF = $19/$23 at $60WTI/$70WTI = 65 per cent to 100 per cent potential upside.

Expand Energy (EXE NYSE)

Expand is the largest natural gas producer in North America (approximately 6.3 per cent of U.S. production) and is greatly benefiting from the new bull market in natural gas.

With over 20 years of stay-flat inventory in areas closest to the largest areas of demand growth (AI centres in Texas and LNG on the Gulf Coast) the company receives premium pricing. We believe the marginal cost of supply is $4/mcf and that gas can rally to $5/mcf on a normal/colder than normal Winter is 12 per cent/22 per cent free cashflow yield. At $4/mcf we think fair value is 8X 2027 CF is $209 target price is 78 per cent potential upside.

Peyto Exploration (PEY TSX)

Peyto is our favourite Canadian natural gas producer, given over 20 years of booked locations (plus another approximately 20 years of unbooked), a prudent rolling hedging strategy that protects their dividend (5.9 per cent dividend yield), and modest production growth.

With ongoing deleveraging from their Repsol land acquisition nearing an end by Q2/2026, we believe Peyto will increase their dividend in the second half of 2026 by 20 per cent to 25 per cent and approximately 7.5 per cent pro-forma dividend yield which is highly compelling given their depth of drilling inventory.

PAST PICKS: NOV. 21, 2024

MEG Energy (MEG TSX) – acquired by Cenovus Nov. 13, 2025

Then: $26.73

Now: $30.89

Return: 16%

Total Return: 17%

ARC Resources (ARX TSX)

Then: $26.97

Now: $26.77

Return: -1%

Total Return: 2%

Tamarack Valley Energy (TVE TSX)

Then: $4.57

Now: $7.77

Return: 70%

Total Return: 74%

Total Return Average: 31%