Eric Nuttall, Partner and Senior Portfolio Manager, Ninepoint Partners
Focus: Energy stocks
Top Picks: Cenovus, Strathcona, Ovintiv
MARKET OUTLOOK:
The worst energy crisis of our lifetimes persists and the safety buffers that we once had at the beginning of the crisis are being quickly exhausted.
Our guiding belief is that Iran will never voluntarily relinquish control of the Strait of Hormuz and is intentionally waiting Trump out given the Islamic Revolutionary Guard Corps (IRGC) does not have an electoral cycle to worry about.
As a result, inbound oil vessel traffic remains muted, Middle Eastern production remains curtailed by approximately seven million barrels per day, global inventories are being drawn down at a record pace, and Strategic Petroleum Reserves are approaching minimum operating levels.
Despite the absolutely unbelievable complacency in the market, we remain in a very dangerous position, with crack spreads near record highs, and the inevitable spike that we have had in refined products like diesel and jet fuel to soon occur in crude oil if the status quo persists.
The buy thesis for energy stocks is not a geopolitically induced price spike, but instead in “the day after” what the world looks like when the situation eventually resolves itself or workarounds to the Strait of Hormuz are concluded in the years ahead.
In short, we think the floor price for oil is higher than pre-war by at least US$10 per barrel, leading to further meaningful upside in energy stocks.
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TOP PICKS:
Cenovus (CVE TSX)
Cenovus is a large beneficiary of the explosion in global crack spreads with their refining margins up three times and two times year-over-year in the U.S. and Canada, while also continuing its trend of stellar upstream operations.
CVE is the cheapest large cap energy stock in Canada and still trades at a material and unwarranted discount to its peers.
With shareholders returns now at 75 per cent we see this hitting 100 per cent at year-end as the company continues to pay down debt resulting in meaningful ongoing share buybacks.
The stock trades at 5.8 times 2027 enterprise value to cash flow (EV/CF), below are target of eight times, resulting in potential upside of approximately 40 to 50 per cent over the next year to two.
Strathcona (SCR TSX)
Strathcona offers excellent long-term optionality on a rising oil price while generating impressive income and per share growth over the near-term.
With decades of drilling inventory they will grow production by 64 per cent over the next five years while generating $400 to $800 million of additional free cashflow per year at $70 to $80 (equivalent to a five to 10 per cent yield plus production growth). Trading at 5.8 times 2027 EV/CF at $70 West Texas Intermediate (WTI) given strong production growth this multiple compresses to 3.8 times by 2030, well below our target of seven times.
Ovintiv (OVV TSX)
Ovintiv has amassed 10 plus years of drilling inventory in the Permian and over 20 years in the Montney, strongly contrasting it with its U.S./quasi-Canadian peers.
Given ongoing deleveraging and continued excellent drilling results we see the company either getting a multiple re-rate or being acquired by an inventory-poor peer.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| CVE TSX | Y | Y | Y |
| SCR TSX | Y | N | Y |
| OVV TSX | N | N | Y |
PAST PICKS: NOV. 17, 2025
Whitecap Resources (WCP TSX)
Then: $11.12
Now: $16.48
Return: 48%
Total Return: 53%
Expand Energy (EXE NASD)
Then: US$116.98
Now: US$93.92
Return: -20%
Total Return: -19%
Antero Resources (AR NYSE)
Then: US$33.64
Now: US$35.58
Return: 6%
Total Return: 6%
Total Return Average: 13%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| WCP TSX | Y | N | Y |
| EXE NASD | N | N | N |
| AR NYSE | N | N | N |
