Why Oil Stocks Are About to Explode | $150 Barrel Reality

Hinzugefügt: 2026-05-21

[00:00:00]Oil's going over $150 a barrel and oil stocks are the best opportunity they've been since 2020. That's not just my opinion. That's what Eric Nuttle has been saying. Canada's largest energy fund manager and the guy who's probably the most wellrespected energy voice in the country has gone on every major news network and made a consistent claim. The realities in the physical oil market are not being reflected in the stock market.

[00:00:24]And that gap could represent one of the best investment opportunities of the decade. So today I'm going to break down the math he's used to get there. What exactly is he looking at and what is the time frame look like here? Because the difference between getting that right and wrong could be the difference between generational wealth and losing everything. We got to start by talking about the cold hard facts. Energy inventories are draining at record levels. This is a chart from the EIA. It shows current stock piles, including the strategic petroleum reserve, and that is draining at the fastest level ever recorded. We are at a point where we're not near the bottom by any means, but we are coming dangerously close to where the operational danger zone is. You can't drain all of the oil out of the market. You can't drain all of the products, all of these materials out of their storage, out of transit. You you just can't. That's not how this system works. It needs a certain buffer in order to function. And we are weeks, maybe months away from seeing an actual breakdown of that functionality in several major rich markets. We're talking the United States. We're talking Europe. We're talking Asia. This isn't, oh, we're worried about developing nations potentially being priced out. This is the kind of level where you need to see demand destruction. Eric broke this down really well in his BN interview just last week where he mentioned that the only solution is a near-term demand deferral via price discovery. And he says that that points to an oil price above $150 a barrel. To be more specific, he's done a couple interviews where he points out the historical norm.

[00:02:11]You usually see serious demand destruction when oil hits about or the cost of energy hits about 5% of GDP.

[00:02:19]Right now, that would represent an oil price of about $175 a barrel. So, there's a significant upside room right now for the current oil price sitting at just around 100. Actually, dipped under 100 on Wednesday as I filmed this video.

[00:02:33]wild that we're seeing a a very clear mathematical solution to the problem showing $150, but traders are still pricing in 100. And so that kind of brings us to the point of this video.

[00:02:46]Why is this such a good buying opportunity? Because if we're at a point where we either see a sudden spike up in oil price or we somehow miraculously see an end to this conflict and the global economy gets back on track, why does that make oil stocks such an amazing opportunity? And here's where we get to the part that I think the stock market is missing. Just because oil might get flowing over the next couple months does not reverse what we've seen happen. And Eric's made a really good point of that, too, because he's pointed out that even if you see the straight open in the next couple months, and let's be honest, even the current peace deal that is in the news that dropped the oil price 6% today would not represent the straight reopening until July.

[00:03:31]We wouldn't see an actual peace treaty start until sometime in June and then you have a 30-day period to negotiate.

[00:03:39]That's the current news that represents July. If you see that timeline, the most optimistic timeline currently suggested, you would still see 1.8 billion barrels of oil basically not produced.

[00:03:52]That would represent a base floor price of about $80 WTI for the next two plus years. And that is in a scenario where you don't see excess demand once the straight reopens from countries filling up new strategic petroleum reserves or creating new buffers in order to avoid a similar situation or a reasonable premium that you'd have to put on the price of oil because you are always cautious about this happening again.

[00:04:21]That's where we get to the math that really matters and that all has to do with valuations of stocks. Now, one of the best ways to do this with energy companies is to look at free cash flow and free cash flow yield. Currently, you are seeing stocks fairly valued depending on the stock. Obviously, some are a little rich, some are a little bit less, but they're fairly valued at about $70 WTI.

[00:04:44]From most of the analysis I've seen recently, most producers, again, with the exception of a couple outliers, have pretty much priced in $70 WTI for the next 18 24 months. And you know what?

[00:04:56]That's pretty fair. But the problem is that most analysts who are studying the market don't see a path to get back down to that level. Unless you are the most bearish analyst out there and you think that the second the conflict is over, we're dropping to $40 WTI and everything is cooked. But the analysts are looking at 80 90 $100 for the next couple years.

[00:05:18]And just to show you what that would look like, Eric's shown us a chart here.

[00:05:22]He made this literally yesterday. What would happen if in 2027 you see North American oil producers and what their free cash flow yield would look like at $100 WTI? This is not an insane level.

[00:05:34]This is where we're trading today. So if we just see these prices hold based on again additional demand for refilling SPRs, additional geopolitical risk premium, additional demand from other parts of the world trying to build up reserves, you would see an average free cash flow yield of 18% with some companies trading up all the way to 30.

[00:05:53]That is an unsustainable level. In order for companies to get back to the kind of pricing we have right now with those kind of free cash flows, you would need to see stocks up 30, 40, 50, 60 plus%.

[00:06:07]And that is on average. Again, there are companies that would need to double, triple in order for that free cash flow to look more reasonable to get the yields where they probably should be to be fairly valued like we see today. And that's where we get to the really important stuff because now the question is about timing and it's about stocks.

[00:06:25]How do you take advantage of this and what should you be looking at? And honestly, one of the best ways to do that is to look at what Eric is buying.

[00:06:33]Now, in that interview he gave to BNN just last week, he pointed out three specific companies. And it looks like they're the consensus pick at this point. Let's start with the first one.

[00:06:42]Stretha Resources. Eric has been buying this handover fist. Started buying it basically in February. really great timing. We had seen oil start to run.

[00:06:52]We've seen oil companies start to run, but we hadn't seen the boom that we've seen since Resources is an incredible firm if you were looking for two things.

[00:07:00]And honestly, we've pointed out several other things that their win is for, but they are incredibly exposed to the upside in oil prices. It's a very well-run company. It is a company with a very low break even cost, but it still is not hedged. it has not sort of put itself in a position where it doesn't benefit to the entire upside in oil prices. Strath Kona is the kind of company that could run could run hard on an oil price going up. Other companies in a similar kind of boat, obviously a different long-term riskreward profile to own the company would be like an Aabaska or one of those other sort of midcap oil sands names. You're looking for somebody producing a lot of heavy crude. You're looking for somebody with a cheap break even price and exposure to the upside. I want to point out to you here a slide that we haven't quite dug into yet in Strathcon slide deck. Now, if you're a shareholder, probably seen this before, but I want to point out what Strathon has talked about, the kind of levels that are really important for this company. Now, the first level that we should look at is sustaining capital.

[00:08:01]They can hit their sustaining capital requirements at $41 WTI.

[00:08:06]Crazy low level. Then you look at total capex. Well, that's funded at $52.

[00:08:12]Again, even in the most bearish scenarios, we were just barely getting down into the 50s. So, 52 again quite safe base dividend funded that's at $58 WTI. Again, we are looking at a floor price of something like 100. So, look at what happens beyond that. You show this is their excess free cash flow. Again, Eric's base case is $80 for the next couple of years. And they're looking at debt repayments, M&A, shareholder returns. And I want you to focus in on that last one because the story here is that these companies are going to be printing cash. Again, if you consider that maybe sustaining capex is like the very floor that they could live at, you are basically seeing between the $60 where we were and the $80 where we are today, you are seeing the total amount of free cash coming into this business, total amount of profitability coming into this business over double. And it is far in excess of what they need to run the business to to do all their capex to continue to grow. They're growing by like 100,000 barrels a year.

[00:09:18]They're continuing to grow. They also own several businesses that benefit from this long-term cycle. So, they are in a really good position. And here's an ace in the hole that we've talked about a couple times at Strathona. The Watchers Energy Fund owns enough of this company that they could prevent it from being sold. If somebody comes in with a a stink bid and tries to sort of get them the way that we saw Meg get picked off, ironically, started by Strath Kona. The Watchers Energy Fund has enough ownership in this that that won't happen. You're not going to see this get stolen from you like you could see in again some of the the Aabaskas, the Tamar values or the headarters, right?

[00:09:56]These other sort of smaller midcap plays that have huge upside and you could see that be pulled forwards. If you're looking at timelines here, I'm a long-term owner of this stock. I think honestly that's a great place to be.

[00:10:07]Puts you in a position where you're not worried. As Rick Rule said, you put yourself in a position for the long run.

[00:10:13]If you build for long-term success, short-term surprises are usually beneficial. If you see oil hit $150, you could see the stock in the60s. Is that crazy to say? But I don't think it's it's that wild because you would have to see an irrational move for the market to catch up to the reality they've been basically ignoring. However, if you then see oil sit at 80, right? If you see, you know, ignore the headlines. If you go turn off your phone for the next six months and just live your life and then you look at your portfolio, this stock will still be at like $60 a share because they are going to do huge buybacks, huge dividends, or they're going to massively grow the business or they're going to make really strong acquisitions. They're going to be good capital allocators because that's what they have been. They've shown themselves as really smart. They've basically created this business over the last half decade out of really smart counteryclical acquisitions led by one of the best teams in the country with enough insider ownership that they really genuinely do care. So Seth Kona, I think you should be looking at this as a long-term play in my personal opinion.

[00:11:20]Again, that's how I invest. Can't tell you how to invest, not your financial adviser, but if you build for a long-term position, and I'm not saying you need to buy it today, tomorrow, but Eric's looking at weeks here before the market catches up. So, I wouldn't recommend, you know, I'm not going to wait a couple of months to build out my position. I'm looking to build, and again, I have significant exposure to the energy sector, but you're building over the next couple of days, weeks, maybe a month before we see inventories hit like bare minimum and everybody start to panic. And that's again if things reopen as fast as possible, which we should all be incredibly hopeful for because I don't care if you're the biggest oil bull or you're the biggest oil bear. We should all be hoping for resolution and peace because that is the objective best case scenario for everyone long term. That's how we get the economy going the right way. That's how we get these stocks moving the right direction. We're all on the same side when it comes to that.

[00:12:19]Built for the long term. could be some short-term positive surprises. And speaking of the long term, let's dive into the second name that Eric's been buying that everyone seems like they've been buying. It's every single time we talk about Sovous. And again, Senovas went from like the ugly duckling of oil sands to the bell of the ball. Every time we talk about it, I point out that we were covering this name at like $15 a share, right? low teen share price when everybody thought the stock was doomed.

[00:12:51]When they refining assets were such a weight, long before the mega energy deal was even possible, long before they were anywhere near this market cap, we were covering the stock and talking about the fact that it offered a great valuation opportunity because it basically offered you a large cap integrated Canadian oil sands play at the price of like a midcap light oil monty game. like you literally were buying at the same kind of ratios that you were buying you know much smaller much less sort of optimized businesses in other sectors and not even to mention what's going well you could have bought you know you could have paid twice the price for a perian player that had half the resource but nowadays is getting priced like an oil sands play it's not necessarily the the super undervaluation story which makes some investors a little bit more hesitant about like what is the story here what is so offering me. So, I want to break down exactly what Eric says Senovas is good for. And there's two key things here. Now, one is the thing we've been talking about. They own one of the best oil sands assets out there, Christina Lake. Incredible asset. There are some people over on X who talk about like actually the the process of building this out and the the incredible Unity economics, the incredible break even prices, the incredible work and geology that they're doing there. And again, there's people who can do this a million times better than I can. can tell that story. So, I recommend you go check it out if you're interested. The Christina Lake asset is world class. It is it is almost without peer, right? It is up there with the very best. It is up there with the very best Clearwater assets or or Aabaska oil sands assets. And it is again so good for this company. And they're looking at Eric points out 30 plus years of production. 30 plus years.

[00:14:38]That is way beyond what any of us are even thinking about for our time horizons for these kind of investments, right? I'm, you know, maybe looking at 30 years for my entire portfolio.

[00:14:49]So 30 plus years of of current inventory is incredible. But here's the other thing, the thing that we haven't talked about and the thing that puts Senovas kind of above some of again the the smaller or midcap oil sands pure place gives them a different look. The reason why you should own this on top of or or beside another player, they own refining. Now, of course, there's lots of companies who own refining. But the story here with refining is that the longer we see job owning and Axios and the White House and whoever keep oil prices down, right? The headlines are managing to keep the price of oil down, speculation is keeping the price of crude down. And the longer we see product pricing, the diesels, the jet fuels, the distillates stay high, the longer we see some of the most incredible margins in the history of the refining business. These companies, I mean, we already saw it the end of Q1, they are literally printing money with these refining assets. So, Senovas offers you two options. Option A, oil prices go through the roof and this company makes everybody rich. or option B, oil prices stay low, reality continues to happen and so product prices stay high and this company still makes everybody rich. Those are two pretty great scenarios to be in. A company that is going to offer gigantic margins, gigantic free cash flows, potential gigantic shareholder returns.

[00:16:18]Again, Eric points out in this exact same paragraph that he thinks fair value looks like a $58 target. That's a 40% upside at $80 WTI and that is a fair value target. We are at a time when investors who have completely ignored the oil trade are going to recognize they are underexposed and as we all know the market is not rational. Short-term you could see this thing go far beyond that. Is it insane to say that in a sort of panic buying scenario you could see a $70 price tag? I'm not saying you should look to go buy it at 70 yourself. you should chase the wave if we do see the worst case scenario and oil prices jump through the roof and everybody's panic buying oil stocks. But that's not an impossible scenario because remember 2020. Eric's pointed out this is basically 2020 inversed. Instead of oil prices going negative because people were underreacting, oil prices are going way high because people are avoiding the situation. And when they start to buy and they push these stock prices up, they're going to be overreacting to that news. You could see these stocks overreact upside short term. Again, when I look at the timelines for Senovas, they're fairly similar with Stra Strathona. Don't know why that's hard to say. With one major exception, these guys own that refining asset and so they're going to print money either way.

[00:17:38]So is the kind of play that I would make if I was in a position I didn't want to gamble. And it's not really a gamble, but if I didn't want to take a bet on either side of the oil up versus oil down versus oil flat debate, it's a major debate right now. Obviously, Eric's picked aside, but if you buy Sovis, you're in an opportunity where you have that oil sand asset. You have that long reserve life. You're going to get paid a great dividend to hold on to this thing. The stock is again, it's up a huge amount this year, but the cash flows of the business are up much more.

[00:18:08]So, you're not actually paying a crazy price at today's pricing. at fair value.

[00:18:12]It's 40% under current fair value at $80 WTI, but again the refinary asset gives you a little bit of buffer to that. It's a pretty awesome option. Now, you can also make an opportunity sort of a uh an Imperial play. Uh Imperial has been the popular stock for long enough that the price is higher, but again, similar kind of opportunity, high quality asset, they own a refining business. You just are paying up for that, which is why Eric's not doing it. Or you could own a Suncor.

[00:18:39]Suncor has had one of the greatest turnarounds in history, right? Like if you look at corporate turnarounds at that business, it's one of the best in at least Canadian corporate history, at least in living memory. Again, give me a break here. I don't know that much of the history, but still, Suncor, incredible business. You're paying a little bit of a premium. Puts the Novas in a really good position. And obviously, it's a pretty awesome opportunity if it's still 40% undervalued. And here's where we jump to the last name here. It's White Cap Resources. Again, it's almost become consensus here. These three names have appeared repeatedly when we go out and we get these interviews and we talk to these people and we break down what exactly are the sort of big investors buying. Whitecap has been a very consistent name. I think there's a couple reasons here. Now, Eric points out a couple things about this business.

[00:19:26]One of the big things that I've seen is that they're drilling some of the most economic wells in Canada. Now, Eric points out the fact they've got 25 years of high quality inventory in the Monte and the Duivere. They're going to be a key recipient of funds flows. This is something we said. This is actually what we've done with our money here. It's something that a lot of people have done. We saw in the comments a lot of money from ARC moved to this name because Whitecap was kind of like the the sibling of Arc Resources. We had talked about how they were the oil play with the gas assets. ARC was the gas play with the oil assets and really we should say liquids for both of these business, but they were very similar.

[00:19:59]They operated in similar spaces. They had gotten to a similar size. It made a lot of sense and a lot of investors like myself who aren't necessarily looking to own Shell because that's not quite what I do in this portfolio with these sorts of companies. That's not what I was looking for. Arc became sort of an opportunity to take some of that capital. I I put some into companies like Termoline to bet on the natural gas play longterm, but really to put into stuff like Whitecap. And I think Whitecap's a huge beneficiary. Um he points out again the upside here is insane. He's looking at a price target at $25. That's a 54% upside for fair value in 2027. When I look at the timelines for white cap, I'm actually more bullish on the long term here. Now, again, in a scenario where you see the oil price jump to 150, like Eric's calling for, like the sort of oil analysts on the internet are looking at and saying, it's obvious, yeah, you could see the stock at 25. Again, you could see an overreaction shortterm to the upside. you could see a $30 plus price tag. Now, that's awesome. But long-term, the opportunity for this business is incredible. It's incredible because the more oil production we see in Canada, the more pipelines get built, the more we see the resource get exported, the better this the sort of story is for their distillates, for their condensate, for their liquids that's coming up with the natural gas. The longer and the more sort of disruptive this whole event ends up, the more we see the opportunity for Canadian LG, White Cap produces a lot of natural gas. You raise the base floor price for Ako, White Cap profits handsomely. And then of course, the longer we see a floor price high for oil. The longer we see them able to do this. This is a capital allocation toolkit. They talk about production growth, balance sheet, base dividend, and share repurchases. I think that the way they have approached this, and I'll show you the next slide here. We've looked at this, I think, two or three times on the channel, but they've had this slide in a couple of their earnings reports. I love it. Look at the the strategy here. It's incredibly simple.

[00:22:03]When things get high, when prices get high, you look at moderate growth.

[00:22:07]Smart, right? Don't chase growth. Don't pay crazy dollars. We looked at what was it? $4 billion in land purchases and leases in the United States today. $4 billion bid.

[00:22:21]We're talking about crazy money is now currently speculating on oil prices. You could see assets hit all-time highs in order to go and acquire them. This could be a point where it's really smart to have inventory like all three of these companies have and to be smart and modest about your growth. Don't rush out there to overproduce so that when price corrects to the downside, we get another bust. Don't do that. These companies have been through it. In Canada, our industry suffered for a decade. They understand what happens when times are good and you overspend. So, the moderate growth and the prioritization of the balance sheet, prioritization of repurchases, and the prioritization of shareholder returns, those are all really smart moves here. And obviously, we could be beyond the right-hand side of this chart. And I still trust that this management team knows what they're doing. They've been incredibly efficient even at a time when they would be rewarded for not being efficient. So that tells you something about the long-term opportunity which is another reason why I own white cap for the long term. I'm looking at this business as a long-term opportunity the way I was looking at art. I'm looking at it as an opportunity in the duet opportunity in what I consider to be one of the best plays unconventional plays on the planet right now. a place where there's going to be a lot of investment over the next decade as investment has to move out of older, more mature and more drilled basins like the Perian and the Bakan and then has to move somewhere else. Canada is an easy enough place to invest in.

[00:23:52]We've got our problems but so does every other option, right? South America is another one, Turkeyy's another one, but those have similar, if not worse challenges than we do. So, it's a really good time to own those assets. really good time to own those businesses and longterm there's a huge upside to put that all sort of into one final conclusion here Eric is looking at the reality the math and inventories are drawing down fast and the reality is you're going to see disruption like actual physical disruption to the energy market in the next 2 months and before you see that you are going to need to see what we have seen as the solution every single time the only solution to the system just breaking down and That is demand destruction. And the only way you see that is with oil prices hitting a high enough level. Now Eric, again, he's made a couple calculations, but he says that's at bare minimum $150 a barrel. And the moment you see oil prices hit those levels, you're going to see a huge rush of offsides investors trying to correct for their mistake.

[00:24:54]It's going to put a lot of investors currently holding the stocks in a position with huge gains. What you do in that moment is up to you. Don't let any investor, myself, Eric, or anybody on the internet, tell you what to do with your money in that moment. But we'll all share exactly what we're doing with ours. We're going to try to sort of make sure that everybody understands that this is a huge moment in the energy industry, in the oil and gas investing space. And it's really important to all have a plan to understand the realities of what could happen. We could see all of this fail. And we'll have to we'll have to talk about that when the math comes out and we see how maybe that could happen. But it's very important to recognize that this is not a six months down the road story. This is not a year down the road story. This is a June or July story. And so investors need to be aware that that decision could be coming way faster than they think. And that's where I want to leave the question with you. If oil prices hit 150, what are you going to be doing with your oil shares?

[00:25:55]I would love to hear your thoughts in the comments down below. And as always, if you like what we do here on the channel, please do like it. If you like this sort of these topics, covering Canadian energy, covering Canadian resources, investing in Canada, please do subscribe. And I hope I see you in the next one.