Q: I want to re-visit a question I asked previously (based on Eric Nuttall's appearance on BNN Bloomberg) and Lionel's input on it. I've reproduced those questions and answers below for reference.

To clarify, Eric was not bullish on natural gas, at least over the next year. What he was feverish on was heavy oil, and his top picks were the three companies above.

I had mentioned Tourmaline Oil which perhaps shifted the conversation toward natural gas, but I was really interested in your take on the heavy oil companies.

Do you share his enthusiasm about heavy oil? I'd appreciate if you could rank these companies. CVE seems the biggest but I sense he sees more potential in the other two which are smaller.



Q: Eric Nuttall was very bullish, almost feverish, on oil (represented by the companies above) while being down on natural gas. To what extent do you agree?

Asked by Kevin on February 27, 2023
5I RESEARCH ANSWER:
We like Eric and used to work right beside him (Peter answering). He is bright and gained lots of experience over the past 20 years. He showed a lot of guts in the oil crash when his fund dropped 70% in three months and fell to $20M in assets (he now manages more than $2B). The sector is very cheap, and vs past cycles corporate balance sheets are very strong. Certainly the lack of spending may results in higher prices over the next three years (depending on the economy). But...it will always be cyclical. The price of oil in fact is even down 14% from before the Ukraine war started. But we think some sector representation certainly makes sense. The TSX is currently at 17.4% energy. We might consider that a bit on the high side. In terms of natural gas, it can be very weather dependent, but we would be more bullish than Eric; the price has dropped so much this year, but it is also dependent on drilling, and the price drop is going to cause even less spending to be done on new gas wells.

Q: I am optomistic that Peter and Eric Nuttall are bullish on the gas sector, as in the 5i reply to Kevin's query (Feb 27). What are your views on XES? Technically, it looks like it has a huge runway to the upside ...Thanks....Lionel

5I RESEARCH ANSWER:
XES is the SPDR Oil and Gas Equipment & Services ETF. Certainly there is upside potential as oil and gas companies spend. However, there has been a trend in the industry towards dividends and buybacks, so spending this cycle may be less than in other periods. Still, the fund is up 38% in the past year, and its 35 holdings look solid. We would be OK owning this for sector exposure, with the understanding that it is always going to be cyclical.

Q: Eric Nuttall was very bullish, almost feverish, on oil (represented by the companies above) while being down on natural gas. To what extent do you agree?

Q: Good Morning 5i
I read Cenovus results this morning. There is no mention of a quarterly or special dividend. When would see them announcing dividends?
Thanks