Q: sI’ve been heavily allocated to Canadian energy producers over the past year, primarily through ETFs and large-cap names.
What I haven’t seen yet is a meaningful breakout in the junior oil producer names (ie. leveraged to the price of oil) compared to what we saw with the juniors in the gold and silver market over the winter.
I’m interested in gaining exposure further down the market cap spectrum and would appreciate your perspective on where the best opportunities may lie in Canadian junior producers.
Specifically:
Which sub-$1 billion market cap Canadian oil producers do you see as most compelling today?
Are there particular companies you believe are attracting institutional interest or are positioned for a re-rating if oil prices are maintained or strengthened?
And more broadly, do you expect the juniors to lag this cycle, or is this simply a timing issue before capital rotates down the cap stack?
Any specific names or themes you’re watching in that segment would be greatly appreciated.
What I haven’t seen yet is a meaningful breakout in the junior oil producer names (ie. leveraged to the price of oil) compared to what we saw with the juniors in the gold and silver market over the winter.
I’m interested in gaining exposure further down the market cap spectrum and would appreciate your perspective on where the best opportunities may lie in Canadian junior producers.
Specifically:
Which sub-$1 billion market cap Canadian oil producers do you see as most compelling today?
Are there particular companies you believe are attracting institutional interest or are positioned for a re-rating if oil prices are maintained or strengthened?
And more broadly, do you expect the juniors to lag this cycle, or is this simply a timing issue before capital rotates down the cap stack?
Any specific names or themes you’re watching in that segment would be greatly appreciated.
5i Research Answer:
We think SGY and OBE stand out in the sub $1B sector. While both have some institutional representation, this usually picks up at higher market cap levels. Both are up nicely this year, but neither is particularly "cheap". Still, we think the juniors could catch up a bit, with the caveat that the Iran War adds significant price uncertainty. While juniors on average could move, we think investors may hold back to see where oil settles in, if we get any slowdown in the war. So we would not really expected a spike up.
One theme to also consider is service companies. Energy companies are going to be flush with cash at $90+ oil prices.