Ninepoint Energy Strategy Update - October 2025

I was invited to attend a presentation on October 21, 2025, with Eric Nuttall - Partner and Senior Portfolio Manager with Ninepoint Partners; Eric spent almost an hour discussing Energy.  My notes and observations from the event are shown below.

Mark Schoeffel / 21 October 2025

Summary of Eric Nuttall's Presentation

Eric Nuttall, Partner and Senior Portfolio Manager at Ninepoint Partners, delivered a concise presentation (approximately 35 minutes) on the ongoing multi-year bull market in energy stocks, with a particular emphasis on Canadian producers. Eric argued that the sector remains in its early stages despite persistent negative sentiment, driven by hype around tech, AI, Bitcoin, and other non-energy assets that have "stolen the oxygen from the room." Drawing from recent cross-country roadshows and industry conferences (e.g., Energy Aspects in London), Nuttall highlighted compelling valuations, a supportive macro environment, and structural shifts in global energy dynamics. He positioned Canadian energy companies as increasingly strategic assets for global super majors, citing their scale, inventory depth, and economic advantages. 

Market Sentiment and Bull Market Indicators 

• Early-Stage Bull Market: Referencing historical bull market cycles from Peters & Co., Nuttall noted that energy has seen negative fund flows for two years, with daily redemptions in surviving energy funds. Sentiment remains contrarian and "fucking" pessimistic, far from euphoric peaks that signal tops (e.g., recent videos of crowds lining up for gold). Valuations are "exceedingly compelling": At a $58 WTI strip for 2026 and $4+ natural gas, investors can buy multi-billion-dollar companies at 13-14% free cash flow (FCF) yields, with active share buybacks and decades of inventory.
• No Energy Transition: Challenging the narrative of a rapid shift to renewables, Nuttall pointed out that $9 trillion in global renewable investments has barely dented the energy mix. Oil, natural gas, coal, and even wood demand hit all-time highs last year. He quipped that the real "energy transition" is in developing nations like Nigeria, moving from biomass to hydrocarbons. OPEC's Secretary General echoed this at a recent conference. The IEA, historically bearish, is expected to release a more realistic scenario next month, shifting peak oil demand from 2029 to 2050—signaling "realism creeping in" and potential psychology shifts.
• Demand Fundamentals: By 2050, global population will grow 25%, with urbanization equivalent to 210 new Londons by 2040, driving massive energy consumption. Energy use correlates strongly with GDP doubling. Oil demand will "grow longer and stronger" than consensus, focused on petrochemicals and jet fuel rather than gasoline/diesel. 

Oil Market Dynamics 

• Short-Term Debate: Amid anticipation of an "oil-driven supply flood," OPEC is normalizing voluntary cuts, adding barrels and creating "oil on water" (offshore inventories up 312 million barrels YTD vs. 77 million onshore). However, starting from below five-year averages, onshore builds are normalizing, not surging. Data provider Kepler revised oil-on-water estimates down 2.5%, reducing the delta. Noise factors include sanctioned Russian barrels, infrastructure disruptions (e.g., bombings), and destination flows (more impactful in OECD/U.S. than obscure hubs). Onshore inventories drew in October despite full OPEC+ return (actual 1.26 mb/d vs. expected 2.2 mb/d), contradicting bearish narratives. Short-term softness is possible (WTI ~$55-60 could delay shale response), but current contango signals looseness now while markets bid up future curves.
• Medium/Long-Term Bullish Catalysts:
• Twilight of U.S. Shale: A "large and early call" now gaining consensus (e.g., Diamondback executives). U.S. shale growth ends/plateaus at current prices; supply costs rising to $95/bbl by 2030 due to tier-one inventory depletion and capital returns to shareholders. Non-OPEC supply growth negligible post-2026 (e.g., zero incremental from Feb-Dec 2026 per Energy Aspects), with Brazil/Guyana/Canada projects peaking soon.
• Low OPEC Spare Capacity: Consensus IEA estimates (6-8 mb/d) are "ludicrous"; Ninepoint's wellhead analysis (using Olex data) pegs sustainable capacity at 1.68 mb/d from key countries (on a 106 mb/d market)—"like owning a house without fire insurance." Geopolitical risks are elevated (e.g., 94% of Russian refineries hit, 30% capacity impacted per Cornerstone Analytics).
• Offshore Shift: With discoveries/rates at historic lows, project timelines lengthening (IEA data), and booked reserves minimal amid rising demand, the world relies more on offshore. Ninepoint holds a rare small position in an offshore service company (halved in value recently, but balance sheet solid).
• Price Outlook: Inflation-adjusted $50-57 WTI is "ridiculously low." Short-term debatable (next 1-2 months), but early-mid 2026 consensus on these themes could drive prices to $70s-$90s+ ("not out of the realm of possibility"). Bullish despite bearish noise. 

Natural Gas Opportunity 

• Demand Surge: A shift from non-involvement; now 2:1 gas-to-oil exposure. Key drivers: U.S. LNG exports (17 bcf/d now to 30-35 bcf/d by early 2030s); LNG Canada (0.7-1 bcf/d to 6-6.5 bcf/d); AI data centers (5-10 bcf/d by 2030, plus hyperscalers like Oracle going gas-fired off-grid). U.S. power demand up 2.2% YTD (5.5% in data center-heavy Texas); EIA estimates require 175 new nuclear reactors (10-20 year build) or Hawaii-sized solar—impractical. Wind stalled (e.g., Trump policies). TC Energy forecasts 45 bcf/d demand growth over next decade (16-20 bcf/d from LNG, 5-10 from AI).
• Supply Dynamics: Permian plateau limits associated gas; Marcellus constrained. Haynesville is marginal basin (supply cost ~$4/MMBtu per producers); YTD growth from drilled-but-uncompleted inventory normalization. At $4 strip ($4.05 as of presentation), buy producers at 12-14% FCF yields, 4.5-5x EV/CF. Normal/cold winter vulnerable to spikes (one cold spell last winter halved inventories); potential $5+ next year with LNG/AI adds.
• Weather Sensitivity: Monitoring models; unnamed trader noted vulnerability to cold snaps without storage builds. 

Canadian Energy's Strategic Edge 

• Global Context: Only four basins with size (Saudi Arabia, Iran, Venezuela, Canada); Canada is "friendly, next door" for North American shale expertise applied to tight sands/shales. BMO data shows Canada tops global booked reserves (conservative booking hides true scale: 40-80 years inventory).
• Economics: Peters & Co. payout metrics rank Canadian plays #1 in North America (fastest capital payback for 2x return, enabling FCF/share buybacks).
• Market Access: Heavy oil discount narrowed to $10.85-$11 (from $25-30); LNG Canada ramping (teething issues resolved); gas discount to fall to $1-$1.10 USD. Pipeline bottlenecks normalizing. Policy shift: End of "phase-out" rhetoric, windfall taxes; budget/parliament updates imminent.
• M&A Activity: Active (e.g., Varen acquired at 39% premium; potential Synovus/MEG drama).

Valuations, Risks, and Portfolio Positioning

• Relative Mispricing: Energy up 9% YTD vs. tech's volatility (e.g., +40% daily swings). At strip, energy averages 2% FCF yield vs. tech's 20-30x revenue; oil names 4x CF. Balance sheets strongest in Nuttall's 24-year career (some net cash). Dividends sustainable at 7-8% down to $50 WTI (35-40 years coverage in Ninepoint Energy Income Fund, yielding ~7%).
• Buybacks: Sentiment funk enables aggressive repurchases (correlation with share price performance); even holdouts pivoting to per-share growth.
• Funds Overview: Ninepoint Energy Fund (growth-focused, volatile; up ~3% vs. TSX energy index; 27% oil, rest gas/services; tactical cash up to 78-82% historically). Ninepoint Energy Income Fund (smaller, income-oriented). Outperformance via stock selection (e.g., lesser-known names vs. CNQ/Suncor at 7-8x CF). Data investments (satellites, Olex, OilX) for real-time insights.
• Risk Management: Minimize volatility via cash, right stocks; geologist partner Keegan grounds hype; options via Colin.

Nuttall closed by emphasizing the bull market's durability, positioning as an "energy fund" (not oil-only), and encouraging Twitter follows (@EricNuttall) for updates. 

Summary of Question and Answer Section

A Q&A  followed (moderated by Neil Ross) and addressed roughly a dozen pre-submitted and live questions, lasting around 15-20 minutes. It delved deeper into themes from the presentation, with Nuttall providing nuanced, data-backed responses. Key exchanges: 

• AI/Bitcoin Mining Power Needs: Provinces lack grid capacity; Alberta prime for growth. Hyperscalers (e.g., GE Vernova's 8 bcf/d backlog) going off-grid to avoid political backlash. Conservative on AI estimates—LNG buildout is core thesis (3-4 bcf/d annually to 2030), with AI as "gravy."
• Exploration/Drilling Changes: Zero interest in exploration (oil remains scarce/hard to produce at scale). Small offshore service position is opportunistic, not thesis-changing; focus on undervalued U.S. gas producers post-summer selloff.
• LNG Canada Suppliers: No specific providers (benefits all via basis improvement). Phase 2 may spur M&A if owners short gas; otherwise, spot market purchases.
• Oil Demand Trends: Growth shifts from gasoline/diesel to petrochemicals/jet fuel. China plateau possible, but India (lower per-capita intensity) and emerging markets (Africa, Middle East) drive non-OECD gains. OECD peaked 10+ years ago; IEA's peak delay to 2050 removes a key objection.
• Venezuela: Reserves rich but production constrained (underinvestment, damage, brain drain); $80B needed for scale—years away from meaningful supply.
• Russian Flows: Ukraine's escalated hits (refineries, pipelines, exports) suggest U.S. policy shift under Trump. Russia under-quota; up to 30% refinery capacity impacted, export bans. Post-war flood unlikely due to investment shortfalls (echoing former OPEC Secretary General's concerns).
• MEG Deal (Multiple Questions): Lamented timing at oil cycle bottom; Strathcona (Adam Waters) hostile bid opportunistic. Synovus vote deferred to next Thursday (needs 66%, at 63%—surprising given arbitrageurs). Hoped both bids fail for re-entry (sold MEG at $28 amid dual-risk); Strathcona paper inferior, Synovus underpaying long-term value.
• Future Depletion Rates: 5-10% globally (5-10 mb/d); Epsilon's 15% misquoted/high. Underinvestment + demand growth + U.S. shale loss sets up M&A; Canadian firms strategic for U.S. peers.
• AI's Role in O&G: Increases power demand (natural gas/LNG bullish); marginal supply $4/MMBtu—$5 possible next year (12-20% FCF yields).
• Worst-Case Oil Scenario: OPEC flood + long-cycle projects online + U.S. response below $60 (needs $50-55 for rig cuts). Demand stimulative at lows; sector flat/negative production, no buybacks, but 7-8% dividends hold 6-9 months (sustainable to $51). Avoid COVID as template.
• Best-Case: 1 mb/d annual demand + 1.7 mb/d OPEC spare on 106 mb/d market + zero non-OPEC growth from Feb 2026. Rally to $70 (shale plateau), $80s+ for growth.

Nuttall reiterated the bull case, urged wholesaler outreach, and ended on optimism amid buybacks and mispricing.