These are not two companies i follow in depth, but I can tell you that both companies will be challenged for some time
Statoil is going to be challenged on the European gas side. I dont have good long term views on European gas
What do you think of Suncor right now as an investment?
The challenge fr me right now is their lack of financial flexibility with the sanctioning of fort hills and hebron projects
The breakeven oil price for the projects is too high given the current oil price environment
Until i get a greater comfort on higher oil prices, I'd rather not pay for it, so for now i'm on the sidelines
In the wake of the NDP's victory in the Alberta election, there has been much debate about the impact on energy companies. Is that a significant concern in your view?
Its a significant concern
Investors dont like uncertainty and Alberta has dished out its fair share of it
We've seen billions of dollars of value lost from Alberta producers since the NDP victory
We also fully aware of the potential for more damage with the promise of new environmental regulations by the end of the month
Are there companies that are better positioned to deal with these changes (and damage)? Or is it an industry-wide concern that hurts everyone?
We believe that ultimately, the damage to the produces cost structures will be limited given that Alberta already has the highest royalty structure in Western Canada, but the uncertainty is making it challenging for companies to make capital allocation decisions and eroding share values at an already challenging time for the industry
Some companies are better able to cope than others. For example, Kelt and ARC Resources have significant exposure to BC and can easily shift capital to these regions
Other companies like Raging River are currently insulated given SK exposure, but it does make it difficult for companies like Raging River to acquire Alberta assets
/companies in this environment
Do you recommend Canadian oil producers over US producers right now?
Canadian producers are more insulated than US counterparts given they receive the C$ equivalent of a US benchmark
YTD Crude is C$ is up > 19%. Canadian energy equities are down over 3%
At what point do you foresee US shale oil production returning to market?
Shale producers benefited for years because of excitement over growth
that growth is no longer necessary, so until we get an environment where we need signifcant production growth, i dont see a big return on that front
that does bring me to one element that the market is paying little attention to right now, which may drive more growth out of the US
There is currently no risk premium in oil prices, but the situation in the key oil producing countries hasnt been this dire for a while
Nigeria has no foreign reserves
Venezuela is in critical condition and many producers are in the same boat
None of this is being priced into the market.
Whitecap Resources is currently the top holding in the Sentry Energy Growth & Income, which you co-manage. What do you like about that company? Is there still time for investors to buy into the stock now based on current valuations?
This is one of the healthiest dividend paying models out there
we like the all in payout ratio less than 100% with a strong balance sheet
The company has done a number of strong acquisitions and expect to see more accretive deals going forward
This is a buy at current prices.
One final question before we wrap up, can you talk about the impact Iran may play on oil ... both in the near and long-term?
The US administration is very keen to get a nuclear deal with Iran done
this is a headwind for oil prices in the near term, but i think investors are overestimating the impact Iran could have on the oil markets
We think theres a strong possibility that the June 30 deadline is pushed back
As well, Iran has to prove to the IAEA that they are in compliance with the deal, which could take months
Finally, a Saudi official at the June 5 meeting responded to a question on Iran that they would make room for Iran to return to the market (likely in conjunction with the rest of OPEC).
We'll end it there. Thank you once again for joining us today. We appreciate your time and insight.