[Music] Welcome back to another episode of the Oil Groundup Podcast. I'm your host, Rory Johnson. A reminder to hit subscribe and leave us a review. And if you have any questions of us or any feedback on the show, please drop us a line at
[email protected]. Oil Groundup is distributed in partnership with the ClearCommodity Network at ClearCommodity.net and also the Oil and Gas Global Network, the leading podcast network for Oil and Gas. Today I'm joined by Joseph Shockter to discuss some of the specific factors that have helped drive oil-producing equities higher and Canadian MPs to their highest level in nearly two decades. Joseph Shockter, pleasure to have you on the podcast and welcome to Oil Groundup. Rory, it's a pleasure to be with you. Thank you very much, friend. Before we get into everything that's going on in this very, very fascinating oil market, could you just provide a little bit of your background for our audience, who you are, where you come from, how long you've been in this industry, and what is your comparative analytical edge here? Well, I live in Calgary, Canada, which is the Houston of the oil patch in Canada. I've been involved in the energy research area since 1972. I have an accounting degree in a CFA, and most of my focus during my career has been on the energy sector. I have worked at a brokerage firm, Richardson Green Shields. I was chief market strategist there, but always had a following and a focus on the commodity board. Right now, my view has been that we are in another one of those energy supercycle commodity supercycles. We've already seen the precious metals take off, uranium take off, some of the food numbers have taken off. I think that energy has lagged because of a number of issues. We can talk about that when we go into it. I think that this cycle, which started in 2020, is probably going to go into the 2030s, because the industry is not spending enough money to replace declines. World demand right now is about 106 million barrels a day, and up about 1.2, 1.3. New production may be 600,000, Guyana is going to be additioning on more crude Brazil, United States, Canada. The US, for example, is up 238,000 barrels a day from last year, just the EIA data released today to 13.74 million barrels of crude, but you also have to take into account the natural gas liquids that come out of the Permian basin, and that's 9.97 million, and that's up 724,000 from a year ago. As you go after the natural gas, you strip out the liquid. You take that all into account, and the United States is about 23.7, sorry, million barrels a day. The consumption is only 21.6, so that's why you see the US as an exporter. My whole background is what's going on with the industry? Where are the opportunities? Where are the basins that there's upside for exploration? Who are the companies that are drilling in those basins? Of course, who's going to benefit from a shareholder point of view? We spend our time all the way from large companies, $25 billion mark, all the way to companies that are 50 million. We have clients that are interested from a conservative point of view, give me a dividend yield for it to 6%, plus 15, 20% capital gain. We have those who want growth, where if the drill bit is good, and they grow 5 to 7%, plus return their shareholders, NCIBs and dividends. Then we cover entrepreneurial, which is get up to the plate and swing for the fence, which are more junior companies that are very successful with their drilling and their exploration of focus. We're trying to meet the needs of three different client groups. We've done that successfully since we started the business in 2017. As I said, I've been in the business since 1972. I've been through a few energy cycles and a few really dead periods for energy. Right now, I think we're in a very exciting super cycle. There are going to be corrections along the way. If you remember last year from January to March, we went from $79 to $54 and the stock's backed off. Of course, you had a great buying opportunity late March, early April. When that happened, we sent out a buy signal to subscribers. We told them that the indicators are all showing bargain levels for everything, gave them ideas to look at. People in the States, if they want to buy, and in Canada, they're listed on one of the TMX exchanges. A lot of them did exceedingly well. We had a lot of doubles and some triples from those lows of April of 2025. Right now, I think we need a little bit of a cool off. But again, we have geopolitics in front of us with potentially war coming between the United States and Iran to get rid of their nuclear facilities, their ballistic missiles, their terrorism activities, and then lastly, their harming of their own civilians that are protesting the despotic regime. There's lots going on there. The concern and the reason the price of oil's up, probably $12 from the low, is because people are concerned that Iran may attack not only the US fleet, but also the energy facilities in the area of their neighbors, and 13 million or 30% of the seaborn oil trade goes through the streets of Hormuz. Yeah, so I mean, let's unpack. There's a lot going on. You obviously covered a lot of ground there. This past year has been arguably one of the weirdest in memory in terms of some of the disconnects between paper balances published by various analysts and the kind of roller coaster ride of prices that have been kind of jerked around by various policy movements by the White House. So could you just kind of give us an overview before we get into kind of the forward looking and what this means for the producer equities? Could you just talk us through kind of how you envision like the mental model of what 2025 looked like in the oil market? Well, where was this oversupply? Was there an oversupply? Like are you do you believe or disbelieve? The oversupply is as kind of seen in the balances of the IA and the EIA. Where do you see these barrels going and kind of setting this up for over the next year or two? Because I completely agree that I think you know, supply growth is slowing. The question is this current at least on paper overhang that we still see in our balances. So talk me through how you see 2025 happening and kind of what you see the picture being. Because I think there's still a lot of debate among barrel counters as to what exactly was going on. Yeah, there's two areas to cover. Let's talk about global inventories and then we'll go into OPEC, which is really the key question there. So every week the EIA puts out their data of what's going on just like I covered a few minutes ago. And the EIA is showing that if you look at the US storage, it's at the bottom of the five year trend. So there's no problem with inventory access in the United States. Then there's two other charts you want to look at. One is global inventories and how many days of supply. And that's right now around 90 days of supply. It's around an 88 to 92 is normal. When we had COVID, that got up to 120 days of inventory and it took six months to get below 90 again. The other time when we had very low inventories, of course, was in 2008 when we went down to 79 days of inventory. So 87, 88, 89, 90 is about norm. It changes based on the weather and the seasonality, more demand in the winter. So you need more oil, more demand in the summer, you need more during the spring and the fall, you need less. And so the demand goes down in those seasonal periods. So right now, where we should be, the place where the criticism and the comments by the bears are is that sea-borne inventories are up. And a lot of that is the shadow fleets of Russia Iran and in the past, Venezuela. Other now, the US now controls those ships and are selling it at much higher prices than the Venezuela and government was getting. And interesting, it's the buyers of the United States, which is consuming some, Europe is buying some and India is talking about buying some. So the Americans are marketing it and it's set of trading at $20 below a market price. It's trading at maybe 10 or 12. And that relates more to the quality of the crude being heavy, which is the same as Canadian heavies. There's a discount between that and light oil WTI. So that's one picture. And so the sea-borne has a bit of an inventory overhang, but the overall number is not a problem. Going to the OPEC, that's really the wild card. A lot of people think OPEC has about two and a half million barrels of more supply they can bring on. And of course, OPEC is talking maybe in April, they might raise production. And if you look at the data over the last couple of minutes,
couple of months. The OPEC numbers, and I've got them in front of me, are not showing that they can grow production. They're supposed to grow them by 143,000, the original OPEC group, and they were down by 135. And part of that, of course, was Iran losing market share because of American sanctions and American pressure on buyers of their crude. So they lost 81,000, and then Venezuela, of course, lost 87,000, and that's going to go up, of course, now with the US. But the interesting thing is Saudi Arabia only was able to raise their production by 13,000 to 1.0,8 million barrels. A lot of people say they have 12, 13 million barrels of ability to sell. The reality is field production. I repeat that field production has never been more than 10.5. So if they want to go to 11 or 12, they can do that for short periods of time by draining their storage tanks and draining the fleets that are out there on the water. So yes, you could say Saudi Arabia could produce 12.5. You could argue maybe UAE or Kuwait could raise their production. But field production is where they cannot raise. And that's really the issue for from my bullish stance, is that they have not shown in, you know, they didn't show it in 2008. They didn't show it, you know, in the last year or two that they can raise production from the field. And to me, that is the bullish side. And I think that if people start to realize that when we go into Q2 and Q3, that OPEC is not able to raise production, and then that would be the first start. And the other thing is OPEC plus has got problems because the Ukrainians have been so successful in knocking off the Black Seaports for Russian exports. Well, Kazakhstan also uses those ports. And Kazakhstan lost 249,000 barrels to 1.33 million because of the attacks by the Ukrainian special forces against the ports there. And there were reports today that now Russia is having problems selling coal to other places because the attacks on the ports that handle coal too. So I think that once people start realizing that there's not a lot of real oil coming from fields, I think that's going to be the bullish side. And I think we pumped through 70 during Q2. And then in Q3, as it becomes more apparent that there's no excess supply. Remember, you got to take into account that the world has, and there's arguments by the geologists, what is world depletion? In other words, if you look at the Montenegh and you look at the Permium, there's 50% depletion. Like a well comes on real big, comes down at 50%. But what's the global numbers because you've got co-arfield and the big oil fields, long-life reserves in Saudi Arabia. You've got Canada with the oil sands, which are long-life. So the average number that you get is between 5 and 8%. Let's take the lower number. If demand is 106 million barrels, you've got to come up with 6 million barrels a year of new production just to keep the same reserve life index. We're not finding even half that. We're not finding 3 million barrels. That's the bullish long-term argument that we are not spending enough. And they're not going to spend enough. If Trump gets his $50 oil, they're not going to spend it. You've heard from the continental resources, Mr. Ham, saying, "There's no reason today to drill any wells in the bucket. We cannot make money doing it." So they're not doing it. And so I don't think you're going to see $50 oil unless there's some economic event to another problem on the health scare side, another COVID situation, or an economic issue like O809, a financial crisis where the economy drops off and demand drops off quickly. I think we're looking at a situation where there's a bullish cycle here. And it'll become more and more apparent as we go through each quarter of 2026. And that's going to set up much higher prices in 2728 because the industry is disciplined. In the going back, you know, you know, six, eight months, six, eight years ago, the industry was drill baby, drill baby, drill and grow baby grow. Now the industry is under pressure from shareholders. We want you to be disciplined. We want you to drill wells that are only that are economic. And we want you to do return of shareholder capital, either in normal-course issue or bid, buy back stock or pay me a dividend. So they're not spending multiples of cash flow on the drill bit. And that to me, that discipline also is a major bullish factor that's going to help the industry do better. And you know, can we see, you know, $70, $80, $90 oil in the next few years? Yes. Because the industry will not be enticed to spend enough money until we get much over that price. So on that, I think so. What we see, I mean, to your point, a major evolution over the past half decade has been the marked slowdown of US production growth, particularly on the crude side. The big debate is whether or not that is, that whether or not, you know, US shale patch broadly has hit a kind of a fatalistic geologic peak or if this is an economic peak, that and the pivot point there being essentially, you know, we can depend if it was a geologic peak, then you could have this kind of skies, the limit upside where no matter how high prices go, US shale producers can't pump more. This is similar to your argument that say the Saudis can't pump more because of like geologic reserve constraints. How do you view that versus the argument that this is this is more of an economic, this is an economic peak in US production. We really saw US oilfield activity kind of flatline and then fall off a cliff following last April, following the kind of double double punch of the liberation day tariffs that Trump announced, followed the next day by OPEX announcement that was tripling the pace of production increases on, I think that was literally on April 1st because why not? You know, funny, funny jokes all around. So do you see this being a question of like let's say we do get back up to 90 or a hundred dollar barrel crude. Where do you see US production growth going in that scenario? Do you see it re-accelerating to a stage where it balances itself there or do you see this being something that it can't keep up with those prices? I accept the geological argument. Remember where was the biggest producing oil area going back a hundred years ago? It was Pennsylvania with the Rockefellers and so now we're looking at Texas, we're looking at other areas where there's big production potential. People don't realize that the geologic is true but we're also not going after basins that we used to go to offshore Gulf of America. There used to be a lot of discoveries there. There's you know, they're 40 to 60 million dollar a wells and so people aren't willing to spend that money at today's current prices. So there is opportunity still at different zones, you know, even in the premium offshore, you know, in the Gulf of America, Alaska potentially has a lot more but price will make the difference. So the economic argument is there. If you get $65 oil tier one inventory is running out. If we have $80 oil tier two inventory becomes tier one. If you have $100 oil tier three inventory becomes tier one. So price matters on the economic side but both arguments are correct. Geologically basins tire out but there are other zones that you can go after and you know, there's still activity going on in Pennsylvania. There's still activity going on, you know, in Oklahoma. There's still activity going on onshore but the offshore areas look at Guyana. You know, it's proved that that whole Gulf has a lot more potential and you know, Brazil is talking now going up to the northwest part of the country and drilling offshore big wells because they think the Guyana trend continues. We're not tiring of opportunities. It's price sensitive opportunities. The one that makes the Guyana so successful is the total input cost to produce is $35 US a barrel and yet the price is, you know, they get Brent. So they're getting, you know, almost $70 a barrel now. So let's start looking forward. So let's assume that demand stabilizes because I think another question is, you know, the one of the bearish arguments is that demand growth will slow or plateau or whatever, but let's for the sake of argument say demand growth kind of stabilizes around current levels just north of a million barrels a day or over a year and we do see US growth kind of slowing and opact kind of plateauing if we end up in that that that price zone of say $70 to $90 a barrel. Let's look at Canada. So I'm actually Toronto based. So I'm obviously a strong watcher of Western Canadian production as well. Where do you see Western Canadian production going in a scenario like that? Over recent years we've seen growth and can't actually surprise pretty roundly to the upside over the past couple of years. Western Canadian production has been quite strong particularly following the that in service a date of the Trans-Mount expansion and in 2024. So where do we see that going? And then I think we could actually begin to look at some of the actual names that you cover and kind of where you see different producers position. Yeah. So this Canadian production overall when you take into account natural gas liquids and the crude oil is 6.5%.
1 million barrels. So we're the fourth largest producer in the world. The biggest one, of course, as we talked earlier 23.7 is the US. Then you go to Saudi Arabia, which is just over 10 million. Then you go to Russia 9.2 million Canada 61 and then the next one below that is China 4.2. So we are in an Enviable position. We have a fabulous basin. We have a a longer reserve life than our the comparable basins in the United States. Our stocks are cheaper than the US stock equivalents, but they've had a good rally in recent months because of you know Carnie and some of the things being said about supporting the growth of the resource business not only energy but mining etc Force products etc But I think that the big thing for us on is takeaway capacity and so we have maybe 300,000 TMX potential volumes. We have rail that we can increase But given the issue where Venezuela is coming back on and Chevron of course is the big player there They're going to be able to bring to the refineries that they own on the Gulf Coast Their own production from Venezuela and a Venezuela goes from a million barrels. It's you know 900 to a million right now to 1.3 to 1.5 by the end of 27 which is sorry the end of 26 which the Secretary of Energy has talked about That much you know increase can happen in that short of a period of time that a while a lot of it will go into the Gulf Coast Refineries which would then displace Canadian crude and we're already seeing that from the data that Canada is losing some market share In the United States and that market share is going to Venezuela and it's going to Brazil and it's going you know to other countries And so I think that we need to get a pipeline and so the question is where does it go? Of course first nations are opposed to it on going to the west coast the premier of BC is opposed So do we go through the Northwest territories in Yukon into Alaska and then ship from there Is there a chance that Churchill becomes an export hub for seven eight months of the year? When the ice allows shipping to go in and out to you know and during the summer months especially You know exports can go from there or do we go to the great lakes and then potentially have smaller ships Take it to the you know to the to the coast on the on the east coast and then transfer to larger ships and then maybe able to sell it to Europe You know to to displace Russian Crude and of course the Europeans love getting oil and from natural gas from the United States But they don't want to have more than a third of the imports coming from one country and they're there now They were much higher than that from Russia and I think they realized that having one major supplier At that rate you could cause problems if there was any just you know changing the attitude or the availability of crude or natural gas From that one supplier so longer term Canada has a lot of potential from the reserves point of view But the takeaway infrastructure and also remember all every project that we built on the infrastructure side has gone way past any budget Expectations coastal gas line trans Canada have to take massive write downs TMAX is got a bloated you know balance sheet and debt And you know if they want the first nations to buy into it They're gonna have to take a massive write down on the debt to make the economics worth work for the first nations to be buyers or Anyone else to be buyers. So we have issues here of Not the capability of the industry, but the takeaway capacity and the and the willpower for the Canadian government and the B.C. Government and the indigenous communities to say yes, we are willing to grow our export capacity There's no issue of export capacity on natural gas. They're all in favor or most are in favor There's always somebody against it, but oil is a is a different more complicated problem We'll be back after this short break Hi, this is Chris Barry, host of the power current podcast throughout my investing life I've been obsessed with a single question what happens when commodities geopolitics and technology collide About 15 years ago I found it an advisory firm to help answer this question for both companies and investors alike and the power current podcast is an extension of this effort Each episode we dive deep into the current state of the most important markets companies and technologies that will power the revolution in energy today and into the future Find the power current podcasts wherever you get your podcasts And now back to my conversation with Joseph Shockter So on the egress on on pipeline and takeaway capacity we have a couple different options like on the horizon We've got additional expansions and transmountain Transmountain corporation said roughly give or take three hundred fifty thousand barrels a day of potential capacity expansion in there You've also got around four hundred thousand barrels a day of potential expansion capacity that and bridge has cited on mainline Only the first half of which has actually been FID but there's still potential upside from there now that would obviously push us now towards US Gulf Coast Re export markets, which has been this weird balancing factor that we've been needing to deal with But and then and of course there's the Ottawa Alberta MOU, which is this big kind of grand bargain of This you know that at least out on paper an exchange of emissions pricing higher emissions pricing and carbon capture and sequestration Investments from industry and the and the province an exchange for some kind of open clearance for a million barrel a day bit of an pipeline to the West Coast Let's let's for the purposes of the conversation because I'm curious to understand Kind of a more granular level where you see the kind of Fundamental potential being if egress was taken away. So let's assume that something of those Happens that egress isn't an issue Differentials for WCS stay Relatively range bound around say ten to fifteen dollars a barrel and hearty We'll ignore them as well for now, but let's just assume this kind of normal happy outlook for Canada not just similar to what we've seen over the last year and a half two years Where do you see I mean one thing we all often hear is that greenfield is dead in Canada It's all brown field from here is that something that you agree with? Where do you see growth potential coming from and could you give me a sense of breaking it down between say Incremental oil sands expansion versus conventional versus NGLs Okay, NGLs will happen because you're going to need The the condensate for moving the heavy crude. Yeah So the Montenegro Verne you know the natural gas will go west to the LNG projects, you know cedar and Keys to the main all the ones there LNG Canada to so if we get to six BCF you're gonna have a lot of natural gas liquids come out and that gives you the What you need to push the heavies through the pipe so the question then is you know will there be you know You know some of the mines will run out. So you're going to need to have a greenfield a new project projects This is also the Suncor based mine the Suncor Stratcona, you know, they're all you know, they're all you know, synovas They're you know, they're all gonna be looking at that. They're also gonna be looking at you know more thermal more sagd And sagd is you know is is really shown a lot of upside And again, it's you know the economics or not at you know if you had $60 Canadian It would work but with a 1.37 Canadian dollar with US pricing it does work So it you know, that's the problem if we go to a $90 WTI the last time we were a $90 WTI the Canadian dollar is at a premium to the US So that's something to keep in the back of your mind is a strengthening Canadian dollar if I resource prices go up Remember the biggest export we have is Canadian energy the second is precious metals So we are sitting that if our resources do well then the Canadian dollar has a reason to go from 73 cents up to 78 to 80 if you have you know $85 consistent WTI and if we have $100 WTI we could be parity again. So You know nice nice move from 73 if it does happen on the egress issue You know, I don't disagree with the potential of those egress projects with Enbridge and the others But the costs have been so out of line and and you know, I have not met the expectations and so I and also the timeline for getting those projects on TMX expansion TMS more compression all of that will take time And I don't think our premier premier you know premier Daniel Smith from Alberta Expect those projects to be sufficient To meet the you know the global demand and you know, do we want to miss that opportunity to sell to Asia? We have you know look at the shipping days from the west coast to South Korea to Japan to Vietnam to Thailand to China Compare that to shipping from the Gulf Gulf coast, you know the United States. So We have a competitive transportation advantage if we were able to get the production on so that she wants a million barrel a day Project to get a go ahead. There's issue of carbon dioxide or CO2 issues There's issues of carbon capture And there's also first indigenous rights. So it's it's going to be something where we'll see if that you know if that group
that's based in Calgary can go through it with the feds with the different groups that are impacted and get a positive result out of that. But she's pushing that as a major requirement. And the question is which port is going to be accessible? And then how much is the cost to put the pipe in the ground to that port? Some people think the TMX expansion may be the only way it's going to go if you wanted to have it do from BC and then you have to go elsewhere which would be Alaska or Churchill or the Great Lakes. So again, there's so many opportunities. It's a question of cost and support from all the groups that are impacted by it. And are you able to give a sense of, for instance, in my work, I focus a lot on oil sense. I don't spend that much time looking at conventional. Could you give me a sense about what the breakdown, because I think when now, when most people think about the Western Canadian set of entry basin, it's oil sands dominant. It's a dill bit market. That's where the vast majority of both current production is in most of the growth is being. But to your point, there's there's the Duverne, there's a whole bunch of other more conventional basins in the region. Could you give a little bit of color as to what we're seeing out of those basins about Duverne, Viking, etc. What are we seeing out of these regions? Well, the total production in Canada is 6'1, might be 6'2 at the end of 20'26. Of that, close to 4 million barrels is the oil sands and sagd, thermal oil. So that is what we're selling mostly to the world because there's a lot of refineries that are built. They like that $10 to $15 discount. That offset's transportation makes a higher margin for the refineries. So that's really where we're with there. And that's where our basin is there. Yes, we have conventional and we have median gravity oil. And that gets sold in the market and there's lots of opportunity and there's refineries in Canada and the Midwest that can take that. So we do have that. But if you're looking at the Viking, if you're looking at not a Q and if you're looking at any of the different areas where you can produce the cardium, the problem we have is that it doesn't have a lot of growth. We can replace declines. We can have maybe 5% to 8% growth, new technology going to more areas, again, putting infrastructure to move that oil. Of course, you can move by trucks. There's an advantage. The gas you have to figure out how do you get it to pipe or do you re-inject it? So I don't see, if you look at that 6.1 and you say, can we add a million barrels, I would say 8, 7, 800,000 has to come from oil sands and thermal. And then if we drill more Montenegrovene wells for the gas to go west, then you have the more liquids to move the heavies through the pipelines. So I would say that it's like two or three out of every 10 barrels has to be condensate. And then the other 6, 7 barrels will be the heavies. Yeah. So I think on that basis, I mean, so for listeners, we have two main diluent import pipes into western Canada. We've got southern lights and coach in which imports naphthen condensate from the United States, but all the rest of the in-basin production of diluent actually comes like you were saying from whether it's natural gas liquids or condensates, etc. So is your view that essentially, how do you view those diluents as it can strengthen themselves? Do you think that oil sands production could eventually be bottlenecked by the availability of diluent in the basin? Or do you think that's just always going to kind of keep up on the margin? I think in some ways you may say that we may get more diluent coming out of the basin and you may need less from, you know, Pemmen is coach in line imports, because if we're going to bring on, like right now the industry produces 18 to 20 BCF a day depending upon the weather and time, you know, what's going on for natural gas. We have an opportunity, you know, if we get the two BCF from the first phase of LNG Canada, but you add all the projects that are potentially going to come on before the end of the decade, you can have six to seven BCF of movement of natural gas to the west coast for LNG, which means there's going to be a lot of diluent, you know, or a lot of propane and condensate and all the other, you know, you know, byproducts that come out of the wells that way, you know, light oil, which will be separated and the gas go west and then the liquids can go east to Fort Mac or Hard to Sea or, you know, wherever it's needed to be blended or to the chemical factories in the stress-gone area. You know, we're building a very big chemical industry in Canada again because we have the product here and the technology and you want to be right near the raw material if you're a chemical producer. Yeah, I mean, and again, you so you look at the actual producers themselves. They're producing companies when we're talking about this. Let's assume, again, for just simplicity's sake. Let's assume flat Canadian dollar value from here and flat WCS. So I think we've got roughly 15 bucks flat right now on WCS, differentials and hardesty. Given those backgrounds, what price of WTI does the industry need to kind of feel comfortable? You know, where is that pressure point on US dollar WTI for the Canadian industry? And at what price point do you think it starts to look really attractive in terms of growth again? Like, could you give me a sense of those rough levels? Well, I think, you know, at 66 where we are today for WTI, the industry is going to make reasonable money, but you compare it quarter to quarter, you're not going to see big increases. Look at the IMO numbers. Imperial oil showed you that, you know, 10 dollar difference between, you know, Q4 of 24 versus Q4 of 25, it had a big impact on their cash flow. We're going to be seeing a lot of companies start reporting next week. And, you know, for the next month, we're going to be getting all the companies giving us their year-end numbers. So I think, you know, where we are now is not attractive enough to invest new capital. We need, you know, 70, 75 for the new projects to make sense. And to see a real announcement of a big project with significant new capital being committed, I would think you need $80 US WTI with a Canadian dollar where it is today. So when we look at the value of these companies, one thing. So just looking at the charts today, we're closing in on something like an 18-year high for the SEPTSX composite energy index, cresting above 4,000 today. And depending on where we close, it could be the high. Could you talk a little bit about what has been driving this fairly aggressive rally in, I mean, you mentioned IMO, I'm most kind of a poster child for some of these recent gains. Could you talk a little bit about what's driving that? How much of this is kind of an energy equity story overall just in terms of higher multiples? How much of this is underlying commodity price and run? And how much of this is Canada specific? And you mentioned Karni earlier and some of the kind of more particularly relative to the Trudeau era, a much more amenable kind of disposition towards commodity producers in Canada. You used to talk about kind of breaking down those three different factors. Sure. Let's talk first about price. In April of last year, we were sitting at $54 to they were 66. That helps a lot to make things better for the industry. Volume increases, I don't see happening, even at these prices. The politics has changed a lot. And so that has given Canada a halo versus a negative which we had before. And the stocks have performed very, very well. As I've said, there's been doubles and triples in April of 25. And the reason is number number one, of course, the commodity price recovery, but also the Canada has the potential to grow its production. And Canada is no longer with a negative multiple. We're gaining ground against the US multiples. We're still cheaper on a multiple basis. Now, historically at market bottoms, we traded less than PDP below proved, developed producing assets. At the top of markets like we were in 2008 and 2014, we were trading at 2p or prove plus probable reserves. And the trophy companies were trading above that. On a cash flow, multiple we were trading at two to three times cash flow. At the peak, we paid trade at seven to eight. So you have number one, multiple expansion to you have higher cash flows, which mean more cash flows. So you'll you can justify again a higher pump up and then production increases. So there's multiple levers here for the Canadian industry that even though as you say, where near all time highs versus the last 10, 15 years, we still have a long, long way to go. And that's why Canada is a very attractive place to go. And our companies have tremendous reserve bases. You know, some of our natural gas producers have 25 to 30 year 2p, you know, RLIs. And that's
That's what you need for the LNG producers. They want to tie down long life reserves. The industry is a whole, if you're looking at light oil, it might be on a proven basis between five and seven years. So the industry is on a treadmill. It has to keep on drilling to do that. The oil sands producers have that 25, 35 year. And so they need to keep on finding projects as the end of the maturity of a life of one field goes or one project. They have to replace it with others. So that's why SACD is done well because the size of the projects are smaller and they don't take the big billions and billions of dollars. That a big open pit or oil sands project would be. And if you want an upgrade, of course, just could chain, could chain, could chain. The number is just a bigger and bigger. So I think that we are sitting in an end-real position. If we end up getting to $100 oil in 20, 20, 20, 30, our dollar will go up, but we will see a lot more cash flow in the industry. The foreigners who ran away, they kept on selling assets to everybody to get out of the country. Usually when they're worried about security of supply, they come running back in and they overpay. Take for example, Mike Rose, eternally. He built up Berkeley, sold it to Belidon and Darko. He built up Duvernais, sold that to Shell. So the foreigners keep on coming back when they want to be a buyer. Look at recently Oventiv. Used to be in Canada and Canada, moved to the States. And now they're selling their assets in the States in the Anadarko Basin. And the first thing they did was the Paramount deal. If you remember, they bought a large assets in the Monty from Paramount, then they took over a new vista, which closed in January. And so they want to come back and have, and they're going to have more production in Canada than the United States. So they move into the States and then backing out. Look at Batex. Batex, say, "Okay, Canada, they don't love us. We're going to go to the States." They sold the US assets to the loss compared to the amount of money they invested. And now they're coming back to be in Canada. So I think we'll see more investment in Canada simply because our basins are not as tired and our basins still have a lot more upside. They'll be at the clear water, the Charlie Lake. There's so many different things that the Sparky, there's so many places where we can go long to recharge on, more chemical use to get better productivity from the wells. Drilling time has come down so much across both basins in the States and Canada where you can now do in the States four and five mile wells. I don't think we're doing more than three mile wells in Canada. But again, if you own the land and you have the geologics and you can have the directional drilling work in your favor, there's a lot of ways we can do to make more productivity. And I think Canada is still a great place to go. And I think we'll find foreigners finally realizing that and coming knocking on the door. And of course, take over premiums. They're going to have to be high for people to want to sell out. So two questions here. So I think one question is around kind of big versus small. So I think we've mentioned a lot of small producers, but I think most of the ones we've been talking about at a higher level are imperial, etc. These are like the big champions of the Western Canadian oil industry. Could you talk to me first about how you see the trade off between smaller and larger players? Is there a big premium right now? Does that make small companies more attractive? And how do you see that kind of playing out? Well, the institutions usually are chicken to go into the medium and small right away. So they're going to buy CNQ and they're going to buy the Suncore and they're going to buy Imperial and they're going to buy Sonovus. And then as they get more comfort with the sector and they have analysts starting to cover the sector, not just the generalists, then they're going to go down into the paramods and the Celts and the Birchcliffs and other names there. White cap, of course, is grown by acquisition and is a favorite and a popular name right now and a big producer, a bigger producer because of XTO and then Veron, which was the old press and point. So we're going to see more and more acquisitions occur. So whoever has a great reserve base in the West five and NBC is a likely takeover candidate during the LNG craze as they want to tie down reserves. For people in the conventional oil and gas area, if you can find a play and grow to three to five or 10,000 and then show that the play has lots of more room to grow, then some of the big boys may come back and buy you. And I think we're going to see maybe the Cardium, the Belly River, we've seen a number of wells that are four or five hundred barrel a day wells, that can even attract the termally and C and Q. So I think that as some of these plays start showing higher productivity and long reach, then the big boys will come in and they may buy up some of the smaller players. And then again, the talented young teams or teams will say, "Okay, thank you very much for the money. Let's spin off a spin co of some of the assets with more exploration potential. Look at Spartan Delta spinning off Logan. Logan's now at 14,000, 15,000 B.O.E.s a day and growing." They just put out the reserve report, significant growth in their PDP and 2P reserves. So I think that's what you're going to see is the entrepreneurial management teams are going to say, "Okay, thank you very much for the payday. Let's take away some of the assets and let's start it all over again." And you actually led beautifully into my second part of the question, which is in terms of that acquisition or kind of merger appetite. You had mentioned earlier that one of the trends we've seen over the past decade, 15 years has been the kind of Canadianization of the Western Canadian oil patches, both US and European majors largely pulled out. Do you see, and you mentioned this kind of potential almost like a FOMO demand of getting back into Canada? Do you see those acquisition targets that you mentioned? Do you see that being more attractive to US or European companies looking at getting back into Canada? Or do you see the potential suitors much more likely being kind of the Canadian majors, CNQ, IMO, SunCore, etc? I don't see IMO or SunCore, Sonovus being aquisitors, but CNQ has shown that if it makes money for us, we're there. And there is about as entrepreneurial as any energy company in Canada. Murray Edwards has been very good at building that company, both domestically and internationally. Remember, he bought Ranger Oil at one point in the career of CNQ. So I think that it's going to be some consolidation in Canada, but I think look at the Termalines acquisitions over the years. They bought out a number of companies. They bought out Bonavista. They bought out crew. They bought out other companies as they grew and Arx done the same thing. They made acquisitions. So I think that the domestics will try to get bigger, but at some point, even those domestics will have a big boy from International come knock on the door. And if they pay the right price, Mike Rose has not said I won't sell in the past. Even Termaline could be part of the prey instead of being the predator as they've been, they could be the prey at some point. So one thing we haven't talked about yet, particularly among the majors, a lot of them are integrated. They have an extensive refining assets as well. And one of the things we've seen, if oil prices have been volatile over the past couple of years, refined product prices and crack spreads, refining margins have been truly, truly crazy. How do you see, for instance, the current rallying price of diesel? I mean, I'm just looking at my screen right now, diesel crack spreads are up $6 a barrel in the past three days on largely the Iran situation. We're taping this on Thursday, February 19th. So we don't know where Iran's going to go and we're speaking by the time this, this, this airs, we could be in a whole different world. Just talking a little bit about how you see these companies, the refining components of these companies. I think for most of my early career refining was kind of the sleepy kind of dozy side of the industry, lost leaders, kind of maybe a hedge in certain, certain years, but generally kind of seen as the, and of the, the stepchild of the upstream. But obviously through COVID and the blowouts and refining margins, these have been really, really kind of valuable cash generating assets of these companies. Can you talk to me a little bit about the refining aspects of some of those Canadian majors? Yeah, I don't spend enough time on them to go into specifics with numbers, but, but the concept is this the industry has shut down so many refineries, and especially the smaller ones that weren't economic, that all of a sudden you have a shortage of refinery capacity on the west coast of Canada for sure. And you know, even in the east, and that's why you bring in refined products from the United States. So the profitability has increased significantly for those who do have refineries. And you know, that can, will probably continue because the NIMB argument, not in my backyard, you know, to, to, to, to say you're going to build one in the Toronto area, I don't think would get, go over very well there. I don't think it'll go very well in the morning.
Montreal area. So wherever you think, you know, BC, come on, not in my lifetime. So I think that that really gives a high economic value to the facilities. And of course the replacement cost is obscene, you know, multiples of what they paid to put it on and what's on the books. So depreciated value on the book. So I think that's a good business to be in for, you know, and that causes the cash flow that gives a dividend income to shareholders. But my focus has always been on the E&P side, both domestic and international. So Canadian companies working internationally, taking the Canadian technology, which is as good as the US, you know, what do we do bring our mountains in versus, you know, seven in the seventh fleet, you know. So I think Canada's got a lot more acceptance on the international front. And our Canadian companies are working offshore tile and they're working in Trinidad, they're, you know, they're working in, you know, in the Middle East, they're working, you know, in Columbia, they're working in some of our voiced interest in and potentially getting involved in Venezuela. Yeah. So, you know, and you know, one of our companies on the drilling side, they already operates there. Enzyne works for Chevron, and they've got two rigs running. So, and that's why enzymes popped about a buck in the last few weeks. Because people see the opportunity for that. I'm waiting to see the enzyme call and see how they did, you know, in Q4, but there'll be probably quite a few questions about the potential for them in in Venezuela. So, you know, I'd like the, you know, both the, the, the royalty companies. So we cover freeholds and topazs. On the international's, we cover everything from, you know, Grand Tiara, Touchstone, you know, and there's Alvo Petro in Brazil. There's Valura Offshore Thailand that I mentioned, and we're always looking for new names and I'll be meeting with companies, you know, in the months ahead. We always do once a year. Retail investors don't really have a lot of access to management. You know, the institutions spend a lot of money traveling around the, you know, the world talking to institutional investors because they buy big bites. And, you know, AGMs and not, like they used to be, we had FaceTime with management and retail could come and talk to management. So we put on a conference every year called the Catch the Energy Industry in Calgary and Mount Royal University. It'll be Saturday, October 17th. And we have between 35 and 45 companies there. The largest would be a termaline at, you know, 640,000 Buees a day all the way down to smaller companies. It might be 5,000 Buees a day or smaller. So, you know, to have FaceTime with management is important. And so, you know, keep that in mind when, you know, people check our website, um, call www.ShactorEnergyReport.ca. And they can see when that conference is. And if they can come to the Calgary area, it's a great time and place to get FaceTime with companies that you're interested in. And, um, and that's part of what we do. We have the research side and then we have the conference and we try to make sure and we add value because the individual investors get to meet the companies we cover and the companies we cover get to meet, you know, high net worth individual investors. And that may be the only time that they spend time on retail investing, you know, in IR. So, it's a win-win and we've kind of created a vacuum or found a vacuum and we've created a product to fill that vacuum. So, Joseph, you've kind of made the case for bullishness both at the global commodity price level and specifically to the Canadian or the Canadian North American, the peace space. But you, as we kind of wrap up the end here, could you talk through some of where you see the risks that I've looked? Do you see the risks as being more tilted towards the global commodity price? Or do you see that kind of being more a kind of a Western Canadian basin type risk a la egress? Like, could you talk me through where you see the risks lurking? Yeah. You know, if you want to be bearish on the world global economy, then of course you have price risk. But I'm in the camp that I think we will see, you know, economic growth that, you know, it might be globally 2%. But the growth is going to come mainly from the emerging world where that's where the copper, the nickel, the lithium, all the things we're going to need for the grid, for the AI world. And so that's where the demand growth is going to come from. So unless you can, you know, pour cold water on that story, the bullish story of 1.2, 1.3 million barrels of demand growth globally per year, you know, into the, you know, into the next decade or faster. I don't see, you know, demand peaking, you know, I don't see peak oil in, you know, 2008 or 2035. I don't think during my professional career, we're going to see peak oil. So the key thing is going to be egress and what goes on politically in Western Canada. And so it's, you know, the, right now BC and Alberta are not on the same page on oil. They're on the same page on natural gas. We need first nation support. We need the economics to make sense for the companies to want to. Right now, the premier, you know, Daniel Smith is trying to get an agreement to a pipeline west. But the problem is who's going to build it? Who's going to own it? And they need to see the economics be attractive. And if they don't, it ain't going to be spent. And so that to me is really, we are, we are, you know, we've been to landlocked, look at our natural gas price. The US price today is, you know, $3.15 US. So pops over $4.00 Canadian. And the Canadian price is like a buck 70 and a co because we're landlocked. So we have, you know, low natural gas prices until we see much more egress on the west coast for LNG. And, you know, a lot of people have been hoping for $3 a co for the average for 2026. You know, right now, as of January February, that looks to be not so optimistic of you or not such a good view. Well, thank you so much for joining us. If before we let you go, could you let our audience know kind of anything you have coming up and where they can find more of your work? Yeah, we have, as I mentioned, the website, then you can put that on the detail there. We do quarterly webinars. Our next one is going to be next Thursday. So the first quarter, 2026 will be on the, you know, on Wednesday, Thursday night at 7pm. It's a 90 minutes. We go through the macro side. Then we talk about the companies that have reported, you know, they're Q4 results, year in results for 2025. Then we do Q&A. So we have two Q&A sessions, one on the macro, one on the company specific. So people can through the chat line of the Q&A. You know, we use go to webinar. So people can just send in their questions and we can answer them. The team will be there to respond. And then the, and then the other thing, of course, is we start building our audience, or sorry, our presenters, for the catch the energy conference. And that's something we'll be busy, you know, because you want to get them in place before June. And then, of course, the summer things are quiet as we know. And then September, we build our audience. So we have, you know, two products. The SCR is where we do the, some macro, but we do company specific there. And we cover 32 companies. And we're going to build up more because we had a lot of takeovers last year. We had, you know, Kauet know, Nevis to step. So we want to replace those with other companies. But then we also have something on the macro, however, which we do on sub-stack, which is called the Ion energy. So if you're interested just on the macro side, our product is on sub-stack. And if you want the company specific in terms of which names we like and why we like, what price we think they're make, they're attractive prices. How did they do each quarter to quarter? We do something called balance of evidence on a re company. What we like that what's going on in the company, what we don't like. If there's insider selling, if there's more debt, if production is difficult, if basins are getting tired and they don't have a replacement, we cover that in terms of the balance of evidence in those issues. So the SCR is something for people who want to buy stocks and be kept up on the ones that they don't that they all know we cover. And we cover 32 now. We had at the high 38, but again, every time you add a new one, somebody gets taken over. So that's in some ways it's very nice, because if you own the one that got taken over, you got a nice little extra pop in your portfolio value. But on the other hand, I've got to spend my research team to get together and say, who else are we going to cover now? And then we go knocking on door. So it's always an ongoing effort. But we love what we do. We love the sector. And I've been added oil and I'm going to be added for a while more. So just go to our website, see if anything makes it. We have free copies of our research, historic research, not the most recent stuff. And then if you like what you see, become a subscriber. Joe, I said thank you so much for joining us today. My pleasure, Rory, I appreciate being on.
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