TORONTO (CU)_As the pandemic appeared to recede and economies began reopening, prior to the newly discovered Omicron variant of the Coronavirus, oil prices rebound by more than 50 per cent in 2021. After a string of difficult years for those invested in the oil and gas business, energy stocks reported an overall surge last year, positioning itself as the best sector in the S&P 500 Index and S&P/TSX. Now, as we enter into another year which may or may not be dominated by the ongoing global health crisis, one of the leading energy fund managers in the world is advising those looking at oil and gas stocks to think small and think Canadian.
“Canada is, I think, the place to be in 2022,” Eric Nuttall, a Partner and Senior Portfolio Manager with Ninepoint Partners LP, told BNN Bloomberg. Morningstar’s top-performing energy-focused fund last year was Nuttall’s $950 million (US$752 million) Ninepoint Energy Fund, reporting a total return of 189 per cent which blew away the S&P/TSX Composite Index’s 22 per cent. The second best performer was also another Canadian energy-focused fund, Canoe Energy Portfolio Class, which posted a total return of 101 per cent in 2021.
According to Nuttall, energy investors last year benefitted from what has been described as a “disproportionate” increase in smaller-cap Canadian energy companies like Cardinal Energy Ltd. and Baytex Energy Corp., both of which rose over 420 per cent last year. However, the fund’s decision to buy 53 million shares of struggling oil sands producer Athabasca Oil Corp. in January 2021 has been described as the most prescient trade last year. At the time, Athabasca’s total market value was less than US$80 million, with US$450 million of debt maturing in February 2022. But as oil prices rose over the year, the oil sands producer’s cash flow improved, and the company managed to push almost US$90 million in maturities out to October 2023 by refinancing its debt. The stock gained a whopping 600 per cent last year.
Matt Taylor, Athabasca’s chief financial officer, noted that the company’s balance sheet refinancing was a catalyst for the shares. “The stock’s performance and trading volume (in 2021) is reflecting this optimism and we have attracted a number of new investors like Ninepoint,” he said in an email. Meanwhile, Nuttall is looking to boost returns for 2022 through similar deals, although he has admitted that it will be difficult to come up with another Athabasca. “That one was special,” he said.
