Eric Nuttall's Top Picks: October 27, 2023

[Fraser921]

Eric Nuttall's Top Picks: October 27, 2023

Crescent Point is having remarkable success with a new frac design (elevator frac) in its recently acquired Montney acreage, having recently drilled one of the most economic wells in the Montey ever drilled. With 300 potential follow-up locations amenable to this technique, and 15 years of inventory overall, we see the current valuation of 2.8X EV/CF and 23 per cent free cash flow yield at $80WTI as very compelling. We think fair value is 5X = $22/share = ~100 per cent potential upside.

Cenovus Energy (CVE TSX)

Cenovus should reach its final debt target of $4 billion in January allowing it to begin returning 100 per cent of free cash flow back to shareholders. Trading at a 14 per cent free cash flow yield at $80WTI we believe the name could re-rate to a 10 per cent free cash flow yield or 6X multiple = $38 fair value or 40 per cent potential upside.

Enerplus (ERF TSX)

Enerplus is a near debt-free oil company with 15 years of Bakken inventory and is currently returning at least 60 per cent of free cash flow back to investors. Trading at a 3X EV/CF multiple at $80WTI and a 16 per cent free cash flow yield, we see meaningful upside to our target of 5X EV/CF = $28.50 = 66 per cent potential upside.

https://www.bnnbloomberg.ca/eric-nuttall-s-top-picks-october-27-2023-1.1990466

[Fraser921]

outlook for oil

https://www.bnnbloomberg.ca/eric-nuttall-s-top-picks-october-27-2023-1.1990466

(3rd window) on right

[dan_s]

As we move into Phase 3 of The Big Paradigm Shift, we should see the multiple expansion that Eric keeps mentioning.

IMO the current backwardation of the NYMEX strip for WTI makes no sense unless you believe there is a MAJOR global recession just ahead. Without a recession, this world will need every barrel of OPEC oil production capacity back online and more oil from the U.S. shales to balance supply and demand. OECD petroleum inventories are low, and they keep draining; that cannot continue.

Phase 3 is when the majority of the Wall Street Gang understands that we have a significant oil supply shortage.