While the past year has been tough overall, he believes the biggest challenge is sentiment.
‘Nobody’s here. Nobody cares. Nobody is aware of any of the bullish potential, because everybody is just focused on the narrative around, ‘(The market is) awash in oil and we’re going to fall to US$60 (per barrel).’ Or I even saw US$40 the other day. You’ve got to try to really tune out the noise,’ Nuttall explained during the conversation.
‘I think given how underweight people are, given how strong balance sheets — ie. business models — are today, that even at US$70, which seems to be a reasonable price to triangulate around, we can still find opportunities,’ he added.
Nuttall is looking for companies that have paid down their debt and have strong free cashflow.
‘The only thing to do with that free cashflow is to meaningfully buy back shares,’ he said. ‘If you look at the relationship between share buybacks and performance, it’s like mission accomplished — there’s a very strong linear relationship between the companies that have been most aggressively buying back their stock and the biggest outperformers.’
Nuttall also said he sees investment potential outside oil stocks in the year ahead.
‘We’re looking for names with multi decades of inventory, because my belief is that the demand for hydrocarbons — oil, natural gas, coal — will grow longer and stronger than consensus believes,’ he said.
When asked about his final thoughts heading into 2025, Nuttall returned to sentiment.
‘I think that’s the biggest thing — sentiment is awful, fundamentals are not. Things are not perfect, but they’re not nearly as bad as what consensus believes, and there’s still money to be made in this sector,’ he finished.
Watch the interview above for more from Nuttall on oil supply, demand and prices in 2025.
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
