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 I'm Charlotte Mloud with investingnews. com and here today with me is Eric Nuttle, partner and senior portfolio manager at 9point partners. Thank you so much for being here. Great to have you back. >> You bet. Good to be with you as always. >> Yes, great to be catching up and it's been a little while since we had you on. So before we get into what's coming up in 2026, I was hoping we could take a brief look back at 2025 for the oil market. How would you characterize last year? Were there any big surprises or

did it play out as you expected? >> I would say there were a lot of surprises. Last year was incredibly volatile. The market had to deal with a lot of different uh dynamics. Uh obviously there was President Trump and uh you know his Twitter feed and what that would offer the the markets. We had to deal with economic uncertainties around tariffs which I think in the with the passage of time turned out to be much to do but nothing. The biggest shift though was OPEC policy where in February March they decided to begin

returning barrels to the market. I would say that caught the market offguard and there was uncertainty in terms of well how well would the market be able to absorb those incremental uh barrels. So the the price of oil ended up down I think roughly 18 19% on the year. What was interesting was that energy stocks performed far better than I think most people uh thought. Uh my fund was up roughly 18%. So we were we were quite happy with 2025 given how challenging of a year it was to navigate and it makes

us even more optimistic on what 2026 may hold. >> Well, and let's get into what you see coming in 2026. And I thought we could start on the supply side. One point that I have seen you a highlight on X is that we're going to see a peak this year in nonOPEC production and of course we've talked in the past about the twilight of US shale. So I wondered if you could unpack what you're seeing there. >> You bet. So a huge dynamic, something we've talked about in the past was the

maturity of US shale. You we can see it in terms of the lack of ability to meaningfully grow for most of the basins. You know there's three major basins in the United States. There's the Perian, the Bacan and the Eagleford. We think the Bacan and the Eagleford are now plateaued to decline and and now the Perian finally is. Just last week the EIA actually forecasted the peak in US shale production. So that was kind of val validating what we're seeing. So why is that so important over the past 15

years? US shale has been 117% of total nonopc supply growth. And so let's make that make sense. Nonopc production is about twothirds of global oil supply. And the biggest dynamic or in fact all of the growth has been US shale. Uh there are a couple countries growing and will be able to grow for the next several years. You know Canada being one of them. You know we've got the resource we're we've got pipeline eress increasingly. Uh Brazil is growing. Uh Argentina a little but in net most oil

producing countries are mature. And so we reference work by energy aspects. It's globally recognized and respected firm that says the the production from nonopek is peaking this year 2026. So that's very very very important and I think people are unaware of one it's happening and two just how significant it is because you know we had the biggest bear last year the the IEA say well demand's going to grow under their base scenario to 20150 so you know demand's roughly 106.5 million barrels

per day whether it's going to be growing to 120 or 134 depending on which source you use that's a lot of demand growth and so where is the demand going to come from well it's not going to be nonopac so now we have to look at OPEC you know Saudi AE etc our estimates is that in aggregate they only have about 1.4 4 million barrels per day of spare capacity. That's a very very very small amount and that represents just over one year of demand growth. And so, you know, let's assume we're going to be talking

next year. Well, we'll be talking about peak the rollover in nonopac supply. We'll talk about how OPEC spare capacity is likely been windowed down just a little bit more. And yet, demand will be hitting record after record after record. And so, there's a digestion period that the market is in now. we are having to absorb the barrels that were put on by OPEC last year. So, it's a it's a process, but it really feels like the market is looking through the builds of today to what are going to be the

draws of tomorrow. So, it's really a second half story for for oil. Uh we think that oil is bottoming. You know, calling the exact price is is a mug's game that feels like it was 55. This is the most anticipated supply glut in the history of humanity. And so, you know, the market is a discounting mechanism. You would think that you know the known known are being fully discounted and yet the market's looking through it and saying well geez you know what happens when US shale has peaked what happens

when OPEC is normalizing their spare capacity and yet demand is growing. So that's the outlook on oil. Natural gas we're very bullish on as well, especially given the sell off we've had which has been largely weather induced. There was a lot of optimism around you know December of 2025, January 2026 and sure enough mother nature you know pulled a surprise. We're bullish on oil not because of weather. We always kind of assume normalized weather. Why we're bullish on natural gas is the buildout

in LG. Let's liqufy natural gas both in Canada and the United States. It's a ratable meaningful change year after year after year. So this year 2026, the US is going to be growing demand by about 3 billion cubic feet per day. Canada as the second part of phase one of LG. Canada continues to ramp. That's going to add another BCF a day. So that's 4 BCF a day. There's other elements to the bullish thesis. You know, electrification and AI and data centers on all that. But the the bedrock

of our core bullish thesis is companies have spent multi-billion dollars building out these facilities. There is a global call on natural gas. Even if there's a bit of a surplus in international markets, we still think the the marginal cost of supply in the United States is about $4 per MCF. That's the required price to motivate producers to drill in the Hannesville, which is a the a large but higher cost basin to satisfy demand growth. And at $4, we can get very very excited about natural gas stock. So I I would

characterize our outlook for 2026. Oil, you know, cautiousish a little. You know, we don't see meaningful upside in the next couple of months, but it's really about the second half of next year and 2027 in the year beyond. We think we are on the cusp of a multi-year bull market for oil and for natural gas, we remain bullish. >> Okay, that's a lot for us to unpack there. So oil, oil coming up in the second half of the year, natural gas. So is that a more immediate story for you

in that case? >> It is especially we've had a pretty significant selloff in natural gas uh stocks. It's our preferences in the United States. You know, these companies are are larger, larger market cap, more ability to be uh relevant. More importantly, they have production closest to where demand is growing. So they get preferential pricing. You know, it makes makes sense. You don't have to ship your gas nearly as far. And so where is demand growing? its LG facilities in the Gulf Coast and its

data centers around the northeast of the United States. And so that's where the Marcellis is and that's where the Hannesville uh is. But with US uh companies or US stocks, they are subjected to be caught up in in certain investment themes. And so AI data centers that was very very buzzy, you know, in 2025. It it added to a volatility in those stocks. Natural gas as a commodity is probably the most volatile commodity on the planet. And then you add on the the funds of flows from different, you know, thematics. So

it's we saw natural gas stocks sell off pretty dramatically. We get excited because I think $4 is a fundamental floor with upside depending on on weather, which is actually finally improving now. But at $4, we can buy into companies with 20 plus years of in of drilling inventory. And because of the selloff, they're trading at 14% free cash flow yield. So what does that mean? Well, >> at $4 to generate enough cash flow to keep production flat and could buy back 14% of their shares outstanding year,

which they're actually doing. And so, yeah, we're we're we're bullish on natural gas in the shorter term. Medium-term, we're much more excited about uh oil. You know, natural gas there is there is a ceiling price. Industry has gotten so good at drilling it. We think $5 depending on, you know, is there an interruption or pipeline goes down or whatnot, but $5, I think, is a reasonable ceiling. oil. However, when we think about, okay, what does the world look like post US shale? You know,

US shale taught us all that there's this abundance of lowcost reserves and, you know, they can be profitable down to the insanity. They the PQ4 was like $20. These companies would make so much money. We know that was nonsense. We are in a post US world. And so that means that to satisfy demand growth and we must satisfy it as an industry, where are the barrels going to come from? It's going to be offshore. That is not a $50 world. That is not a $60 world. I don't even think that's likely a $70 world. We

have to have the oil price go high enough, stay there long enough to allow companies to start pivoting away from shareholder returns and actually start drilling again, exploring again, developing again at size. So I think it's it's we're saying 70s. I I I think do think that's being quite conservative. We think the upside is meaningfully uh above that. on an inflationadjusted basis. Oil is probably the cheapest commodity on the planet. There have been so many false narratives. You know, the biggest

proponent of them has been Donald Trump in recent uh quarters. And so, I think that's really lulled the market into this false sense of complacency. Meanwhile, we're walking into a supply crisis that's coming, you know, much sooner than I think people may be aware of. And for prices, is that a price level that you see us getting to for oil in that second half of the year when we start to see maybe maybe a turnaround? >> It's really hard to say. You know, I can I can just talk to you fundamentally

where we think it would be. Uh oil is driven really more from the financial markets than the physical markets. There's as much as a 50 to1 ratio. You know, for every barrel produced, 50 of them are traded on a daily basis. So, I I've you know, doing short-term calls I I think again is a bit of a mug game, but where what what oil price when we talk to oil companies do they need to start being able to grow again? We think it is at least $70. And to motivate companies to go start exploring and

spending $200 million on exploration well, you know, and this will feed into maybe a conversation on Venezuela, like the oil price today is too low to warrant sufficient investment. And there has to be that profit motive. There has to be the willingness of of shareholders to allow these companies once again to take capital out of shareholder returns, you know, buybacks and and dividends and redeploy it into the ground. The only thing that will allow that is a meaningful price rally. >> Well, and I think you're right, we

should pivot over and talk about Venezuela. I know you've mentioned elsewhere online that this is this is pretty much noise for the oil market. So, can you explain what you mean, what you're seeing there? Yeah. So the market ran with the narrative that okay, Donald Trump, you know, he clearly wants lower oil prices. He's going to, you know, one take over the country and, you know, uh to give safety asurances and allow companies to go in and there's all this oil, largest oil reserves in the world.

And it feeds into well geopolitically, what does that mean for Canada? The United States doesn't need us anymore and we're kind of screwed because we haven't we've been too dumb as a country to build out adequate uh pipelines, egress, etc. Okay, what's the reality? U one, the oil price is too low to allow companies to invest in what is still a very uncertain uh regime. Secondly, there are profound infrastructure challenges above ground, below ground, you've had a massive exodus of skilled

uh talent. You have a pipeline network that hasn't been invested in for 50 years. There was a leaked pedest report that estimated the spending was something like 63 or 66 billion. That's like in 20 years ago terms. The view now is it's about hundred billion dollars just for the pipeline networks. You've got to invest in tanks. You've got to redrill wells. It's this is not an overnight thing. And earlier we talked about well you know peak production for nonopc is coming to a theater near you.

And so by the time these this country can actually resurrect production assuming that companies will actually go in and despite the initial meeting between executives and Donald Trump, you know, you had Exxon saying the country is uninvestable. I think that was what most people were thinking. He was the only one brave enough to actually say it in that meeting. You talk to companies, I've talked to people that have have fairly good contacts with with higher up executives and they would they would

measure the appetite to go into that country as extraordinarily limited right now. So you you hear on the fringe the odd company, wildcatters, etc. But Exxon's not running back into country and we don't even think Chevron is is, you know, at scale going to be able to meaningfully grow production. Low hanging fruit, maybe a couple hundred thousand barrels per day over the next year and a half or so. But the real heavy lifting, you know, adding a million barrels per day, we'll be we're

talking the 2030s, I think, before that could actually transpire. And by that point, the world would be desperate for every single barrel that Venezuela can produce. And so my understanding is you use this Venezuela situation as a buying opportunity for Canadian oil stocks. So can you talk about we've talked a little bit about where you see opportunity in natural gas. Can you talk about the oil side? >> Yeah, it's it's the best opportunity for an investor is when you identify a a

catalyst or an event where people are acting out of fear or panic, misinformation, ignorance, coin it however you as you may, and stocks sell off. And so we had some names fall, you know, I think it was 12 14% over a two-day time period. And we used that to to gobble up a number of names where might either we didn't own them or we had a a smaller weight like a 4% there was one name. So it's a midcap Canadian oil sand company. It was a 4% weight heading into that uh event. We love the company. It was just in terms of

short-term cautiousness. We couldn't get as enthusiastic on the the near-term price upside. Well, the stock had fallen 18% from its peak. And so we had literally we were dealing with a Canadian bank and they had somebody selling four or five million shares strictly because of the the Venezuelan headline. So we we happily uh bid them at a discount. We bought, you know, four or five million shares just off of that one. We we bought more from that. Well, why did we do that? Even at $60 oil, this company can generate meaningful

free cash flow. They're ongoing buying back 10% of their stock. They're organically growing production from one uh project. Now they have another one which they should be sanctioning later on. So they're meaningfully growing their production. And at a time when US shale companies are running out of inventory, this company once they ramp all of their projects to full name plate capacity, they'll have 40 years of stay flat inventory. So well, why is that important? As these companies buy back

their stock, they you're able to compound the impact of that. We referenced before, I think $70 is a reasonable floor in the, you know, in the medium term, let's just say. Well, at $70 oil, they could buy back 45% of their shares outstanding over a 5year time period. So, with within five years, you can buy back, let's say, half of the the company, and yet they'll have 35 of those 40 years of staylight inventory for free. And so, we've made a lot of money for our clients practicing that

philosophy, looking at the compounding impact of share buybacks. And when the market gives you an 18% sell-off, those are kind of gifts. So that's that that's the a type of company that we added to um a few weeks ago and it it's worked out quite well. >> Well, thank you for going into that. And as we're talking about the companies, are we in an environment right now where we could see M&A activity pick up in 2026? How are you looking at that? >> So last year was very active from an M&A

perspective. We we unfortunately lost three of our favorite names uh due to that. It's what happens when sentiment remains poor, which it remains very poor now. like this is a sector that's working and yet it bleeds money every single day from outflows. It has for for 3 years now. So as we look at it now, you know, if if I was a USG company, I'm now at a point where publicly I can recognize I can acknowledge that I have an inventory challenge. The question is degree. How do I look relative to

others? Almost every company, there's the odd exception, but most of them have a profound inventory challenge. You have to replace that. The only jurisdiction on the planet you can do that is Canada where you can apply your technical skill set, its proximity. There's now, you know, good rule of law. There's a government that's a little little friendlier towards the sector. So the winds of of of change have blown. This is where you're going to come. So that's the dynamic. Companies that have are

inventory rich, however, are trading well below what we deem to be fair value. they are potentially vulnerable if valuations don't expand to be a feed stock for companies that had an inventory challenge that they have to fix. So I can see the theme of 2025 continuing into this year. >> And as we're talking about Canada as well, I think the last time we spoke it was just after Mark Carney was elected as prime minister. I'm wondering if you have any thoughts you would share on how

how he's impacting the oil and gas sector so far in Canada. I I would recognize that there's been an improvement in tone, you know, in in the change of messaging from the government, a recognition at least publicly, orally, that this is a sector that matters to the Canadian economy. But there's been a whole lot of talk and very little action. There is a, you know, anou um I it's called the grand bargain. I call it the grand ransom between the federal government and the Alberta government in terms of okay what has to

happen for us to build a pipeline and you know will will industry go ahead and have to spend $24 billion on the pathways initiative to to sequester the barrel. You know we're we're told by the federal government that to be to be able to compete in the future as an oil producer we must lower the carbon intensity of our barrels. That is completely idiotic nonsense. It drives me insane. If I had the opportunity to ask that exact question to an unnamed CEO of a very large oil sand producer and I said you know XYZ how many of your

clients care about the carbon intensity of your barrel it took him three nanoseconds I hadn't even finished the question for him to say zero there is a demand for every barrel that can be produced a China in India want to buy the safest most reliable and cheapest barrel on the planet there's very little in fact there's zero appetite for this necessity to invest in a multi multi multi-billion dollar project when we're the only country in the planet doing this to ourselves. You know, this is

such a critically important industry for the Canadian economy, especially given the macro uh economic backdrop facing us today. And so, there's been an improvement in tone. It should not be this difficult to recognize that a a a tubular piece of steel can lift millions of Canadians out of poverty, but it's still it's a very contentious, debatable, apparently a non no-brainer still for for different levels of of the government. So, I'm I'm more optimistic. We're we don't have to talk about

windfall profit taxes and a lot of the the environmental zealots or wing nuts in cabinet are no more, but there's still a lot of work to be done. Good to get your take there. And as we're wrapping up, I think this has been a great review of oil and gas heading into 2026. Any final thoughts you would leave with investors? >> Yeah, I just I've rarely, in fact, never in my 24 career have I seen such a massive um contrast between the near-term and the medium-term. You know, for the oil market, this is the most

anticipated supply glut in history. Everybody knows, you know, air quotes that inventories are going to build, the price is going to sell off. Is it 50? Is it 40? I mean, is it 35? Whatever. I I I disagree with that. When there is an event that is widely widely widely anticipated by every participant in the energy sector, it's likely now being discounted. We look at different metrics um and there's no there's no levels of panic or fear. In fact, a lot of the the builds that we should be seeing, we are

not seeing uh yet to the degree that we should be. So, it it feels like the worst is largely behind us. I and I would encourage people really try to take a medium-term perspective like ignore the day-to-day headlines. Where are we going as an oil market? US shale production when the US government itself is now saying, "Okay, we're in decline." Well, you just lost the largest source of supply. In fact, the only meaningful large source of supply over the past 15 years, that is no more. In a market

where you have demand for the next several decades at a price on an inflation adjusted basis is is near all-time lows. if you ignore you know the co lows and at a time when OPEC major countries within OPEC are not really investing in new capacity because they have other regional uh priorities or domestic priorities. So there there is a imbalance coming between supply and demand growth that should lead to meaningfully higher oil prices. If you use the current price, I'm going to round let's say $60 oil. Companies are

generating massive amounts of free cash flow, but my god, you can get really excited if you just tack on another $10 to $20 in that oil price. And that's where what we need to allow companies to go and explore again and, you know, go offshore again, go into, you know, frontier regions, etc. And for natural gas, it's a very easy thesis. We have just massively sold off because weather disappointed short-term when the real bull thesis revolves around the increase in LNG demand. That's going to grow this

year. It's going to grow next year. The United States is going to grow by about 50% over the next 5 years. Canada, we're going to add 6 PCF a day by, you know, the early 2030s. And that gas has to come from increasingly high cost basins, which we think at as a minimum is $4. Well, at $4, given the sell off in natural gas stocks, valuations are very, very compelling. We see 30 to 50% upside we think in some of the largest natural gas producers. So it remains an opportunity target-rich environment

whether it's gas whether it's oil you can pick but we remain bullish in the outlook for 20126. >> Well as always a great summation of what's happening in oil and natural gas. So thank you so much for coming on today to go over everything. >> My pleasure >> of course and once again I'm Charlotte Mloud with investing.com and this is Eric Neville with 9point partners.