Why investors are gushing over Canada’s oilpatch

Skip to Content News Archives Economy Defence Energy Oil & Gas Renewables Electric Vehicles Mining Commodities Agriculture Real Estate Mortgages Mortgage Rates Finance Banking Insurance Fintech Cryptocurrency Defence Work Wealth Smart Money Wealth Management Investor Personal Finance Family Finance Retirement Taxes High Net Worth FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials More Innovation Information Technology FP500 Podcasts Small Business Lives Told Tails Told Shopping Financial Post Store Obituaries Place a Notice Advertising Advertising With Us Advertising Solutions Postmedia Ad Manager Sponsorship Requests Classifieds Place a Classifieds ad Working Profile Settings My Subscriptions My Offers Newsletters Customer Service FAQ News Economy Energy Mining Real Estate Finance Defence Work Wealth Investor FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials This advertisement has not loaded yet, but your article continues below.HomeOil & GasFinanceInvestorWhy investors are gushing over Canada’s oilpatchPortfolio managers are rotating more of their funds out of volatile tech and into old economy safe havens such as oil and gasLast updated 12 minutes ago Portfolio manager Eric Nuttall expects Canada’s oil producers will post mouth-watering results when they begin reporting third quarter results this week. Photo by BRANDON HARDER/PostmediaCanada’s oilpatch has a new problem: too much money. Producers are generating more cash than they know what to do with, and investors are lining up to get a piece of it.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountAccording to data from BMO Capital Markets, investment funds dedicated to Canada’s energy sector took in $159 million in September. That extends a run of new capital flowing into the sector and marks one of the strongest Septembers since BMO began tracking the data in 2022.This advertisement has not loaded yet, but your article continues below.Eric Nuttall, partner and senior portfolio manager at Ninepoint Partners LP says Canada’s oil industry is finally getting credit for its strong fundamentals — low break-even costs, high free cash flow generation, disciplined capital spending and strong balance sheets.Canada's best source for investing news, analysis and insight.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Investor will soon be in your inbox.We encountered an issue signing you up. Please try again“Fund flows of any sector are dictated by performance,” Nuttall said in an interview. “Naturally, positive performance brings positive flows. That’s a tried-and-tested rule that has stood the test of time.”Nuttall oversees Canada’s largest actively managed energy fund, according to industry trackers, with about $2 billion in assets under management. He credits the rebound in flows to two things: the surge in oil prices after the United States–Iran war broke out, and the sector’s strong financial health relative to investor expectations.To track how much is coming in every month, and what longer-term trends suggest, BMO analyzes sales of Canadian mutual funds and exchange-traded funds (ETFs), which hold a basket of oil and gas stocks. Those details help explain how the sector has performed and where money may flow next.This advertisement has not loaded yet, but your article continues below.Between 2023 and 2025, investors snubbed oil and gas for other sectors, pulling a total of $2.6 billion out of energy-focused mutual funds and ETFs. That trend reversed sharply in November 2025, leading to a winning streak that continued into the fall.“Ever since the Canada-Alberta MOU was signed on November, there’s been a significant reversal,” said Jeremy McCrea, managing director of oil and gas equity research at BMO Capital Markets, in an interview.Since November, roughly $800 million has flowed into the sector, and BMO expects the trend to continue given the sector’s high returns and growth in shareholder value.“Canadian energy in particular has been outperforming U.S. energy for the past couple of years,” Nuttall said. “That was magnified this year by some of the political changes we’ve had going from a prime minister who wanted to phase out the energy sector to one deeming pipelines in the national interest.”Energy companies, however, still haven’t recovered the billions of dollars that left the sector since 2023, which suggests there is plenty of room to grow.This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.“We see positive performance ahead, so we would expect it to bring in future inflows,” Nuttall said.With third-quarter results just days away, and share prices hinging on the numbers, Nuttall expects Canada’s oil producers to post mouth-watering results.“I think their free cash flow generation is going to blow people’s minds,” he said. “Some of the companies we own are approaching debt-free status next year which is incredible.”As a result, the sector is going to have to deal with a different kind of problem.“They’re generating so much cash, they literally do not know what to do with it,” Nuttall said. “Those are the conversations we’re now having with management teams: as you approach debt-free status, how do you balance shareholder returns with organic growth?”That balance is starting to tilt toward growth. “The expected royalty changes in Alberta this November should push it further by favouring investment in production over share buybacks,” Nuttall said.Most portfolio managers McCrea has talked to are electrified with the sector’s remarkable run over the past year, especially in recent months, and say elevated oil prices are only part of the story.This advertisement has not loaded yet, but your article continues below.As investors increasingly question whether high-flying tech and software companies can generate acceptable returns on massive AI investments, portfolio managers are rotating more of their funds into old economy safe havens such as oil and gas.McCrea hears investors describe Canadian energy as a HALO trade. It’s an investment strategy that shifts capital away from software stocks, which don’t have much in the way of physical assets, into companies featuring heavy assets at low risk of becoming obsolete, hence the acronym.Technology stocks now make up a larger share of the U.S. S&P 500 than they did at the height of the dot-com bubble. Information technology accounts for close to 40 per cent of the index, according to S&P Dow Jones Indices, compared with about 35 per cent in 2000.And if Alphabet Inc., Meta Platforms Inc., Amazon.com Inc. and Tesla Inc. are counted as tech, which, oddly, they are not, the share rises further. Goldman Sachs Group Inc. estimates that AI-linked stocks alone account for close to 45 per cent of the S&P 500, an index that covers the largest publicly traded companies in the U.S.This advertisement has not loaded yet, but your article continues below.“Investors are growing more comfortable with energy’s outlook,” McCrea said. “With the sector seen as less risky, more are moving in for the returns and diversification.”Nuttall said both foreign private equity and conventional buy-and-hold funds are showing renewed interest in Canada, drawn by its plentiful resources and longer reserve life compared to the United States.“Everyone’s always known that Canada has been blessed with an abundance of resource. So when you couple the end of the narrative around the energy transition with a federal government now supportive of the industry, the impediments to the return of major fund flows into Canada are eliminated.”Still, Nuttall says risks remain. Record-high diesel prices threaten a new round of high inflation, which could cut demand for oil. And, among other challenges, high prices could encourage more production worldwide, creating a risk of oversupply.“That said, we think the overall attractiveness of the Canadian energy is extremely high.”We apologize, but this video has failed to load.This advertisement has not loaded yet.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.