First of all, Canadian oil and gas companies are THE hottest investments on the junior scene. They are taking risks around the world right now that have unbelievable potential payouts (Kenya and Iraqi Kurdistan, for starters) and they tend to have stellar management that translates into solid efficiency.
It’s a long list that stretches around the world in terms of exploration and production, but here we will focus on one strong bet--but its natural gas, not oil. And this is where the Canadian juniors excel: They are leaders in balancing a production mix of natural gas and oil, and more recently, natural gas liquids (NGLs).
Before you say “ugh”, natural gas—who wants to invest when the market is glutted and prices are cheap—consider this: Condensate (natural gas liquid) produced from natural gas wells is NOT in over supply. It is in high demand and is in fact trading in a pricing tandem with crude oil.
Let’s look more closely at condensates—and Canada, because this is the key. Canadians are scrambling for more condensate because it’s what they use to add to their heavy tar sands to render it light enough to flow through the pipelines. Right now, Canada can’t get enough condensate. In fact, it has to import it from Texas. So its value as a commodity—as well as pricing in line with crude—makes Canadian juniors focusing on condensate very attractive.
And in terms of natural gas liquids…