My question is about how much higher do you think Iran will be able to push crude when it comes to prices?

Yeah, it's a good question and a very challenging one to answer because historically, a geopolitical event such as this, where Middle Eastern production remains down 7.5 million barrels per day, we have forfeited almost 1.9 billion barrels cumulatively of Middle Eastern production.

If you...

Trust what the White House is telling you.

Exports out of the Strait are anywhere from 12 to 20 million barrels per day.

Perhaps more believable numbers are about 7 to 8.

So we're down 10 to 12 million barrels per day of exports of both oil and products.

Daniel, thank you for the

[laughs]

So this is very clearly, and we've been talking about this for quite a long time, when you look at the magnitude of lost oil production, uh, the Middle East, because of the Strait of Hormuz being largely closed, by my definition, we'll touch on that in a second, uh, Middle Eastern producers have forfeited 1.3 billion barrels of exports.

That's just a staggering number.

As a result, uh, because there have been no or very few inbound vessels going back into the strait to empty out, uh, full storage tanks, that has backed up wellheads to shut in production now.

So the world's down about 7 million barrels per day as we speak, and people at home might be asking, "Okay, well why is the oil price only, you know, 81, $82?" Because of that.

There have been a few safety buffers that we have had that have been using up and are being used up in real time.

The biggest one has been the US SPR and global SPRs.

[laughs]

Well, I think what we're learning right now is that complacency may have been ill-timed.

Absolutely.

It's been astounding to many of us who count barrels and look at oil balances, just how apathetic the market had been.

And it was just unbelievable how consensus just hasn't been able to connect the dots.

As we look today, Middle Eastern production is down at least 6 million barrels per day.

I reference OilX data, and that's likely getting worse given the events of last night.

We know that there were essentially no ships entering into the strait.

What then what happens to the price of oil?

Markets seem to be looking past what's going on in Iran, but do you think it's, there's gonna be a spike again?

Yeah, the market is looking through where we stand today, thinking that, you know, the strait will open up tomorrow, we'll go back to normal.

That apathy is creating the most attractive opportunity for energy stocks that I've seen in my career since the lows of COVID.

We are down 13 to 14 million barrels per day of Middle Eastern production.

When you net everything off, uh, inventories are falling by roughly seven to eight million barrels, uh, per day.

We've already lost 1.1 billion barrels of forfeited production.

Even if the strait begins to open up next month, our math is the world will lose, what, at least 1.8 billion barrels of, of record production.

Mm-hmm

Do all of those producers see a beneficial tilt from investment interest and kind of trade diversification interest, or does Canada, the US, as an example, outperform relative to those as well?

Yeah.

So I think the single largest opportunity today is in the Canadian oil sands or other plays such as the Duvernay or the Montney that share the same attributes, which is long life reserves whose average quality does not erode o-over time significantly, where you can benefit if-- Because you have long-dated reserves, you don't need to deploy nearly as much capital for inventory replacement.

You're generating more free cash flow.

And we were the biggest champion going back several years in terms of the power of meaningful share buybacks over time, the compounding impact that that has.

We have names that we bought, f- uh, one specifically, and it was one of the greatest buys of our lifetime.

We bought nine point nine percent of a, of a small-- what was then a small cap oil sand producer off of StatOil directly, uh, at eighteen cents, and the stock today is twelve dollars.

Yeah.

How are you thinking about that?

Yeah, it's-- I wouldn't say it was totally unexpected, and I would caution that the real s- the real scuttlebutt and story takes weeks to come out.

So I, I'm very cautious the immediate, you know, it's, it's...

And I know it 'cause I got inbounds from, um, CBC, CTV News, like, the, "Okay, can you come on, explain what's going on?" Well, the truth is, it takes time for most people to, to, to find the real reasons.

I think there's two.

One is, and people are, it's their sensitivity to being very public in this.

However, I think there have been challenges and differences of opinions in strategy between the UAE and Saudi Arabia.

So how many names are you, do you have in your portfolio nowadays, and how are you thinking about bottom-up stock selection with all the macro that's going on right now?

What does that mean for where oil prices go?

Very.

So I think many market observers are surprised at the lack of price response in oil to what we've lost.

Because again, we've lost, this is by far, like this is something that was never expected, I would say.

People have thought the idea, but never thinking that it would actually transpire, and here it is.

So my core base, so I think as an investor, you've got to have... your base case and then the two ends of the books, you know, the bookends, what could be both bullish and bearish.

So my base case is this resolves itself in the next week to two weeks.

Tell me why.

So why are prices staying resilient? And what's your view on this change in OPEC's direction?

Yeah, so I think we would need the entire podcast to throw enough stones at the IEA.

So let's set their number aside.

Okay.

Those more credible numbers, like in energy aspects, for example, they are still expecting 2 million barrels per day built.

And if that were to actually come to pass, the inventory glut would be more than double what it was during the peak of COVID.

So that's not to call it a forecast.

From your perspective, do you generally like to see these companies getting larger and why?

I guess the long story short, it's your bullish natural gas.

Yeah, it's kind of heresy to say.

We were one of the more notable bearers for many years.

And up until about six months ago, it was the right call.

We were always bearish because natural gas, it's always been abundantly available.

Not to date myself, but I started in 2003.

And I remember I was 03 or 04.

It was a great thing for society.

Yeah.

Yeah, so we have to look at, especially on a campaign trail, what is said versus who the person is that is saying that.

And so we spend time, and I wish people spent as much time learning about the platforms of politicians as they do on the Toronto Maple Leafs, because perhaps we'd have a more informed electorate.

And so I bought Mark Carney's book, electronic version, so I could do keyword search, because it's not the most exciting read, 500 pages.

But when somebody says, you know, climate change, we know his views.

is the sixth mass extinction event that the majority of hydrocarbons need to stay in the ground to reach climate goals when they're talking about publicly, they're on Team Greta Thunberg, et cetera.

That's the background.

Talk to me about maybe what they have in common and how they can outperform in the sort of the natural gas environment you see playing out.

But if you're right and shale supply is running out and so forth, I mean, should we expect crude prices to be back on the rise again or no?

I think it's going to be a process.

So there's a massive disconnect between what I view the fair value of oil to be and where we trade today.

And I think the reason for that difference is horrendous sentiment.

That's being driven by the mantra of drill, baby, drill.

The market generally buying into it and believing that Trump can somehow force shale companies to drill at an oil price that is below their brink even right now.

We need an oil price $10 higher to get any semblance of any modicum of growth.

pretty preemptive strikes against Iranian and or Russian oil? Because if that's the case, that should be a wake-up call to the oil market, I think, but oil's down today.

How do you deal with that as an investor?

Yeah.

So uncertainty creates massive opportunity.

And to use logic and political decision-making in the same sentence is not always a good thing.

But our belief has been, and those who we speak to, so we do our best to speak to the most informed people.

We have an army of consultants, advisors that we use.

So one person is ex-White House.

Yeah.