BMO oil and gas analyst Randy Ollenberger thinks his sector is significantly mispriced,
“The North American oil and gas group offers generally higher EBITDA growth, generally stronger ROCEs [return on capital employed], healthier balance sheets, and much better free cash flow yields than most other sectors. Despite these attributes, the group continues to trade at a significant discount to other investment sectors in the market. The most glaring disconnect is on free cash flow. We expect the large cap oil and gas group to generate an average free cash flow yield of ~10% in 2025 and ~12.5% in 2026, while delivering actual cash yields to shareholders of ~7.5% and ~8.5% in 2025 and 2026, respectively. These are materially higher than the overall market … Our top oil and gas recommendations are ARC Resources, Canadian Natural Resources, Cenovus Energy, Chevron, Chord Energy, EQT, MEG Energy, NuVista Energy, Topaz, Veren and Whitecap Resources. Among the oilfield services companies our top recommendations are Baker Hughes, CES Energy Solutions, Precision Drilling and Trican Well Service. Our top U.S. refining pick is Valero”