Investment insights from Capital Group
Energy equity bull markets have often shown staying power
Data as at 25 January 2023. Sources: Bloomberg, Peters & Co. Limited, S&P/TSX (Canada) Composite Index performance
The shortening and steepening of the cost curve benefitting oil producers
Data as at April 2022. The cost curve indicates how much oil would be produced for a given price — a function of determining profitability for producers above the breakeven cost of drilling a new oil well. Short and steep cost curves generally enable producers to generate higher profits. Kboe/d = thousand barrels of oil equivalent per day Sources: Capital Group, Bloomberg, Goldman Sachs
European supermajors are investing more capital into low-carbon investments
Data as at September 2022. Capital expenditure figures are taken from information disclosed directly by the company. It is noted that investments dedicated to transitioning away from fossil fuels are likely lower, as several companies include fossil gas-related activities in their “low-carbon” capex. Source: InfluenceMap
Lower capital intensity for the Canadian oil sands supports high free cash flow conversion
Free cash flow conversion is a ratio that indicates how much cash is available to a company after covering its operating and capital expenses, an indication of its capital intensity. Defined here as free cash flow divided by cash flow from operations. Sources: Company filings and Capital Group analysis
Companies highlighted: Canadian oils sands (IMO = Imperial Oil; CNQ = Canadian Natural Resources Limited; CVE = Cenovus Energy; SU = Suncor Energy). S&P 500 exploration and production (OXY = Occidental Petroleum Corporation; COP = ConocoPhillips; DVN = Devon Energy Corporation; CTRA = Coterra Energy; MRO = Marathon Oil Corporation; APA = APA Corporation; FANG = Diamondback Energy; PXD = Pioneer Natural Resources Company; EOG = EOG Resources; EQT = EQT Corporation; HES = Hess Corporation).
European supermajors trade at a significant discount to their American rivals
Data as at 25 January 2023. Source: Bloomberg
Market Volatility
European Equity
U.S. Equities
Fixed Income
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Capital Group manages equity assets through three investment groups. These groups make investment and proxy voting decisions independently. Fixed income investment professionals provide fixed income research and investment management across the Capital organization; however, for securities with equity characteristics, they act solely on behalf of one of the three equity investment groups.