As the loonie hovers around 75 cents U.S. and a new report suggests oil could drop as low as US$20 a barrel, Kevin O’Leary sees investment opportunities.
“I believe the energy sector in the next five years is probably going to offer some of the best returns investors can find,” the CTV business commentator told CTV News Channel.
O’Leary said a prediction by analysts at Goldman Sachs that oil prices – currently around US$45 a barrel – could go as low as US$20 a barrel reminds him of previous predictions “that oil would go to $250.”
In fact, oil peaked at US$145 a barrel in 2008.
“Think about an analyst,” O’Leary said. “They can make a reputation for themselves making something bombastic or very wild in terms of a speculation.”
In other words, oil prices are unlikely to go down that far and could in fact go up.
O’Leary said that while he’s “not recommending it to anyone,” he will probably take money out of the U.S., convert it to Canadian dollars (despite the wide gap in the exchange rate), invest it in Canadian companies “and simply wait.”
O’Leary went on to say that, in addition to the potential for energy prices to climb, opportunities may be created in the Alberta oil sector by provincial government policy.
“The government there has decided not to make a call on what royalty rates are going to be, they’re going through a consulting process,” he said.
“It’s scaring capital away from Canada and the Canadian energy sector because if you go to New York … the multi-billion-dollar pension plans … don’t know what to do with Canada.”
“They don’t know how to do a spreadsheet on what the cash flows are going to be, because the government is saying, ‘we don’t know what we’re going to charge as a royalty rate.’”
As a result of the uncertainty, he said, Americans are selling off Canadian energy stocks, and that makes them affordable.
“It couldn’t get worse in Alberta,” he said. “At some point, when the government is finished with their chaos, it will be a good time to invest.”
