In short: His oil-sands pick: "we've been recommending Strathcona for a long time," valued for the very long reserve life the oil sands carry. Part of a mixed portfolio of gas producers, conventional oil, oil sands and service names.
Strathcona produces heavy oil, much of it from the oil sands in Alberta and Saskatchewan. Oil-sands projects don't decline quickly like ordinary wells — they can produce for decades from the same deposit — so the company's reserve life is very long. Schachter has recommended it "for a long time" as the oil-sands part of a balanced Canadian energy portfolio, next to gas producers, conventional oil producers and service companies.
25:44But I think that we're going to be looking at a double or more in the index. But I think there's five and 10 baggers out there in the energy sector if you have a nice mixed portfolio and I would say you want to own natural gas producers, oil producers in Canada, and on oil producers there's two choices, there's conventional oil and then there's the oil sands and we've been recommending Strathcona for a long time which has a very long reserve life, that's how long the oil sands have, and you want also the
In short: His own controlled company. "Strathcona has publicly disclosed that our business plan is to grow about 10% a year… in part because we have a very long reserve life index, about 60 years, and so we can grow that fast for about 10 years and still have a north of 20 year reserve life index." Built via 10 acquisitions in 7 years across Cold Lake, Saskatchewan thermal and Saskatchewan conventional heavy oil; the #5 SAGD player (and smallest of the five that hold 90–95% of the assets). Runs its own carbon capture and storage — "we're not part of Pathways."
Strathcona is a Canadian heavy-oil producer that Waterous's fund controls, so this is his own book. Its main business is "SAGD" — steam assisted gravity drainage — where you inject steam underground to melt thick oil so it can be pumped up. That kind of asset is expensive to start but then runs for decades, which is the whole point of his strategy.
The number he cares about is the reserve life index: how many years of production you have in the ground at the current rate. Strathcona's is roughly 60 years. That is what lets him promise something almost no US producer can — grow output about 10% a year for a decade and still have more than 20 years of reserves left afterwards. A US shale producer with 8–10 years of reserves has to spend most of its cash just standing still.
He built it by consolidation: ten acquisitions in seven years, clustered in three tight areas (Cold Lake, Saskatchewan thermal, Saskatchewan conventional heavy oil), because neighbouring assets share overhead and technical know-how. It is now the fifth-largest of the five companies that own 90–95% of Canadian SAGD — and the smallest of them, which is the source of both the scale critique and the runway. Two policy details matter for it: Alberta's carbon tax is going up 6.5×, which lowers the value of existing production until the province offers a royalty break on new production; and Strathcona runs its own carbon capture project rather than joining the Pathways consortium, so it is not exposed to whatever obligations Pathways members eventually take on.
27:05And in part because we have a very long reserve life index, about 60 years, and so we can grow that fast for about 10 years and still have a north of 20 year reserve life index. And so we're in a fortunate situation to be able to do that. I'd rather more focus on what the industry has been doing, and the industry has been growing for the last decade.
In short: "I have a reasonably high regard for Strathcona. I just don't see them performing as well as Tourmaline." Named with the two Canadian gassy names he owns; he doesn't own this one.
12:55I own Tourmaline and Birchcliff. I have a reasonably high regard for Strathcona. I just don't see them performing as well as Tourmaline. To own Birchcliff, you need to be a continued bull on North American, but particularly Canadian natural gas. And you have to believe that the impediments involved in moving more Canadian natural gas to liquefied natural gas export facilities on BC is going to go ahead.
In short: Owned — 2nd-largest holding. Meota SAGD (Saskatchewan) + the Hamlin rail terminal: trucked heavy oil moves by rail with no diluent → a true heavy blend that refiners pay a premium for, and cash turns in ~9 days vs long pipe lead times. Sees big under-appreciated value in the Vawn asset Waterous extracted.
Strathcona is Smead's second-largest holding — a Canadian heavy-oil producer run by dealmaker Adam Waterous. He visited its Meota project in Saskatchewan, where oil is pumped using steam (SAGD) and then railed to market instead of piped. Railing sounds primitive, but it has two edges: the oil doesn't need to be thinned with expensive "diluent" to flow through a pipe, so refiners pay a premium for the purer heavy blend; and Strathcona gets paid in about 9 days versus much longer for pipeline barrels, so cash recycles faster. Smead also thinks the market badly underrates the value hidden in the "Vawn" assets Strathcona picked up. Saskatchewan helps — lower royalties and lighter rules than Alberta.
1:48Strathcona did it with some of their investors, and we went out to their Miota asset, which is in Saskatchewan. These are assets that their business has really been put together post what was their Vawn transaction. They already had assets there, but this really strengthens their position Saskatchewan.
In short: Cole — owned. After the $10 special (high ~$42, ~$26 today) it's "very attractive." Waterous "has done exactly what he told people." Growing production below $30k/flowing-barrel (Canadian) while the stock trades ~$60k/flowing-barrel; "stole" the related-party Saskatchewan asset from Cenovus (worth a lot).
59:48I think the high in the stock was around 42 — so you think $10 net of that was at 32 then — um you yeah 26 six today. So, I look at that is it's pulled back to a point where it's like very attractive compared to a lot of things out there. Um, here's what I would just say. I — Why is it lagging when everything else is doing well? — Uh, well, they just had a lot going on and they really rerated from where they were.
In short: Owned. Just paid the long-promised $10 special (return of capital — a partial capital gain for US holders, treated well). "Take Adam Waterous at his word — he's done exactly what he said." Not a greenfield, but growing production ~200,000 barrels. Can build new barrels at ~$30k/flowing barrel — cheaper than buying them in the open market.
Strathcona, run by Adam Waterous, just paid the big $10-per-share "special" dividend it had long promised — for a US holder like Smead it came through as a capital gain rather than a taxable dividend, which he prefers. His point: Waterous does exactly what he says he'll do, so trust him. The company is growing production by about 200,000 barrels and can build brand-new barrels for around $30,000 each — cheaper than buying barrels on the open market — which is why he keeps owning it.
1:02:04But I think that would be the best capital allocation right now. As I step down from that, uh Strath Kona just did their $10 special, which had always been talked about. You know, take Adam Wattress at his word. He's an honest guy. You just don't like him because he says what he thinks. That's so unlike a lot of people in this industry where they'd rather be dishonest and say good things and tell you other things with the doors closed. Okay.
In short: Pro pick — owned. Adam Waterous arbitraged gas for oil (sold Montney, took Tourmaline stock). "Adam needs float" (super-tight register), so incentives say he closes MEG; if not, the settling cash + second fund fund an acquisition spree in all-stock deals. A founder-led business acts fast in a crisis and earns more per dollar of pay. Top-five Canadian producer once MEG closes.
Strathcona is run by dealmaker Adam Waterous, who just made a hostile bid for MEG Energy. Smead's read is that Waterous is a shrewd capital allocator: he sold his natural-gas assets (which everyone loves because of AI/electricity demand) and is buying oil (which everyone hates) — a classic buy-low/sell-high swap. Strathcona's own shares barely trade because insiders hold most of them, so Waterous needs more freely-trading stock ("float") to keep doing deals. Buying MEG, a similar oil-sands business, gives him that float — which is why Smead is confident the deal closes and Strathcona keeps rolling up the industry.
44:34And you're bringing back two of those ideas. Now, since you were on in March, Strath Kona has done the best. It's up about 12%. Um, Meg is up 6% since that time. And of course, we know Stretha is trying to buy Meg. And then, Senovas is basically flat. And the ones that you're kind of reiterating here again are Strath Kona and Senovas.
In short: One of the largest holdings (~7% of the X-US book) — pro pick #1. Invest alongside Adam Waterous, "the best capital allocator in the Canadian oil & gas space." Depressed by a tiny float (~20% now trades after an 11% distribution). A vehicle for all-stock acquisitions once its own stock is valued enough — investment-grade, long-life assets.
Strathcona is a large Canadian heavy-oil producer controlled by dealmaker Adam Waterous, whom Smead rates the best capital allocator in Canadian oil. The stock is held down by a tiny "float" — most shares are locked up by Waterous's investment fund and long-term holders like Fairfax, so only about a fifth actually trades. Smead's thesis is that Strathcona is really an acquisition vehicle: once its own shares are valued highly enough, Waterous will use them to buy other companies in all-stock deals and roll up the industry.
1:03:42occasionally not often but occasionally and we're sitting at a sell-side event and and Adam comes in and he's talking about how constructive he is on the commodity of oil and he's you know talking about what they've seen to build up what was then the energy fund the various you know uh LP funds that they had and I turned to my colleague at the time and I said gosh that guy's just he he's just spoton I said if we ever could get a chance to invest alongside of him in public markets I'd love to do it well I was being naive because obviously it
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