Swanzy Quarshie, Portfolio Manager, Sentry Investments

FOCUS: Oil & Gas stocks

Market outlook:

We have a positive outlook for energy and energy related equities for 2015, however, we remain cautious in the short term. Although much of the issues inherent in the oil markets have been priced into the commodity, we see the possibility of a retest the oil price lows of January driven by growing crude inventory levels globally.

For now, we are firmly in the camp the current demand/supply imbalance is driven by excess supply and expect the market to move closer to equilibrium towards the end of the year with a slow down in North American drilling activity. At this time, we do not expect demand to have a negative impact on the imbalance.

In this environment, we favour companies with strong balance sheets and good cost structures who can take advantage of this downturn to further strengthen their businesses. We prefer oil weighted producers in the short to midterm given the structural challenges in the North American gas market.

In the longer term, we are optimistic that growing export channels and increasing industrial demand for natural gas will help to strengthen the North American gas market.

Top picks:

Bankers Petroleum (BNK.TO)
Raging River Exploration (RRX.TO)
Whitecap Resources (WCP.TO)