Oil and Gas Drilling Activity to Hit Decade High in 2025: Key Investment Opportunity on Strong Fundamentals and Exposure

• Canada's oil and gas drilling activity is forecast to hit a decade high in 2025, with wells drilled increasing 7.3% to 6,604 and jobs growing 7% to 41,800, driven by pipeline expansions and the new U.S. administration's focus on affordable energy.
• The oil and gas sector remains a cornerstone of the global energy industry, with upstream investment projected to increase 7% in 2024 to $570 billion, led by major companies like ExxonMobil and ConocoPhillips expanding production capacity.
• Helium presents a compelling investment opportunity within oil and gas due to rising demand, supply scarcity, and its critical applications across high-tech industries, with the global helium market projected to reach $3.5 billion by 2030.
• Major integrated oil companies like Shell and Chevron are well-positioned to navigate the energy transition by balancing their traditional businesses with investments in low-carbon solutions, while Canadian Natural Resources stands out for its top-tier assets, low costs, and focus on shareholder returns.
• The investment case for oil and gas rests on sustained long-term demand, exposure to economic growth priorities in the U.S. and Canada, and opportunities in undervalued smaller producers and helium-focused companies like Georgina Energy and Royal Helium that offer direct exposure to attractive supply-demand fundamentals.

The oil and gas sector has long been a cornerstone of the global energy industry. Despite the shift towards renewables, oil and gas remain crucial to meeting the world's energy needs for the foreseeable future. Within this sector, helium presents a unique investment opportunity. This rare, non-renewable resource has critical applications across high-tech industries and is poised for significant growth in the coming years.

Major Actions in the Oil and Gas Investment Space

In recent years, the oil and gas industry has experienced a resurgence in investment activities. Upstream oil and gas investment is projected to increase by 7% in 2024, reaching approximately $570 billion, following a 9% rise in 2023. This growth is predominantly led by the Middle East, with $38 billion increase in investment in 2023, indicating a robust commitment to expanding production capabilities. [1]

Major oil companies are actively enhancing their production capacities. For instance, ExxonMobil plans to boost its oil output by nearly 20% by the end of the decade, with capital expenditures expected to rise from $28 billion in 2024 to up to $33 billion annually between 2026 and 2030. This strategy underscores Exxon's confidence in sustained demand for oil and gas products.^[4]

Similarly, ConocoPhillips has been expanding its portfolio through strategic acquisitions and projects. Notably, in November 2024, ConocoPhillips completed a $22.5 billion acquisition of Marathon Oil, further consolidating its position in the industry.

"I think given how underweight people are, given how strong balance sheets, ie. business models, are today, that even at US$70, which seems to be a reasonable price to triangulate around, we can still find opportunities," said Eric Nuttall, partner at Ninepoint Partners. ^[5]

Canada's Drilling Boom

Canada's oil and gas drilling activity is forecast to hit a decade high in 2025 according to the Canadian Association of Energy Contractors (CAOEC). Total wells drilled are projected to increase 7.3% to 6,604, the highest level since 2015. Jobs are expected to grow 7% to 41,800. ^[2]

Increased pipeline capacity from the Trans Mountain Expansion and LNG Canada projects, combined with the new U.S. administration's interest in securing affordable energy, is expected to further boost Canada's oil and gas growth potential. However, CAOEC warns that Canada needs to adopt a more pro-business approach or risk losing investment to the U.S.

Shell

As a diversified integrated energy company, Shell is balancing its traditional oil and gas businesses with investments in LNG, power generation, and low-carbon solutions like biofuels, EV charging and renewable power. This positions Shell to navigate the energy transition while still benefiting from strong cash flows generated by its core operations.

Shell's focus on financial discipline, simplification and shareholder returns under its new CEO also supports the case for investing in well-managed oil and gas companies. With a pragmatic approach to emissions reduction and ESG concerns, Shell appears to be making progress in addressing risks while capitalizing on growth opportunities. Overall, Shell exemplifies how major oil and gas players can evolve into diversified energy companies and continue creating value, even as the world shifts towards lower-carbon energy sources.

Chevron

Chevron's 2025 capital budget reflects the major themes discussed in the oil and gas investment article. The company is demonstrating capital discipline by reducing overall spending while still investing in high-return projects across the US, Australia, and its global LNG portfolio. This aligns with the article's view that investors should focus on companies with strong financial management and return-focused capital allocation.

Chevron's continued investments in its traditional US upstream and downstream businesses, particularly in the Permian Basin, recognizes the ongoing importance of oil and gas to meet near-term energy demand. At the same time, Chevron is dedicating a portion of its budget to lower-carbon projects, preparing for the energy transition.

The company's anticipated restructuring and impairment charges, while significant, show a proactive approach to streamlining its cost structure and portfolio. This strategic high-grading could make Chevron more resilient and free cash flow generative over time, benefiting shareholders.

Canadian Natural Resources

Canadian Natural Resources (CNR) stands out as a high-quality oil and gas investment opportunity based on the criteria laid out in the article. The company boasts top-tier assets across its diverse portfolio, including long-life, low-decline oil sands projects, an extensive Western Canadian land base, and high-impact international assets.

CNR's strong track record of free cash flow generation is underpinned by low operating costs, capital discipline, and a focus on returns. This aligns well with the article's emphasis on investing in financially robust companies with proven business models.

CNR's unique reserves and production base, anchored by long-life thermal in situ and oil sands mining assets, provide the kind of resiliency and sustainability that can generate value through commodity price cycles. The company's ongoing investments in carbon capture, solvent-assisted extraction, and other innovations demonstrate a commitment to improving environmental performance.

The Helium Opportunity

What makes helium particularly compelling is the fundamental supply-demand imbalance. Helium is a finite resource with no substitutes, used in critical applications like MRI machines, semiconductors, and space exploration. Global helium demand is projected to grow at a 5.1% CAGR from 2023 to 2030, reaching $3.5 billion.

The scarcity of helium, listed as a critical material by major economies, has led to price increases and supply concerns. This market dynamic creates an attractive investment case for companies involved in helium production and exploration.

Georgina Energy

As a junior exploration company, Georgina Energy represents a higher-risk, higher-reward way to gain exposure to the helium investment theme compared to more established producers. The company's recent progress in advancing its key projects, Hussar and Mt Winter, is encouraging. Positive site inspection results at Hussar and the granting of EPA155 at Mt Winter mark important de-risking milestones.

Georgina's strategy of pursuing low-risk re-entry of previously drilled wells near existing infrastructure appears sound and could accelerate the path to commerciality. With rising global helium demand and Australia's attractiveness as a stable jurisdiction, Georgina Energy seems well-positioned to capitalize if it can successfully prove its assets.

Royal Helium

Royal Helium presents an intriguing pure-play investment opportunity in the helium space, which is poised for significant growth as highlighted in the oil and gas investment article. With one of the largest helium land positions in North America, Royal Helium has built a strong foundation for future value creation.

The company's recent success in bringing its Steveville helium project into production is a major milestone that validates its strategy and technical capabilities. Royal Helium's integrated approach, spanning exploration, production, and its own purification facilities, gives it greater control over the value chain and the potential for higher margins.

Royal Helium's location in the heart of Canada's helium fairway and its relationships with end-users through offtake agreements position the company well to capitalize on rising helium demand. The company's exploration upside across its Saskatchewan and Alberta acreage provides a pipeline of growth opportunities beyond Steveville, offering investors more direct exposure to the attractive supply-demand fundamentals in the helium market with a proven management team and a growing production base in a dominant land position in a favorable jurisdiction.

The 2025 Energy Outlook

Looking ahead to 2025, experts see a strong year for energy investments across the board.

"2025 is going to be a really good year for energy, absolutely," said Tracy Shuchart, CEO of Hilltower Resource Advisors. "Not just because of the incoming administration that is very pro-energy and very-pro nuclear as well. But I think with this demand explosion that we're having it's going to be hard to keep ignoring that sector as people have over the last few years." ^[3]

In addition to oil and gas, Shuchart is bullish on uranium juniors and companies involved in building out the power grid to meet surging electricity demand from AI data centers. She recommends looking beyond oil majors to smaller producers for more risk and upside.

Chris Temple, editor of the National Investor, also sees opportunity in natural gas and uranium along with gold as inflation rises and faith in the dollar erodes. He cautions investors to watch how deftly the new Trump administration handles relations with China amid that country's economic challenges.

Temple questioned, "This is the most important thing that consumers and investors and policy makers need to watch in 2025 — is Trump smart on how he deals with all of this and rebuilds our own industries to compensate for years down the road? Or is he going to be ham-fisted about it and cause more problems than he solves?" ^[6]

The Investment Thesis for Oil and Gas

For investors considering the oil and gas sector, particularly helium, the investment case rests on several key points:

• Sustained long-term demand for oil and gas despite the energy transition
• Helium's unique properties, scarcity, and critical applications across high-tech industries
• Projected market growth in overall oil and gas investment and drilling activity
• The appeal of helium as a way to gain targeted exposure to a niche market with strong fundamentals
• The potential for both attractive income and capital appreciation
• Opportunities in smaller producers and service companies that are undervalued relative to their assets and cash flow potential
• Exposure to the economic growth and energy security priorities of the U.S. and Canada

References:

1. International Energy Agency (May 2024). World Energy Investment 2024: Overview and Key Findings
2. Mining.com (November 2024). Canada’s oil and gas drilling forecast to hit decade high in 2025‍
3. McLoed, Tracy (December 2024). Investing News: Energy Demand Exploding — Watching Oil/Gas, Uranium and Grid Stocks
4. Financial Times (December 2024). Exxon Cranks Up Oil Output Despite Fears of Supply Glut
5. McLoed, Tracy (December 2024). Oil Facing Volatile 2025 — Where I'm Investing, Plus Prices, Supply and Demand
6. McLoed, Tracy (December 2024). Gold's Next Leg Higher, Plus Uranium And Natural Gas In 2025