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Ground shots showing the bitumen flowlines from a SAGD well pad to the the Central Processing Facility at Nexen's Long Lake Phase 1 integrated oil sands facility in north eastern Alberta, Canada. Long Lake is situated 40 km south east of Fort McMurray in north eastern Alberta.
Ground shots showing the bitumen flowlines from a SAGD well pad to the the Central Processing Facility at Nexen's Long Lake Phase 1 integrated oil sands facility in north eastern Alberta, Canada. Long Lake is situated 40 km south east of Fort McMurray in north eastern Alberta.
(Dave Olecko/Nexen)

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There’s cash (flow) in that there oil patch

Domestic energy stocks have established a new post-crisis equilibrium in terms of valuation and, while the sector as a whole is not compellingly cheap, value opportunities are available.

The S&P/TSX Oil Producers Index is currently trading with an average price-to-cash-flow ratio of 5.46 times. That compares favourably to the pre-crisis average of 6.51 in 2006 and 2007. The sector saw hysterical swings in valuation levels between 2008 and 2011, climbing to 8.5 times in mid 2008 (cash flow began disappearing faster than stock prices fell as demand declined), falling to less than three times at the height of the global financial meltdown in 2009, before spiking again to nine times cash flow in 2011.