Remy Blaire: Now, Wall Street is focusing on artificial intelligence as well as Anthropic’s blockbuster S-1, and we all know that AI is getting the headlines. But energy stocks are running away with the stock market this year, with the energy sector up nearly 60% year to date in 2026, led by refiners cashing in on high fuel prices as well as tight global supplies. Now, Big Oil is ready to show investors the money. ExxonMobil and Chevron report earnings this week, and investors are looking for record production and billions of dollars flowing directly back to shareholders through stock buybacks.
Well, joining us this morning to weigh in is Rob Thummel, who’s senior portfolio manager at Tortoise Capital Advisors. Rob, great to have you here. Thank you so much for joining me.
Rob Thummel: Thanks for having me.
Remy Blaire: Well, as of right now in midday trade, the S&P 500 is looking at a double-digit percentage gain year to date. But we have to note the energy sector outpacing the S&P 500. So do you think the gains in energy have more room to run as we head into year-end and into 2027?
Rob Thummel: I do. I think, you know, obviously energy’s been underappreciated, really underinvested, coming into this year. So I think a lot of people are playing catch-up and getting involved in the energy sector now. Now, going forward, if you look at the forward curve for oil, it’s about 50% higher this year than it was last year. And so there are a lot more profits that are probably going to flow through, and that’s going to result in higher earnings, higher cash flow, and free cash flow, as you highlight. And I’m really curious, actually, at the end of this week, to see if Exxon and Chevron boost their buyback programs for next year.
Remy Blaire: Yeah. And speaking of which, it is a big week for earnings, and we will be paying attention to those results coming out from those big names, including Chevron as well as ExxonMobil. But we have to keep in mind that geopolitics, as well as the rate outlook for the Federal Reserve, also play into this equation here, not to mention artificial intelligence. So how are you looking at the space, big picture?
Rob Thummel: Well, we see artificial intelligence as being a big, major catalyst for potential growth in energy demand, right? We think that electricity is going to become the new oil. Natural gas is actually going to play a really, really important role going forward. The US can win the AI race because the US is the lowest-cost producer of natural gas, really, in the world. And so that low-cost natural gas will fuel the AI revolution, or industrial revolution, going forward. And so we see that as a significant opportunity, not just for oil and gas or natural gas producers, but for the midstream companies, as well as some other infrastructure plays.
Remy Blaire: And of course, with those key names that we mentioned, Exxon as well as Chevron, we’re looking to see what comes out in terms of the top and bottom line, as well as the guidance on those earnings calls. So what are you looking for when it comes to dividends as well as buybacks?
Rob Thummel: Yeah. So the dividend probably has been steady. Exxon and Chevron have both been paying dividends for probably 50 years, I think it is. So that’ll be steady. Now, the buyback will be interesting. Both Chevron and Exxon have announced buyback plans. We hope, and we think, a catalyst will be them upping the amount of the buyback that they’re going to participate in. So if they do that, I think that’ll be a good catalyst that will help drive these stocks going forward into 2027.
Remy Blaire: And I do want to get your take on two key names starting with the letter V. That includes Vertiv as well as Vistra. So why are you focusing on these two names right now?
Rob Thummel: Yeah. So at Tortoise, we have an AI infrastructure fund, and we think Vertiv is a really interesting stock. And the reason why is, if you look at what Elon Musk said last week, he said, what’s going to be the bottleneck, the next bottleneck, for AI? Well, it’s going to be liquid cooling. What does Vertiv do? They’re the leaders in liquid cooling and power management. And so as a result of that, what we think is going to happen, and we’ve seen this playbook play out with Micron and other companies, is that you’re going to see gross margins increase. Well, if gross margins increase, then the net result is going to be much higher revenue, much higher cash flow, and much higher earnings. And so we just don’t think that the market is reflecting that improved gross margin that’s going to lead to higher future earnings.
Remy Blaire: You said Vistra as well.
Rob Thummel: Vistra, yeah. Vistra is a fantastic company. It’s an independent power producer. It’s located primarily in the state of Texas. That’s where it’s got a lot of its assets. You want access to power. You want access to power now, because there are a lot of data centers coming online in the state of Texas, and Vistra will benefit from that.
Remy Blaire: And of course, when we’re talking about the energy complex, we know that diesel has been getting a lot of attention, as well as WTI and Brent. But when it comes to natural gas, give us your take. Why are prices so low right now?
Rob Thummel: Yeah, that’s a good question. So if you look internationally, natural gas prices are not low. They’re really high in Europe and Asia. You know, US prices are really low, as you highlighted, Remy. And that’s because there’s just such a large supply of natural gas, right? You know, the US, because of the shale revolution, has so much access and so much storage available, and ample supplies, that that’s kept inventories intact. And so when inventories are kind of at or below normal, that usually means that prices are low and then go lower.
And so that’s kind of where we’ve been with natural gas over maybe the last year, which actually is a good thing, because it’s kind of the Jevons paradox that has played into the natural gas industry. The lower price has really spawned new interest and new areas of demand and growth: industrial demand growth, manufacturing demand growth, and then, of course, AI demand growth as well.
Remy Blaire: And finally, before I let you go, this is the time of year that we reflect on everything that’s transpired so far in 2026. But as we head into the final months, the final weeks of the fourth quarter, and into the new year, how are you looking at the macro outlook?
Rob Thummel: Yeah, the macro, very, very good question. We’re watching. You know, we want to see what inflation is going to do with these higher diesel prices. We hope we can get that under control globally. I think we can, if we can just maybe get some of these wars to calm down a little bit. The same thing on oil too, right? Obviously, the Strait of Hormuz is really important. I think the whole world has figured out, you know, the Strait of Hormuz is really, really important, and it’s going to be important for decades to come.
And so if we can get some ships flowing through the Strait of Hormuz, and more diesel fuel being produced out of Russia and the US, and then eventually add to global refining capacity, then I think that’ll continue to drive energy demand. But I think, as everyone has figured out, you know, AI is going to be a big factor, and the energy industry is going to be a big benefactor of AI going forward.
Remy Blaire: And of course, since you mentioned AI, we have about 60 seconds here. So how are you looking at the ecosystem, and where are the risks and opportunities?
Rob Thummel: Yeah. No, that’s a great question. So at Tortoise, our approach to AI is basically saying that, you know, AI doesn’t run on chips alone. It runs on infrastructure. So at Tortoise, we’re focused on the enablers of AI, the picks and shovels. And so we have an infrastructure fund, TKI, the Tortoise Capital AI Infrastructure Fund, that focuses on where there is an undersupplied market with growing demand, right? So obviously that’s in electricity. That’s also in memory and storage. That’s in heating and cooling, or cooling, like I was talking about earlier. And so those are the areas where we focus: really inside the data centers, the data centers themselves, and then what goes inside those data centers as well.
Remy Blaire: Well, Rob, it was great having you on the show. Thank you so much for joining us, and thank you so much for sharing your insights today.
Rob Thummel: Thank you, Remy.
Remy Blaire: My pleasure.
