Alberta’s oil and gas sector has grown substantially in the past year, with the value of assets purchasable increasing to $3.7 billion from $1.8 million, according to a report published by Sayer Energy Advisors on Oct. 30. But the report says that due to burdensome debt, companies have been forced to sell their goods and that a lack of buyers is forcing sellers to auction off assets at a discounted price.
Pengrowth Energy Corp. accepted a bid at five cents per share, even though its stocks had been trading at 400 per cent more. Jeffrey Craig, analyst for Veritas Investment Research, said other firms may be forced to make similar decisions as they’ll no longer be able to demand a premium price for their assets. “I think we are certainly starting to reach a point where this deal might be a canary in the coal mine,” he said, as the Financial Post reported.
According to the Sayer’s report, many other energy companies face similar struggles. In September, Obsidian Energy Ltd. began acting on a “strategic alternatives process” with the aim of selling the company, merging or changing the company’s capital structure. Similarly, Accel Canada Holdings Ltd. and Accel Energy Canada Ltd. have acquired legal protection from creditors and are looking for a buyer. Bellatrix Exploration Ltd. is following suit.
Major energy corporations such as Canadian Natural Resources Ltd., or Suncor Energy Inc., usually end up being the buyers in this scenario, but these acquisitions have received poor feedback from shareholders in the past, shares dropping substantially. Encana Corp., saw its shares plummet 17 per cent in November 2018 after the announcement that it would be purchasing Houston-based Newfield Exploration Co. for $5.5-billion (U.S.).
Anish Chopra, managing director for Portfolio Management Corp., said that having large energy corporations involved in mergers and acquisitions is not favourable for energy investors and that “the prevailing thought around large cap oil companies is to spend less on acquisitions and … (more) on stock buybacks to enhance shareholder value.”
For some, the consolidation of energy companies in Alberta could be a favourable option. Mike Archibald, associate portfolio manager for AGF Investments, proposed that if a group of five smaller oil and gas producers were to merge, it could really help the sector. According to Archibald, the catch with consolidating is that “you’d have to collapse four management teams that have to basically say, ‘I’ll put my hand up and say I no longer want to work in this industry,’” and that this is unlikely to happen.
With space in Western Canada decreasing, companies will continue to debate whether following Encana’s lead and moving their production to the U.S. is the better option.
Thirty-seven people were killed and another 60 injured after a convoy of buses was ambushed Wednesday in Burkina Faso Global News reported, citing reports from The Canadian Press and Reuters. According to the Mining Exploration Society in West Africa (SEMAFO), the convoy was transporting employees of the Canadian-owned gold mine. SEMAFO said attack happened about 40 kilometres from the Boungou Mine, but that the mine’s production was not impacted.
“To date, we have no reports of any Canadian citizens being affected,” Global Affairs Canada said in an email to Global News. “Canada stands in solidarity with the Burkinabe people and supports Burkina Faso’s efforts to consolidate peace and stability and in its fight against terrorism.”
An expansion of al-Qaeda and the Islamic State along the Sahel borders and south of the Sahara has resulted in an increase of attacks on the Burkina Faso area in 2019, this ambush having been the fourth in 15 months.
The National Coalition of Chiefs — founded with the intention of representing Indigenous support for the oil and gas sector — hosted the Natural Resource Summit on Monday and Tuesday. The event involved 81 Canada-based Indigenous chiefs and leaders as well as hundreds of experts from the natural resource sector, according to the coalition president Dale Swampy, the National Observer reports.
Chief Roy Jones Jr. ended the conference by taking a moment to discuss the divide that natural resources production has fostered in Indigenous nations. He spoke from first-hand experience, having had his position as chief repealed after openly supporting the expansion of the Trans Mountain Pipeline.
A new organization called Indigenous Strong was announced at the summit, with the goal of encouraging Indigenous participation in the oil and gas industry.
“We are getting louder now because we are getting tired of a small minority of activists and protesters speaking for all First Nations,” Swampy said. “Most Indigenous communities are engaged in resource development in one way or another. The energy industry is an important source of jobs and revenues for many First Nations.”
Eriel Deranger, a member of the Athabasca Chipewyan First Nation and executive director of Indigenous Climate Action, made a statement by not attending the summit. “It’s disappointing that the Indigenous identity is being leveraged in a way to promote these things that are really counterintuitive to a lot of the positions that our communities have taken for decades,” she said.
Chief Roy Fox of the Blood Tribe told Alberta Energy Minister Sonya Savage on Monday that while he supports the growth of the gas and oil sector, there is a misunderstanding of where jurisdiction over land lies. “There is some sort of legal action against Ottawa telling them that in Alberta, all of the natural resources belong to Alberta. That is not true,” he said.
Bill 14 passed on Oct. 30, introducing a new Crown corporation called Alberta Indigenous Opportunities Corp. This bill will see the allocation of $1 billion of provincial funding to “facilitate investment by Indigenous groups in natural resources projects and related infrastructure” over the course of the next four years, and may be a game-changer for Indigenous nations and their relationship with the energy sector. With that, another $10 million has been given to the Indigenous litigation fund to “support Indigenous voices in legal actions that affect responsible resource development in Alberta.”
Miners Want to Take the Boom and Bust Out of CEO Pay Packages (The Wall Street Journal)
B.C. preps ‘fuel transparency’ bill to track gas price gouging (the Vancouver Sun)
Saudi Arabia’s Final Plan For Higher Oil Prices (Oil Price)
How viral oil industry videos have skirted campaign disclosure rules (the Toronto Star)
Coming from different sides of the coin, Derek Evans and Annette Verschuren discuss reconciliation between the energy sector and climate action in their piece “For unity’s sake, it’s time to bridge the gap between energy and climate.” The authors explain in the Globe and Mail that, while climate change is unavoidable, the solution is not to completely cease fossil fuel production in Canada because “the energy sector is nearly one-10th of our national economy (and) it provides important funding for social infrastructure, including education and health care.” Instead, it’s more plausible to expand Canada’s expertise in green technology by ensuring that all levels of Canadian government invest in the industry’s development and create incentives to adopt clean infrastructure in fossil fuel production. For Evans and Verschuren, this is the only way to satisfy both sides.