It is getting so bad, according to Grant Fagerheim, CEO of Calgary-based Whitecap Resources Inc. that not even Canadian institutional investors can be talked into buying Canadian energy company shares, reports the Financial Post.
“We want to get Canada back, to be proud Canadians, to be proud producers of our own products and not be penalized for it,” said Fagerheim in an interview after returning from disappointing meetings with investors in New York last week.
“The question we are continually asked, whenever I’m on the road, is, ‘Why would we invest in Canada right now, when there isn’t a consistent policy on energy or the economy?’ … Even the Canadian institutional investors are skeptical about investing in Canada.”
Insufficient pipelines and curbs on emissions
Investors have been turned off by the lack of export pipeline for gas and oil, Canada’s failure to match the reductions in corporate taxes like the Trump administration succeeded in doing, and the high personal taxes Canadians have to pay.
The Energy East pipeline to Eastern Canada was canceled last year after the National Energy Board announced it would use a tougher review process that looked at “indirect emissions” related to the pipeline.
Additionally, investors are also claiming the uncertainty created by the ongoing reviews and changes in provincial and federal regulations regarding carbon emissions and regulations to reduce methane emissions and air pollution, are also a factor in their decisions.
The pipeline issue has grown to become a hot topic, especially after the release of a report from the C.D. Howe Institute in February this year.
The key paragraph in the report: “Canadian energy producers are at a competitive disadvantage relative to producers in the United States. Much attention has been paid to carbon taxes, but a lack of market access for oil and taxes on investment – not emissions prices – are the main policy-induced competitiveness problems for conventional energy producers in Western Canada.”
Then, there is Kinder-Morgans Trans Mountain Pipeline Extension to the West Coast, which Prime Minister Justin Trudeau approved in 2016 while rejecting Enbridge’s Northern Gateway pipeline to Kitimat, B.C. Proponents of the pipeline extension have used the lack of enough export pipelines as one reason for the extension
Canada’s energy sector on the stock market
Energy shares on the S&P/TSX Capped Energy Index have fallen by almost 10 percent this year alone, even while several of the 38 companies that represent the cream of Canada’s energy industry increased dividends and announced share buy-backs, according to the Globe and Mail.
Suncor Energy Inc. said shares in its oilsands and refining company have seen little if any change since it announced a 12.5 percent dividend increase in February.
Suncor, along with Canadian Natural Resources Ltd., Encana Corp., Birchcliff Energy Ltd. and Paramount Resources Ltd., among others say their “shares are so inexpensive it’s cheaper to buy back their stock to improve performance per share than it is to grow the business by investing in finding and developing new sources of oil and gas,” according to CBC Canada.
“It feels like a complete sense of apathy among investors — especially in Canada — and I have no doubt that a large portion of that is due to the pipeline issues,” said analyst Nick Lupick of AltaCorp Capital. “So some are taking the stance of, ‘Forget it, why bother? I’ll go elsewhere until they figure it out.”‘
