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article imageEight Canadian energy companies booted from main equity index

By Karen Graham     Sep 24, 2019 in Business
Toronto - In the latest sign of difficulties facing the country’s oil and gas sector, eight Canadian energy companies were booted out of the S&P/TSX Composite Index on Monday because their market capitalization has dropped below minimum requirements.
Even though Canada holds the world's third-largest crude oil reserves, the rebalancing of the country's flagship index underlines the problems energy companies are seeing in attracting investment due to concerns over a lack of new pipelines, along with the glut of inexpensive North American natural gas, reports the Financial Post.
The companies affected include Birchcliff Energy, Ensign Energy Services, Kelt Exploration Ltd, Nuvista Energy Ltd, NexGen Energy Ltd, Precision Drilling Corp, Peyto Exploration and Development Corp and TORC Oil and Gas Ltd.
Jeremy McCrea, an analyst with Raymond James said the excluded companies will miss out on investment information from index-tracking passive funds, reports Reuters.
“To raise capital for any energy company here in the last few years has been extremely difficult and this is one more nail in the coffin in their ability to access equity,” he added.
The S&P/TSX Composite Index
A composite index is an important tool used to conduct investment analysis, measure economic trends, and forecast market activity. It is rebalanced on a quarterly basis. The Canadian index represents about 70 percent of the total market capitalization on the Toronto Stock Exchange (TSX) with about 250 companies included in it.
If a company has been booted from the index, they must wait a year to reapply - and will only be admitted if their value is at least 0.04 percent of the index. McCrea said that would be equivalent to just under C$1 billion ($754.26 million), according to the Global News.
S&P Global spokesman Ray McConville said, “Energy companies in Canada have taken quite a bit of a hit lately. It’s simply a matter of their stock prices having fallen to the point where their market capitalization is no longer eligible."
Travis McPherson, vice president of corporate development at NexGen Energy, said being removed from the index won't have any effect on the company's operations, “other than the unfortunate short-term impact to the share price as a result of short-term investors pre-positioning ahead of any action.”
Birchcliff Energy investor relations manager Jesse Doenz said there will be “absolutely zero impact” on his company.
More about Canadian energy companies, S&PTSX Composite Index, Energy companies, below minimum requirements, Investments
 
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