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Trying to determine the reason why behind the dramatic stock price moves of Enbridge Inc. in the last couple of weeks is an exercise that will tax the sharpest of minds. And when some of those sharps minds are prepared to engage in conspiracy theories the problem becomes even more intriguing.

What all participants are attempting to understand are the dynamics, that saw the shares rise by $3.84 over the week by almost $6 in the week’s low. Those gains took place a period of much larger-than-normal trading volumes.

Those increases need to be considered alongside this news that Enbridge raised $2 billion of equity – that could rise to to $2.3 billion – through the sale of 49.14 million shares at $40.70, a cost set in a very healthy 5.7 per cent discount to the closing cost of the shares on the day the deal was priced.

The final factor – the one that has got the conspiracy theorists working overtime – may be the large recent buildup in the short interest in Enbridge. Short sellers participate in that activity since they’re convinced the shares will trade lower in the near future: If that view is correct it will allow them to profit from continued falls in the cost of the shares since the short sellers covers the short position at a lower price.

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We know that because the end of January, Enbridge’s stock price was off by a lot more than $5: it fell to $43.16 on Wednesday from $48.66; we also realize that in the first two weeks of February, the short position in Enbridge on the TSX jumped to 37.194 million shares from 31.444 million C an increase of 18.3 percent. (In those days Enbridge had the seventh-largest short position on the TSX.)



In Ny, where Enbridge also trades, the short position buildup was much lower. “This is a reliable utility stock,” noted one Canadian participant who was interested in the increase.

This participant submit two theories: The underwriters shorted the stock prior to the offering; or “brilliant speculators who sensed there was a 49 million shares issue coming at a knockdown price.”

While none of these theories can be proven, conversations along with other market participants, observe that the big short position and the have to cover might have had an impact within the share price surge. (We will have some indication once the TSX next reports Enbridge’s short position.)

Participants obtain that view since the size of the deal – an equity offering of $2 billion is five times the total amount that Enbridge raised in mid-2014, the last time it sold common shares – and the discount; large deals need a large discount, and Enbridge and the underwriters agreed to a proper concession. (On its 2014 equity financing that raised $460 million, the discount was 2.04 per cent.)

Put the 2 together and it might be presumed the selling price (and therefore the necessity to cover the short) would rise. And that’s what happened: on Thursday the shares improved by $2.38 to $45.54, a trend that continued Friday with another gain of $1.44. (On Thursday, volume around the TSX was almost six times normal.)

Other market participants possess a different take: They reason that the cost of oil has become a proxy for Enbridge.

John Whelen, Enbridge’s chief financial officer, said “the market perception has been around our capability to raise capital. This can be a very unusual market and investors have tended to pay attention to macro factors. By pre-funding our equity requirements for the next two years we have answered the market’s concern for what is definitely a attractive growth program.”

bcritchley@nationalpost.com

OTTAWA – Canada’s finance minister says he’s encouraged by “very positive feedback” from his Group of 20 peers to the Liberal government’s economic blueprint outlined during a two-day summit in Shanghai.

But while Bill Morneau said the gathering of industrialized nations – coming at a time of growing concerns within the stability from the global economy – “made good progress” to help to strengthen sustained growth, the actual text of the group’s communiqu offered few details of the agreement.

The G20 finance and central bank chiefs, however, maintained they were “committed to further enhancing the structural reform agenda” first agreed to in 2014 – an objective that has been complicated by the global collapse in oil prices since mid-2015 and new concerns that the possible exit by Britain in the European Union provides another shock towards the global economy.

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Still, inside a statement released around the weekend, Morneau said the G20 ministers “made good progress on advancing policies to bolster the worldwide economy.”

“I received very positive feedback on Canada’s new path for long-term growth, and recognition that when the center class thrives, we all thrive,” he said.

He added the government’s March 22 budget – the very first because the Liberals, led by Justin Trudeau, came to power – “will demonstrate Canada’s commitment to making smart and necessary investments to be able to grow the economy and make a real difference for that middle-class and the most vulnerable.”

That policy path includes tax breaks for middle-class families, increases towards the Canada Child Benefit for all those with low-incomes and spending on infrastructure projects.

To do that, the Liberals ran on the campaign to return Ottawa to some deficit – a shortfall that is now expected to be $18.4 billion within the coming fiscal year, up from the promised $10 billion deficit.



Many economists, however, believe the government will need more firepower to prevent Canada sinking into another recession. They suspect that spending level could rise up to $30 billion or more in only the very first year of the government’s four-year mandate.

Meanwhile, previous structural reform commitments through the G20 were designed to add two percent to global growth by 2018. So far, the International Monetary Fund has predicted that growth is only going to reach 0.8 per cent in that timeframe.

“The worldwide recovery continues, however it remains uneven and falls short in our ambition for strong, sustainable and balanced growth,” according to the communiqu, released at the conclusion of G20 talks on Saturday.

“Monetary policies will continue to aid economic activity and ensure price stability,” the group said, but added that “monetary policy alone cannot result in balanced growth.”

Indeed, the financial institution of Canada – led by governor Stephen Poloz,  who also attended the G20 summit – has cut its key lending rate twice previously year, both times by 25 basis points, first in January 2015 and again the next July.

The central bank rate is now at 0.5 per cent and expected to remain there until policymakers can better gauge the impact of the federal government’s economic plan.

During the G20 meeting, IMF md Christine Lagarde emphasized the need for structure reform has become “even more pressing given the disappointing state from the global recovery.”

“Our research finds that for that more advanced economies, reforms that foster technology and innovation may have the best pay-off,” Lagarde said in an address in Shanghai. “For emerging market economies, strengthening property rights and capital markets might be more relevant.”

Despite these goals, the G20 didn’t support calls for a co-ordinated global spending package that could help limit the chance of global financial trouble, similar to that observed in 2008-09.

“(But) we’ll make use of all policy tools – monetary, fiscal and structural – to bolster growth, boost investment and ensure stability in markets,” the G20 communiqu said.

In an argument, the Finance Department said Morneau “encouraged his G20 counterparts to apply long-term growth strategies.”

In Shanghai, also, he met with Canadian business leaders “to discuss making more global opportunities for Canadian businesses to develop and thrive on the international stage,” the minister’s office said.

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HALIFAX — An airline passenger advocate says Canada need to look at establishing seat-size standards for commercial airlines.

Gabor Lukacs says an attempt by American Sen. Charles Schumer to want the U.S. government to determine seat-size standards is one thing that needs to be done in Canada.

Lukacs said such standards are needed on Canadian flights, as cramming too many people onto an airplane poses safety risks.

“It’s an enormous safety issue,” said Lukacs from Halifax on Sunday. “If you cram too many passengers in too small of the space, then some people will end up the inability to evacuate the plane in the same amount of time (during an emergency).”

They’re like sardines.

Lukacs said overcrowding planes also infringes on passenger comfort, especially on lengthy flights.

“It can be very problematic,” he said. “There’s even the issue of air rage. Because seats are so close, you’ve individuals who use such things as stoppers from allowing the seat in-front in it to recline. It makes tension between two strangers… or even a small amount of tension can spark a fist fight.”

Lukacs said creating standards that apply to all commercial airlines will bring Canada consistent with other jurisdictions, like the European Union.

“When it comes to air passenger rights, we’re greatly behind the rest of the world,” said Lukacs.

Transport Canada did not immediately return a request for comment Sunday.

The U.S. also does not have federal limits how close an airline’s row of seats could be or how wide an airline’s seat should be.

Schumer, a New York Democrat, says he will add an amendment to some bill that’s pending before Congress that would require American Federal Aviation Administration to set the seat-size guidelines. A vote is expected in March.

Schumer said airlines have been slowly reducing legroom and seat width.

“They’re like sardines,” Schumer said of airplane passengers. “It’s not a secret that airlines are looking for different options to cut costs, however they shouldn’t be cutting inches of legroom and seat width along the way … It’s here we are at the FAA to step-up and prevent this deep-seated problem from continuing.”

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Schumer said seat pitch, the length from a point on an airline seat and the same just right the seat in front of it, has dropped from 35 inches within the 1970s to some current average of closer to 31 inches, and seat width has gone from 18.5 inches to about 16.5 inches.

He argues the requirement is required to stop airlines from shrinking those numbers even more.

An FAA spokesman said agency officials “anticipate reviewing” Schumer’s proposal.

Airlines for America, a business trade group representing a range of U.S. carriers, said it believes the government’s role is to determine a seat size that is safe, but opposes the proposed regulation.

“We feel the federal government shouldn’t regulate, but instead market forces, which reflect consumer decisions and competition must decide what’s offered,” spokeswoman Jean Medina said. “As with any commercial product or service, customers vote every day using their wallet.”

— With files from The Associated Press

 

Rumblings from Enbridge’s $2 billion equity financing – an offer that’s expected to be upsized by 15 per cent which closes Tuesday – continue.

One rumbling concerns the way in which the stock was allocated. With a cast of 17 firms, four more dealers were involved this time around compared with the company’s previous equity offering, a $460 million issue in mid-2014.

But there was no room for any selling group firms. Those firms, which don’t carry any of the risk that is assumed by the underwriting group, put orders in with respect to their customers (normally retail) with the expectation of having a so-called fill.

On this financing – announced at 4:42 p.m. last Wednesday C potential selling group firms received a phrase sheet at approximately 4:51 p.m. Three and a half hours later – a remarkably short period of time to sell such a great deal of stock – exactly the same firms received an email from syndication “that the financing is already closed and there is no selling group allocation.”

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Instead all the available stock was placed through the firms within the syndicate: allocations ranged from 16 percent for RBC and Credit Suisse to 0.5 percent for each of First Energy, Macquarie Capital Markets and Peters & Co.

“You put a purchase set for shares with respect to a customer and you are told that you get nothing. It’s deflating,” noted one broker. “Get exactly the same result several times consecutively and you start losing clients,” he added noting that while not having a selling group may go in the short term, it isn’t constructive from the long-term perspective.



The argument runs this way: over a cycle issuers need both large and small dealers to satisfy their needs. But to make sure that the little dealers remain once the big dealers decide they won’t be covering that segment from the market, they have to get area of the good deals. (A couple of years back, in another blow, the federal government of Ontario did away with selling group participation because of its bond offerings.)

And Enbridge was a good deal: the orders piled in (a lot more than 200 institutions participated); demand was strong as has been the after market performance: the shares are up by more that $6 from issue price. It might happen to be easy money for that smaller firms – though because it’s a classic zero-sum game, their revenue would have come in the cost of the underwriters.

This broker contrasted the Enbridge experience with what went down with the privatization of Hydro One in which the seller (Ontario government) insisted on broad retail participation – a goal which was partly achieved by including a group of selling group members. That edict was easy to implement because the offering was marketed – and not bought, where self interest necessitates shares be sold as quickly as possible.

Who gets what inside a deal is really a multi-part process. The overall allocation between firms – meaning the underwriting liability each dealer agrees to – is decided by the issuer with input from the lead managers or book-runners. Enbridge’s policy is: “We take care of people who take care of us.”

With input from the issuer, the split between institutional and retail will be determined, a determination that may change once all the orders have been received. Within an over-subscribed deal, the final allocation, which institutions get stock could be tense.

bcritchley@nationalpost.com

 

 

 

OTTAWA – Divergence in United states economies shows little manifestation of narrowing.  

While the U.S. economy performed much better than expected in the final quarter of 2015, Canada’s output likely slowed due to the ongoing drag from low oil prices and weak business investment.

On Friday, revised U.S. data showed that country still performed much better than expected in the final quarter of 2015, managing revised annualized growth of one percent, up from the previous estimate of 0.7 per cent, and pointing to an improving pace for gross domestic product in the first quarter of the year.

Revisions to U.S. GDP through the Commerce Department now put overall growth in 2015 at 2.4 percent.

That is a hard act to follow for Canada, in which the economy managed only 0.3 per cent growth in November, coming after a flat reading in October and a 0.5 percent decline in September.

December and fourth-quarter GDP data will be released on Tuesday, using the consensus of annualized quarterly growth being about 0.3 per cent, “so, hardly any growth,” said Douglas Porter, chief economist at BMO Capital Markets.

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As for Canada’s overall 2015 tally, forecasters aren’t anticipating more than one percent growth, and just slightly better output its this season – even with federal government stimulus spending and tax cuts for middle-class families.

Most estimates put Canadian GDP growth at 0.5 per cent within the first quarter of 2016.

“The story there is that we believe we will see another big stop by business capital spending. This is where the weakness is originating from,” said BMO’s Porter.

Meanwhile, the U.S. economy has become forecast to grow by as much as 2.5 per cent within the first quarter of 2016.

“(But) we remain firm in our opinion that the U.S. economy continues to grow, with reduced slack continuing to improve inflationary pressures and providing sufficient evidence to Federal Reserve officials to tighten monetary policy twice more later this season,” said Fotios Raptis, senior economist at TD Economics.

The recent financial market turmoil “poses a danger of a broader slowdown in global economic growth than some of the backward-looking economic indicators are dictating,” Raptis said.

In December of this past year, the Fed raised its key lending level a quarter point to between 0.25 and 0.5 percent, after sitting tight since 2008. The Bank of Canada moved well before that – in January 2015 – however in the opposite direction, cutting its trendsetting interest rate 0.75 per cent in one per cent, where it absolutely was since September 2010.

The Bank of Canada’s next rate decision occurs March 9.

But most analysts don’t anticipate any change at that meeting, given the federal government’s 2016-17 budget won’t be tabled until March 22.

However, the bank’s April 16 decision, that will accompany its forward-looking quarterly Monetary Policy Report, often see alterations in the outlook by policymakers around the economy and the possible impact of Ottawa’s spending plans.

Financial Post

gisfeld@natinalpost.com

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Royal Bank of Canada has postponed a trader day that planned to discuss the recent purchase of Los Angeles-based City National Bank, following a death of the U.S. private and commercial bank’s chairman emeritus and board member Bram Goldsmith.

Goldsmith, who was 93, died on Sunday. He’d served as chief executive of City National from 1975 to 1995.

Royal Bank had scheduled the investor day for analysts and shareholders to take place this Friday in Toronto.

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“Bram was accountable for building City National into one of the most highly-respected and trusted banking franchises within the U.S.,” Dave McKay, RBC’s leader, said inside a statement late Monday.

McKay added that Goldsmith’s resolve for serving clients and the community was “demonstrated every single day as he continued to operate tirelessly as chairman emeritus and a person in the board.”

Goldsmith was first elected to City National’s board in 1964. He was the chairman from 1975 to 2013 and chairman and chief executive officer from 1975 to 1995.

Royal Bank acquired City National for $5 billion this past year, the biggest takeover in the Canadian bank’s history. A brand new date will be set for the investor day shortly, the financial institution said in the statement.

Many alternatives regarding the way forward for troubled Bombardier Inc. happen to be proposed. The Quebec government has already committed $1.3 billion in aid and today some type of moral argument has been levelled at Ottawa to throw money into Bombardier’s cap also. This is a horrible idea from a governance perspective, in addition to a taxpayer perspective.

Let’s be clear about Bombardier’s governance reality: The Bombardier/Beaudoin families hold almost 60 per cent of voting power within the corporation, despite holding a fiscal interest of just one-quarter of this figure. This can be a dual-class-share firm that simply isn’t flying.

A federal bailout would place perhaps a billion or even more taxpayer dollars in the hands of family that is insulated from governance accountability because of the corporate structure that it has chosen. This insulation and insufficient accountability have not been good for the organization. Over the past 5 years, Bombardier’s stock price has declined a lot more than 75 percent. Why should Canadian taxpayers be on the hook for Bombardier’s poor corporate governance?

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Dual-class share structures are fundamentally unfair: They leave the subordinate shareholders unprotected and cry out for a response from securities regulators. Advocates of such structures recall success stories – like Fairfax or Onex – without focusing on the point that dual-class-share structures undermine corporate governance standards since the subordinate shareholders are burdened with a disproportionate share from the economic risk within the firm relative to remarkable ability to help the affairs of the corporation. In particular, they cannot elect directors or otherwise ensure change through their vote.

As the Magna buyout showed, and also the Corus/Shaw deal suggests, dual-class structures can have severe consequences especially when there aren’t any legally mandated procedural safeguards relating to special committees, valuations, fairness opinions and voting conditions. Because the jurisdiction of securities regulators draws on investor protection and also the public interest, dual-class-share structures ought to be further regulated, otherwise prohibited, in capital markets.

From Ottawa’s perspective, if Bombardier were to receive federal funding, there are no accountability mechanisms in place to make sure that the current board would inflict better than it has to date. At the very least, the Bombardier board itself needs to be replaced and repopulated not with government representatives – as the Quebec government is proposing – but with independent directors (out of the box the case in non-dual-class firms). This will need a dismantling of the dual-class structure.

Reforms are needed to make sure that Bombardier’s subordinate shareholders can bring about the decision about who is around the board of this corporation. This isn’t the place for taxpayer money.

Anita Anand is the J.R. Kimber Chair in Investor Protection and Corporate Governance, Faculty of Law, University of Toronto. Email: anita.anand@utoronto.ca

Home Capital Group Inc. leader Gerald Soloway is stepping down after almost 3 decades at the helm from the mortgage lender.

He will hand the reins to company president Martin K. Reid in the company’s annual meeting on May 11.

Soloway will remain a director of Home Capital and subsidiaries Home Trust and CFF Bank.

“The Board want to thank Jerry, on behalf of shareholders, employees and customers, for three decades of incredible service, building one of Canada’s premier banking institutions from humble beginnings and in doing so helping a large number of Canadians reach their house ownership goals,” Kevin P. D. Smith, chairman of the boards of Home Capital and it is subsidiaries, said inside a statement.

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Home Capital would be a darling of the financial services industry until a hiccup this past year. The firm cut ties with 45 lenders after an internal probe determined that “falsification of revenue information had occurred” on some loan applications.

However, the company concluded that no credit ratings or property values had been falsified, which was unlikely the problem would result in credit losses.

In Monday’s statement, Smith credited Soloway with pioneering residential mortgages for that self-employed, and for those “with limited credit rating that do not meet the lending criteria of major financial institutions.”

During his time as CEO, Home Capital grew from the dozen employees and about $51 million in assets to more than 870 employees and most $25 billion in loans under administration.

Reid, his 56-year-old replacement, joined Home Trust, the regulated lending subsidiary of Home Capital, in 2007, as treasurer. This year, he was promoted to president of Home Capital and Home Trust.

In that role, Reid has had “increasing responsibility for that daily operations from the business and interactions with Home Capital investors,” the company said inside a statement.

The motives fuelling a minority shareholder’s make an effort to thwart Corus’s $2.65 billion purchase of Shaw Media were called into question Friday, as Catalyst Capital Group Inc. aired its concerns about the proposed sale on the conference call with investors and analysts.

Catalyst, a personal equity firm with US$6 billion in assets that are experts in distressed situations, said its only objective would be to maximize the worth of those minority shares. The company says it owns no other position attached to the transition, apart from class B shares of Corus.

Catalyst has argued that Corus is overpaying for Shaw Media up to $858 million. The private equity firm is looking for that March 9 vote to be postponed, for more disclosure and the ability to ask questions directly of the Shaw family, which controls both Corus and Shaw Media’s parent company, Shaw Communications Inc.

“We have obtained extraordinary support from fellow shareholders,” said Gabriel de Alba, managing director and partner at Catalyst. He didn’t name any investors but said that some were large ones, which the momentum behind their cause has grown within the last 24 hours. “They’ve seen the same concerns that Catalyst has highlighted related to both valuation and reporting,” he added.

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But the broader market appears perplexed through the assault by Catalyst, that has long employed combative strategies simply purchasing large stakes as a creditor. Now, Catalyst claims to be fighting for the little guy who, it contends, is assuming more risk and it has seen his position become depressed and diluted.

Late in the 50-minute call, one person asked if de Alba would address what he described as “an elephant within the room,” referring to Catalyst’s bitter feud with private equity firm West Face Capital Inc., a trader in Wind Mobile Corp, which Shaw has proposed to purchase for $1.6 billion. Senior managers at Shaw asserted they plan to make use of the arises from the Shaw Media sale to invest in their December acquisition of Wind.

West Face bought a 35.42 percent stake in Wind as a member of a consortium of investors that purchased the carrier in September 2014 from the former foreign owner, VimpelCom Ltd., for an estimated $300 million.

In a lawsuit weaving its way through the courts, Catalyst had alleged that West Face secured its ownership stake in Wind by obtaining and taking advantage of confidential information that belonged to Catalyst, which in fact had been pursing Wind. Now, West Face stands to create lucrative returns with money paid by Corus.

“What you’re describing is really a beautiful soap opera” that should be “released on a women’s TV channel,” de Alba said in response to the question.

“That’s just a fantastic story which has absolutely nothing to do

China’s latest easing move signals that shoring up growth may be the government’s main concern even when doing this further weakens the yuan or contributes to leverage that threatens the longer-term health from the world’s second-biggest economy.

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The People’s Bank of China said Monday that it’s cutting the quantity of cash the nation’s lenders must lock away. The move marked the very first time in 4 months that the central bank has used certainly one of its traditional monetary-easing tools, despite mounting signs of a weaker economy and a stock exchange in near-freefall.

The action came days before Premier Li Keqiang is anticipated to create the bar lower for gdp having a 2016 target expansion selection of 6.5 percent to 7 per cent, in contrast to last year’s goal of around 7 per cent. The renewed concentrate on growth could be at the cost of any effort to rein in ever-increasing debt: Chinese banks extended a record amount of new loans in January. Meantime, the yuan is down 3.6 per cent against the dollar since October.

“This move suggests that, ultimately, supporting growth takes priority over ,” Louis Kuijs, chief Asia economist at Oxford Economics in Hong Kong, said inside a note. “Today’s move matters when it comes to what it really signals about the policy direction,” said Kuijs, who formerly worked at the World Bank and International Monetary Fund.

PBOC Governor Zhou Xiaochuan highlighted scope for more action ahead of several 20 meeting in Shanghai last week, saying China had “multiple policy instruments” to address growth risks. The half percentage-point decline in the necessary reserve ratio will inject about 685 billion yuan (US$105 billion) in to the economic climate, Bloomberg Intelligence estimated.

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Economic Impact

Whether those funds actually stimulates the economy is yet another matter. Credit Suisse Group AG economist Tao Dong said the outcome depends on just how much banks are prepared to lend to house buyers.

Roberto Perli, a former Fed official who’s now a partner at Cornerstone Macro LLC in Washington, said in a note that the experience probably isn’t a “net monetary easing” since it replaces temporary cash injections. Or, as University of California at San Diego professor Victor Shih says, the move merely counteracts money outflows of recent months.

“It appears a bit desperate,” said Alicia Garcia Herrero, chief Asia Pacific economist at Natixis SA in Hong Kong. “Zhou already said that he’d use monetary policy around needed to support growth, so this basically means that growth continues to be not coming naturally with the already lax monetary conditions.”

China might not be done easing. The most recent cut takes the ratio to 17 percent for that biggest banks, still among the highest such levels in the world.

The central bank said hello lowered the reserve ratio to guide stable and appropriate development in credit.

“This is unlikely to become the final RRR cut,” said Tim Condon, head of Asian research at ING Groep NV in Singapore. “The question is, just how long will it require these to follow up with an interest-rate cut.”

Stocks, Reserves

China is facing an abundance of difficulties in the economy and markets. The Shanghai Composite Index has declined 24 per cent this year, the worst performer among 93 global equity indexes. Foreign-exchange reserves have plummeted US$762 billion since mid-2014 because the government tried to defend a falling yuan.

Injecting stimulus in the form of debt could make things worse in the long run. Goldman Sachs Group Inc.’s investment management division has warned that China’s debt-to-GDP ratio increase is probably the highest in recent history. Debt will peak at 283 percent of GDP within the future years, according to the median estimate of eight economists inside a Bloomberg News survey published in February.

“The PBOC must walk an excellent line,” Oxford’s Kuijs said.

–With assistance from Xiaoqing Pi, Allen Wan, Tan Hwee Ann and Jeff Kearns.

Bloomberg News

Canadian pork processor Maple Leaf Foods Inc posted a better-than-expected fourth-quarter profit as margins in the prepared meats business improved.

Adjusted operating profit in the meat products group, which includes brands for example Schneiders and the company’s namesake Maple Leaf brand, was $54.6 million, in contrast to a year-ago loss of $19.A million.

The Mississauga, Canada-based company said margins at the business were helped partly by lower operating costs in the new prepared meat plants and pricing.

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Maple Leaf, which recently completed a restructuring program started in 2010 to enhance earnings by shutting or modernizing factories, raised its quarterly dividend by 1 cent per share to 9 cents per share.

Excluding items, Maple Leaf earned 25 cents per share, beating the average analyst estimate of 21 cents, according to Thomson Reuters I/B/E/S.

Net profit was $33.3 million, or 24 cents per share, for that fourth quarter ended Dec. 31, versus a net lack of $28.Two million, or 20 cents per share, last year.

Revenue rose nearly 10 % to $873.1 million within the latest quarter.

? Thomson Reuters 2016

HOUSTON ? Brian Ferguson was one of the oil executives in a global energy conference here listening intently now to Saudi oil minister Ali Al-Naimi’s warning to high-cost producers to exit the trade. But he remains unmoved.

Good news, oilsands growth is unstoppable. Unhealthy news, it’s unstoppable

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“Part of what (OPEC is) trying to do is create uncertainty about price, so longer-lead projects would be very hard,” the CEO of Calgary-based Cenovus Energy Inc. said in an interview around the sidelines of the IHS CERA event that attracted a couple of,800 energy industry executives and government officials, in addition to a strong contingent from Canada.

While U.S. shale producers attract much of OPEC’s ire, the Saudi oil minister also named the Canadian oilsands the type of who had prospered in the past decade as OPEC “subsidized” them, however it will now let free markets take over.

The OPEC-orchestrated free-for-all has sent oil prices reeling to some decade-low, leaving thousands in Calgary, Houston and elsewhere unemployed, with expected capital spending in the oilsands set to contract to $16 billion this year from $28 billion in 2014, according to Peters & Co.

“A very real and troubling impact of low oil prices includes reduced employment inside our companies and through the logistics, including transportation, manufacturing and high tech,” said Steve Williams, CEO of Suncor Energy Inc. inside a speech in the Houston event.

There is really a strong sense in the industry that this is really a structural, perplexing downturn.

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“Few people can tell you what is happening in oil markets, but I will try,” said an exasperated OPEC Secretary-General Abdalla Salem El-Badri, because he blamed just-in-time U.S. shale output for that market glut.

Canadian oil companies have little time for OPEC’s machinations.

“I can’t make my financial commitment on which OPEC may or may not do,” said Ferguson.

Cenvous plans to raise production by 100,000 barrels per day this year, area of the 800,000 bpd of Canadian oil likely to enter the market during the next 5 years, International Energy Agency estimates.



But Suncor’s Williams said the will have to “rethink” the way it operates and take advantage of the oilsands unique attributes.

“We are almost not part of the oil industry- just because a lot of the characteristics in our business are extremely different,” William said. “We have vast amounts of resource easily available and our clients are not just one of exploration, development and production. It’s largely capital investment- and very efficient manufacturing.”

Canadian producers will also be facing a unique domestic crisis, as not one other major oil-producing country on the planet has such a schizophrenic relationship with its resources.

Despite being home to the biggest coastline on the planet to its east and west, Canada includes a solitary, choked-full 300,000-barrels-per-day Trans Mountain pipeline to gain access to markets other than america. Plans for brand new conduits have been delayed, denied and disparaged as global warming issues involves the fore.

The newly elected Liberal government considers moving natural resources to markets a “national goal,” but Natural Resources Minister Jim Carr is careful not to cheer-lead the sector, instead focusing on putting in place a strong process that garners public confidence.

“Everybody knows that there needs to be regulatory reform to ensure that major projects to become approved,” Carr said within an interview in Houston. 

The industry doesn’t appear to be waiting for either OPEC or the Canadian government. Cenovus spend less by 30 per cent this past year and expects more reductions this year, because it aims to lower your turnaround time for large-scale projects and rein in steam-to-oil ratios.

Companies are also aiming to reduce their carbon emissions to ensure they continue to be within Alberta’s new 100-metric-tonne-per-year cap, without sacrificing growth.



“If you think the emissions cap is going to get in the way of future growth, you are either incredibly bullish on prices or incredibly bearish on technology, and I would say we want the opposite of this to achieve success,” said Andrew Leach, who spearheaded the climate change review panel set up through the NDP government in Alberta.

For its new projects, Suncor is planning to design an agenda once and replicate it 10 times to create economic savings that spend less up to 50 per cent and soften its impact on the environment.

“My feeling is technology will make a genuine impact on the environmental impact and the cost base,” Williams said. “I see those things over the following four or five years appear in certain scale.”

yhussain@nationalpost.com

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