Follow the money. It's sage advice offered in the classic movie All the President's Men, and it's sound guidance to understand what's unfolding in the Canadian oil and gas industry today.
Uncertainty Drives Capital Back to Canada
As uncertainty ripples through global energy markets amid the war in Iran, importing countries want to secure oil and gas from dependable exporters. And investors are paying attention to Canada.
“This is the third time that I’ve seen a big green light for Canada, where (capital) is flowing back,” ARC Financial Corp. CEO Brian Boulanger told the Global Energy Forum on Thursday. “But I can tell you also, the last two times, the capital left almost as quickly as it came, on a bunch of broken promises.”
ARC is Canada’s largest energy-focused private equity manager, and Boulanger notes 27 multinational oil and gas companies were active in Canada in 2015, but that number later fell to 14 with the exit of international players. Yet, there are signs of change, such as supermajor Shell’s recent $22-billion acquisition of ARC Resources.
More than $5 billion of institutional capital flowed into Canadian oil and gas stocks over the past year, led by investors from outside the country, according to data from analyst Jeremy McCrea of BMO Capital Markets. He believes the shift in the federal government’s tone toward oil and gas development — highlighted by last November’s federal-provincial energy MOU — along with the long-life reserves of many Canadian petroleum producers, are garnering foreign investor interest.
“It’s kind of a one-two punch here, and that is why we’re seeing these international dollars come back into the sector,” McCrea said Friday.
Policy Changes and Geopolitical Factors
Boulanger pointed out Canadian oil and gas equities are up sharply since Prime Minister Mark Carney was elected last year, while concerns about possible tariffs being imposed by U.S. President Donald Trump on Canadian energy have also receded. Canada’s kryptonite in the past decade has been the inability to get new projects built quickly, along with federal policies under former prime minister Justin Trudeau that appeared to be designed to slow the industry’s growth — although output did continue to climb.
“Compared to 2022, everything is better. Everything. I mean, you’ve got Carney versus Trudeau, you have got people’s understanding that Trump is not going to tariff the industry, so that’s a positive. You’ve got structurally higher commodity prices,” Boulanger said on the sidelines of the show. “There is more international capital taking a look at Canada.”
As the Middle East war disrupts energy trade flows, other countries and investors are re-examining Canada, a theme that resonated at this week’s Global Energy Show.
