BC delays LNG framework – again
Also: why ATB's Bruce Edgelow thinks U.S. fund managers are taking a renewed shine to Canadian energy stocks (and it has nothing to do with the falling loonie)
When he was younger, Max Fawcett wanted to make a mint in the markets. Now as the managing editor of Alberta Venture he gets to write about them. Close enough, right? He can be reached at email@example.com
by Max Fawcett
Timing, as they say, is everything. Dundee Capital Markets released a report at the end of January called “Riding the Canadian LNG Wave – The (Potentially) $200bn Question.” They probably didn’t realize how important that parenthetical was. As Justine Hunter writes in the Globe and Mail today, “the Liberal government cancelled the fall sitting of the legislature last September, saying more time was needed to draft a complex tax regime for LNG. But at that time, Mr. de Jong [the province’s finance minister] said both the public and LNG proponents would see the framework for the tax by the end of 2013.” Well, so much for that. Late yesterday, de Jong announced that the government was delaying the release of its framework for taxing LNG exports until the spring, and related legislation until the fall. As Hunter writes, “That means that final investment decisions from any of the proponents are not expected now until late in 2014 – at the earliest.”
While the report’s conclusions are now complicated by this latest delay, they’re still worth considering. The biggest takeaway for investors is that they might want to focus on names that, as Dundee’s team of analysts wrote last month, “offer free optionality when it comes to this nascent market.” They highlighted two top names: Petrowest (TSE:PRW) and Entrec (TSE:ENT). “The former has a strong presence in the Horn River, Liard, and Montney gas plays in northeast B.C. as well as established relationships with the major proponents of LNG in Canada, positioning it to take advantage of LNG related activity. In the case of Entrec, which provides heavy lift and heavy haul services, the firm is expanding its service capabilities in northwest B.C. in preparation for the LNG development (LNG facilities and ancillary infrastructure will require crane and heavy haul transportation services).” Dundee also likes Stantec (TSE:STN) for its exposure to the engineering work that a full-scale LNG build out will surely require.
Meanwhile, in the course of a conversation with ATB Financial’s Bruce Edgelow for a story that will run in our April issue, a few interesting tidbits came up that are worth sharing. He says that the tenor of his conversations with U.S. money managers has changed noticeably over the last couple of months, and thinks we could be on the verge of seeing some institutional money flow back into Alberta’s oil and gas sector. “The rising NYMEX and related AECO has people back in the investment realm in the Canadian space, notwithstanding the fact that they still have lots of opportunities in the U.S.,” he said. “To the firm, every one of them said they’re looking afresh at Canada.” And that renewed interest has nothing to do with big-ticket items like pipelines or LNG facilities. “We’re no closer to LNG. We’re no closer to Energy East on the pipeline side. So, when queried on what’s driving the fact that they’re quite anxious to get into the Canadian market, they said ‘Look at the storage levels. Look where we’re at on NYMEX. We think we’ve come off the floor.’”