The hits and misses at this year’s CAPP investment symposium
The annual investment symposium hosted by the Canadian Association of Petroleum Producers and Scotiabank wrapped in Toronto on Wednesday, leaving investors with a greater sense of optimism than was in evidence at this time last year. It was all about survival. Since that time, however, oil prices have strengthened to more than US$50 per barrel, there have been two mammoth deals in the pipeline world involving TransCanada and Enbridge, three significant transactions that have consolidated ownership in the oilsands, a raft of equity issues — most of which were oversubscribed — and green lights for three pipeline projects that will move crude out of Canada.
What didn’t change is there is yet to be a final investment decision on the development of any of the liquefied natural gas projects, the under-representation of women presenting or as part of panel discussions and the format itself, which was short on thematic panels and long on the one-on-one, inside-baseball type sessions of research analysts lobbing questions at company executives, or individual company presentations to investors.
Better that CAPP and Scotiabank take examples from other conferences, which showcase companies and their senior executives in panel discussions on important themes on a macro level, rather than the micro commentary that extended into discussions of stratigraphic traps in reservoirs. Really? Do the conference organizers really believe the investor audience needs that depth of knowledge before it buys — or sells — shares in an oil and gas company? Unlikely. What did work well were the four panels that sought to tie themes together, whether in the realm of natural gas and LNG opportunities or the pace of innovation taking place.
Let’s explore that innovation narrative.
Anyone who attended the innovation panel on Wednesday walked away with a better understanding about how the oilsands producers are continuing to work together to find ways to do three things: decrease emissions and costs and increase productivity.
That’s the sort of information that is increasingly more important to investors making oilpatch investment decisions.
Surprisingly, the room was two-thirds full.
For all the criticism that has been levelled at the oilpatch — and more specifically the oilsands — in the need to improve its collective environmental footprint, the attendance in the room suggested another story.
Either the buy side isn’t interested, it’s not relevant to their investment decisions or they already know everything about the innovation going on and didn’t need to be there. But they did. It was important for the delegates to hear from Canadian Natural’s vice-president of technology and innovation, Joy Romero, about the progress that has been made at decreasing carbon emissions — 16 per cent; the drop in the amount of time it takes to reclaim a tailings pond; or how much money the company spent last year on research, development and innovation initiatives.
That number was $149 million, putting CNRL at the top of the list in the oilpatch and landing it in fifth spot in the country.
“The energy sector,” said Romero, “is a very important research and development engine in Canada.”
That’s not something many Canadians are aware of, but should be.
It would have been enlightening for CAPP delegates to hear the chief executive of the Canadian Oil Sands Innovation Alliance, Dan Wicklum, highlight the milestones that have been achieved, as well as a number of exciting projects that are underway.
Since inception five years ago, the companies involved in COSIA have shared 936 technologies valued at $1.3 billion and it is increasingly being seen as a model for other industry-led research collaboratives around the world.
COSIA is a co-sponsor of the NRG COSIA Carbon XPRIZE, in which there are 26 teams that have been moved into the semifinal round and are all seeking to find ways to convert carbon emissions into useful products.
There are 276 projects with a total value of $680 million in various stages of development, investigation and testing under the COSIA umbrella, with one of the more exciting announcements having come in early March, when the federal and provincial governments committed $20 million for the building of a testing facility in Calgary.
The Alberta Carbon Conversion Technology Centre will be one of a small number of facilities around the world where carbon conversion technologies can be tested on a commercial scale. Here’s another way to look at it. When institutional investors buy shares in Canadian energy companies — and especially the oilsands players — they become, at least they should become, ambassadors for the sector. That means they need to know more than the production, operational and financial metrics. Equally important is to understand the competitive advantage — in both cost and carbon terms — which is increasingly coming through the world of innovation.
As Cenovus’s chief executive, Brian Ferguson, emphasized to a group of reporters on Tuesday, and Wicklum re-iterated on Wednesday, there is enormous potential presented by the world of digitization.
“We are working with IBM and General Electric to collect the data and find incremental improvements,” said Wicklum. “When applied across the sector, the impact is meaningful.”
Think of it this way: If Cenovus alone generates one million points of data on a daily basis, imagine what that translates into for the sector as a whole.
The message — missed by those who opted not to attend the panel discussion — is that the energy sector is committed to moving up the innovation curve, with the outcomes having an important focus: long-term competitiveness in emissions, footprint and cost — all of which are critical to the viability of the sector in a lower pricing environment and a world increasingly committed to decarbonization.
There are plenty of people who like to criticize the oilpatch for not telling its story beyond the numbers. But when they don’t show up to hear it themselves —which was the opportunity presented on Wednesday afternoon — they don’t have a leg to stand on.
Do the conference organizers really believe the investor audience needs that depth of knowledge before it buys — or sells — shares in an oil and gas company?