Oilpatch favours growth over dividends, despite pressure from investors: report

Canadian energy companies are struggling to attract investment while their U.S. rivals are having an easier time raising money. Analysts at Barclays Capital have a simple solution for the Canadian oilpatch: Change your strategy.

In a new report entitled “If you can’t win, change the game,” Barclays Research analyst Grant Hofer said mid-cap Canadian oil and gas producers do not offer the growth opportunities their U.S. competitors enjoy and, as a result, can’t attract the same amount of capital.

“Acknowledging that Canadian mid-cap energy companies are struggling to compete for investor interest, we believe that a shift away from growth could be helpful for some companies,” Hofer said.

The Calgary-based analyst’s report suggests a handful of companies — especially Crescent Point Energy Corp., Obsidian Energy Ltd. and Bonavista Energy Corp. — should spend more of their free cash flow on dividend payments to shareholders and less on drilling for new growth. Hofer said that Canadian oil companies could thereby attract more capital from investors looking for yield by transitioning into an income-focused investment vehicle.

Hofer’s report contrasts the growth-focused company model, followed in investment hot spots such as the Permian light oil formation in Texas, and the incomefocused model followed by companies in more mature formations such as the North Sea or even the oilsands.