Oct. 26, 2018

ONE-ON-ONE WITH RAFI TAHMAZIAN OF CANOE FINANCIAL

  • From a global perspective, investors are treating Canadian energy companies as if ‘they are in jail’.
  • The carbon tax focuses on the supply / industry side and does not impact the demand for fossil fuels.
  • Our federal regulators are handicapping our energy industry’s ability to recapitalize.
  • Over time, the low oil prices and anti-fossil fuel regulations have reduced capital for ‘up stream’ investing. This has created a major decline event.
  • Canada will be challenged to find financing for expansion of the energy industry. Financing options will be limited to only a few companies.
  • Global demand is expected to peak out at 130 million boe/d by 2030-2040 vs the current demand of 101 million boe/d, with demand increasing by over 1 mill boe/d annually.
  • Our energy service industry is being pressured by new technology, narrow profit margins and limited capital.
  • In short, we continue to attack the supply side (producers) and underinvest in the industry.

NORTH AMERICAN ECONOMY

  • Bank of Canada increased rates by 0.25% to 1.75% and opened the door for more increases.
  • Canadian banks increased prime to 3.95% vs 3.70%.
  • Canadians are 5x more likely to take a car loan for 84 months (7 years) than Americans.
  • New Ontario provincial government is repealing parts of the Fair Workplaces, Better Jobs Act, including:
    • Freezing minimum wage at $14, with annual increases tied to inflation starting in 2020
    • Replacing personal emergency leave of 10 paid days per year to unpaid leave of: 3 days for personal illness, 2 for bereavement and 3 for family responsibilities
    • Employers will no longer be required to pay part-time and casual workers same rate as full-time workers for the same job
  • Canada is imposing a carbon tax on provinces that have not implemented their own carbon tax, with much of the revenue returned to qualified individual tax payers.
  • Canada has passed legislation on the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Canada is one of the first countries to ratify the 11 country deal.
  • Initial US Q3 GDP came in at 3.5% vs 3.3% expected by economists;
    • Consumer spending accelerated to 4%; the highest since 2014
    • Inventories provided the largest contribution since early 2015
    • Government spending increased the most since 2016
    • Trade was the largest drag in 33 years

TIDBITS

  • Saudi Arabia signed deals worth more than $50 billion in oil, gas, infrastructure and other sectors at the investment conference in Riyadh.
  • President Trump has approved a plan to drill for oil from a manmade island north of Alaska.
  • President Trump said the US will exit the landmark 1987 pact with Russia that limited nuclear arms.
  • An Australia based start-up is planning 21 sites across the country that will fully charge electric cars in just 15 minutes.