Investor interest in Canada’s oil sector is on the rise among U.S. investors due to a more favorable stance from the Canadian government and the perceived stability of returns. Jeremy McCrea, a managing director at BMO Capital Markets in Calgary, noted a shift in investment where more funds are flowing in from the U.S. while Canadian investment has slightly decreased.
Despite lower oil prices impacting investment decisions, many portfolio managers still see value in holding energy stocks, with a preference for the Canadian sector over the U.S. McCrea highlighted that U.S. ownership of Canadian oil and gas companies has increased to 59%, while Canadian ownership has decreased to 34%.
CEOs in Calgary’s oil industry are witnessing this trend within their companies. Grant Fagerheim, CEO of Whitecap Resources, mentioned a significant increase in U.S. institutional holders in his company to 66%. Brian Schmidt, CEO of Tamarack Valley Energy, noted a growing hesitance among Canadian investors, especially pension funds, in contrast to the enthusiasm shown by U.S. investors.
The change in investment sentiment began about a year ago, coinciding with policy promises from the federal Conservatives to support the oil and gas sector. Prime Minister Mark Carney’s pledge to enhance Canada’s energy presence has further fueled investor confidence in the sector.
The completion of the Trans Mountain Pipeline expansion has boosted investor interest by enhancing export capabilities. Additionally, the economics of the Canadian oil sector, particularly the oilsands, are proving attractive compared to the U.S. market. Canadian oilsands projects offer stable, long-term returns despite high initial costs.
Investors are drawn to Canadian oilsands companies focusing on shareholder returns rather than extensive capital projects. This cash-generating approach has appealed to investors like David Samra of Artisan Partners, who sees it as an attractive future prospect.
Looking ahead, the outlook for the Canadian oil sector appears positive, with potential for further growth in U.S., European, and Asian investor interest. Fagerheim highlighted the global attention shifting towards the Canadian oilpatch, indicating a broader recognition of the sector’s potential.