The tone at this year’s Calgary Stampede is understandably more sobering compared to the recent past since crude oil and the overall equity market are rather weak. Participants would likely be a little more upbeat if crude had increased from US$60 per barrel, instead of moving down again to the low US$50 range.
Analysts at Raymond James, which hosted its 8th annual Stampede Investor Conference on Tuesday, noted that both investors and management teams are struggling to understand where the industry fits inside a macro setting that\’s “as uncertain because it is dynamic.”
Chris Cox noted the Canadian energy market is emerging from the seasonal breakup period, which is typically when producers have experienced time to evaluate their programs and form a pretty clear picture of what the rest of the year will look like.
“Capital budgets aren’t formally changed, but managements’ posture often has,” he told clients.
But Cox noticed that the uncertainty created by both pricing and Alberta’s new government has management teams in “wait-and-see” way of the second half, instead of having already reevaluated their plans as with previous years. That likely means there won’t be any meaningful shift in terms of activity anytime soon.
Since producers and repair providers can’t predict where energy costs are heading, what resulting activity levels may be, and what the province’s royalty review might mean for project economics, the usual discussion of person business models during the Stampede really shouldn’t happen to be expected.