Growing interest is observed among American investors in the Canadian oil industry, driven by more favorable government messaging and the perceived reliability of returns in the Canadian sector. A shift in investment, termed as a “rotation” by Jeremy McCrea, Managing Director at BMO Capital Markets in Calgary, indicates increased investment from the U.S. and a slight decrease from Canadian sources. Despite lower oil prices impacting investment enthusiasm, many portfolio managers are inclined towards energy stocks, with a preference for the Canadian sector over the U.S.
U.S. funds currently hold approximately 59% of Canadian oil and gas companies, up from 56% last year, while Canadian ownership has decreased from 37% to 34%. CEOs in the Calgary oil industry, such as Grant Fagerheim of Whitecap Resources, have noticed this trend within their companies, with a significant portion of institutional holders now hailing from the U.S.
Brian Schmidt, CEO of Tamarack Valley Energy, highlighted the hesitancy of Canadian investors, particularly pension funds, in contrast to the more receptive attitude of U.S. investors. The shift towards U.S. ownership is evident, with Schmidt noting a rise from 20% to 40% since the onset of the COVID-19 pandemic.
The change in investment dynamics began about a year ago, coinciding with political shifts and promises to boost the oil and gas sector. Despite the re-election of the federal Liberals, Prime Minister Mark Carney’s commitment to positioning Canada as an energy powerhouse has resonated with investors, contributing to their confidence in Canadian investments.
The completion of the Trans Mountain Pipeline expansion and the relative economics of the Canadian oil sector compared to the U.S. have also fueled investor interest. While U.S. oil production heavily relies on drilling new wells, the economics in Canada, particularly in the oilsands sector, offer long-term stability and lower operational costs, attracting investors seeking reliable returns.
In recent years, Canadian oilsands companies have prioritized returning profits to shareholders over new projects, appealing to investors seeking steady returns. This strategy has garnered attention from international investors, including those from Europe and Asia, indicating a broader global interest in the Canadian oil industry. Overall, the future outlook for the Canadian oil sector appears promising, with increasing attention and investment from international markets.
