Mar 9, 2017
BNN's Daily Chase: Royal Dutch Shell joins supermajors’ retreat from the oil sands
By Andrew Bell
Anyone worried that foreigners - or at least foreign governments - plan to seize control of the oil sands can probably breathe easier this morning. Non-Canadians seem perfectly happy to sell out of Alberta.
The decision by Royal Dutch Shell (RDSb.N) to part with most of its Canadian oil sands assets and reduce its share of another in deals that will raise a US$7.2-billion is the latest in a string of divestments.
The move follows Statoil’s sale of northern Alberta oil sands assets to Athabasca Oil Corp. for up to $832 million late last year.
And French energy giant Total SA has been trimming its exposure too, selling a 10 per cent portion of the Fort Hills mine to partner Suncor Energy Inc. for $310-million in 2015.
Spare a thought for Canaccord analyst Dennis Fong. He just started coverage of the Canadian big producers and now has to drag out the slide rule and recalculate his numbers for Canadian Natural (CNQ.TO), which is buying the Shell assets in deals that will cost it about $4-billion in new shares and just over $8-billion in cash.
For the record, Fong started Canadian Natural, Suncor (SU.TO) and Encana (ECA.TO) at Buy while Cenovus (CVE.TO), Husky (HSE.TO) and Imperial Oil (IMO.TO) are rated Hold. We’re trying to get Fong on our Commodities show, which starts at 11 a.m. ET.
TRICKY TIME FOR TRUDEAU
BNN managing editor Noah Zivitz sees a political angle, noting that this “awkward timing for Trudeau. The Prime Minister is heading to Houston today to address global energy leaders at CERAWeek. How does he make the case for Canadian energy when a supermajor is all but staging a full exit?”
RBC calls the deal “transformative” for Canadian Natural, estimating that it could add as much as 10 per cent its 2017-18 cash flow per share estimate.
MARKET CALL TONIGHT IS MOVING
Starting Monday, March 20 BNN’s Market Call Tonight broadcast will begin at 5:30 p.m. ET/2:30 p.m. PT.
THE BULL TURNS 8
Meanwhile, we’re observing a significant anniversary today. Eight years ago, the Standard & Poor’s 500-stock index struck bottom as investors fretted that damage from the financial crisis would be almost impossible to contain. It was a great day to buy stocks: The U.S. market is up more than three-fold since then (without dividends). Meanwhile, the Toronto benchmark index, which also bottomed that day, has doubled.
Can the run continue? At 3 p.m. ET, we’ll hear from Jeffrey Saut, Chief Investment Strategist with Raymond James, a long-time market watcher.
CRUDE SLIDES
BNN is the channel to watch today for coverage of the massive transaction and the slide in crude prices that has pushed oil under US$50after the United States reported another jump in crude inventories, which were up 8.2 million barrels.
At 11:10 a.m. ET on Commodities, we’ll talk oil patch mergers and acquisitions with Robert Fitzmartyn, managing director in institutional research at FirstEnergy Capital, who joins us from the firm’s energy conference in New York. And at 2:20 p.m. ET, Torys LLP partner Chris Christopher will tells us why he sees a brighter outlook for oil & gas M&A in 2017.
Fitzmartyn warns that regulatory uncertainty in areas such as carbon pricing is helping to drive international companies out of Canada. He adds that Shell is dumping high-cost barrels as it goes for growth in natural gas globally.
Weak oil prices have been weighing on the Canadian dollar, which has dropped below 74 U.S. cents. At 3:30 p.m. ET, we’ll get a loonie outlook from Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets.
Every morning Commodities host Andrew Bell writes a ‘chase note’ to BNN's editorial staff listing the stories and events that will be in the spotlight that day. Have it delivered to your inbox before the trading day begins by heading to www.bnn.ca/subscribe.
