CALGARY, ALTA. – Canada’s Oil & Gas Producers (CAPP) are forecasting capital spending in the oil and natural gas industry will be $2 billion higher in 2020 compared to the previous year.
The forecasted increase represents a four per cent rise on the conventional side and an eight per cent increase in the oil sands.
“We are very happy to see an increase in capital investment expected for 2020. It’s a reflection of the hard work and determination on many fronts to bring the industry into a more competitive position. That includes the corporate tax cut by the Government of Alberta, and incenting crude by rail under curtailment, which is helping to attract business and investment,” CAPP president and CEO Tim McMillan said.
“Investors are seeing some positive activity in the industry right now, and it’s important that all levels of government show a commitment to Canada’s energy industry and the hundreds of thousands of Canadians who work in the industry. We need policies and action that keep us moving ahead – making us competitive, completing projects, and getting Canada’s responsibly produced energy to global markets,” he added.
Conventional oil and natural gas investment for 2020 is forecast at $25.4 billion u from last year’s $24.4 billion, and oil sands capital investment will rise to $11.6 billion in 2020 up from an estimated $10.7 billion in 2019.
The main driver behind the increase is a more competitive economic environment because of several key policies, a CAPP release stated.
“The increase in capital investment is a very positive sign for the upstream sector, and there is a lot more work to be done to keep this momentum. That includes the continued steps being taken, including the Government of Alberta’s red tape reduction panel, as well as necessary work that must happen in terms of municipal tax reform in both Alberta and Saskatchewan to foster fairness and competitiveness,” McMillan said.
The Alberta government introduced the job creation tax cut in 2019, and as of Jan 1. 2020 the province lowered Alberta’s corporate tax rate to ten per cent from 11 per cent, with a planned reduction to eight per cent by 2022.
Alberta also allowed producers to ship more crude by rail under curtailment and allowed new conventional drilling without restriction on production.
The government of Saskatchewan also stated it had a goal of increasing oil production by 25 per cent to 600,000 barrels per day by 2030/ Capital investment in the province is also expected to increase to ten per cent in 2020, going up to $4.4 billion from $4 billion in 2019.
Venture-capital funding in Canada fell to prepandemic levels in the second quarter this year as the tech downturn hit privately held companies, the Canadian Venture Capital and Private Equity Association says, and financiers warn that the sector’s sudden caution may continue.
The CVCA said in a new report Thursday that there was $1.65-billion in venture capital (VC) deployed across 182 deals in the second quarter of 2022. It was the lowest quarter since the pandemic prompted a flood of cash into digital-services companies, down 67 per cent from $5.1-billion in the same quarter in 2021. But it was roughly on par with 2019′s $1.66-billion second-quarter investment.
The investment figures the association released for the first half of 2022, however, suggest that the downturn’s true impact will be more starkly revealed in the coming quarters as data catches up with the gap between when deals are first negotiated, closed and then announced.
In its report, the CVCA said that the $4.5-billion in investments announced in the first quarter – the country’s second-highest quarter on record – was largely comprised of 25 “mega-deals” worth more than $50-million that were “largely residual transactions” from 2021.
Particularly among later-stage companies, “we’re going to see a slowdown that might persist,” Christiane Wherry, the CVCA’s vice-president of research and product, said in an interview. While some of the institutional investors her association works with are “able to stay the course” with financings, she said she’s seen much more caution among smaller VC firms, funds and family offices.
There may now be a “more realistic air” to the venture ecosystem as venture investors spend time “digesting the end of the pandemic and where we go from here,” said Matt Golden of Golden Ventures. Michael Hyatt, entrepreneur, investor and Northleaf Capital Partners adviser, said that financiers “are being highly discriminate about what they are going into.”
Sean O’Connor, managing director of Conexus Venture Capital in Regina and chair of the CVCA’s data committee, said that “founders and VCs are not seeing eye to eye as we figure out what the new world looks like,” which could lead to tension in calculating company valuations.
“We’ve seen the VC space move back into something a bit more normalized from before the pandemic, but it’s a struggle to figure out how much of that regression will show up in valuations.”
The swelling of valuations in both public and private markets during the first two calendar years of the pandemic has been broadly recognized, in hindsight, as a unique moment in which a global shift to digital services coincided with historically low interest rates.
The tech sector has struggled since last fall as a mixture of macroeconomic events including the pandemic and Russia’s invasion of Ukraine began triggering supply chain slowdowns and broad uncertainty. Subsequent high inflation put pressure on central banks to boost interest rates, making capital more expensive and drying up the pools of investor money that flooded the market for tech companies since the Great Recession.
Not all segments of the tech sector are facing the same headwinds in Canada, according to the CVCA’s numbers. Young, seed-stage companies aren’t exposed to the same investor pressures and economic factors as bigger, cash-consuming firms. They saw $263-million in financing across 104 deals, making the second quarter the highest on record both in terms of total investment and deal number.
Environmentally friendly or sustainability-focused companies, classified as “clean tech,” saw investment levels surpass 2020 levels in the first half of 2022, and the CVCA said the sector could reach 2021 investment levels by the end of the year. “As investors shift their focus from the pandemic, which was an emergency situation, now they’re shifting their focus to something equally as urgent,” Ms. Wherry said.
But in general, the public-market pullback was a shock for later-stage companies that might hope to tap into public markets: the CVCA didn’t record a single initial public offering last quarter, it said.
BANGKOK (Reuters) – Investment applications in Thailand dropped by 42% in the first half of 2022 compared to the same period last year, official data showed on Wednesday, led by a sharp fall in foreign projects as the global economy slowed.
Foreign investments, which made up 60% of the overall 220 billion baht ($6.22 billion) of applications in January-June, more than halved year-on-year, data from the Board of Investment (BOI) showed.
But a surge in electric vehicle (EV) and digital investments bucked the trend, and the BOI said on Wednesday it had approved several new major investment pledges.
“We will continue to monitor the situation and adjust our policies and incentives to ensure Thailand remains the resilient destination of choice for global investors in fast growing sectors such as electric vehicles,” BOI said in a statement.
The Southeast Asian country has promoted high-tech sectors and supported EVs to maintain its status as a regional auto production base.
In January-June, investment pledges in EVs surged 212% from a year earlier to 42.4 billion baht while ones in the digital sector jumped 202% to 1.45 billion baht, the BOI said.
On Wednesday, the BOI approved investment pledges worth 44.5 billion baht – including China’s BYD’s 17.9 billion baht project to produce EVs, and PTT’s 18 billion baht gas production project, the agency said.
($1 = 35.38 baht)
(Reporting by Kitiphong Thaichareon, Satawasin Staporncharnchai and Panarat Thepgumpanat; Writing by Orathai Sriring; Editing by John Geddie)
The Caisse de dépôt et placement du Québec posted a negative return of 7.9 per cent for the first six months of the year, in what chief executive Charles Emond noted was the worst period for stock and bond markets over the past 50 years.
As of June 30, the Caisse had net assets of $392 billion, with the $28.2-billion decrease due to investment losses of $33.6 billion offset by $5.4 billion in net deposits. The losses included a full write off of the fund’s US$150 million investment in crypto lender Celsius Network LLC, which is now in Chapter 11 bankruptcy proceedings in the United States.
“The first six months of the year were very challenging,” Emond said in a statement. “The mix of factors we faced had not been witnessed in several decades: spiking inflation that triggered rapid and sharp interest rate hikes, rare simultaneous corrections in both stock and bond markets, fears of an economic downturn and the war in Ukraine with its many collateral effects.”
Over the same period, the Ontario Teachers’ Pension Plan Board reported a positive return of 1.2 per cent on Monday.
During a news conference Wednesday to discuss the Caisse results, Emond said the Quebec pension fund wrote off the Celsius crypto investment even though it is considering its legal options and intends to preserve its rights in the court-monitored U.S. bankruptcy proceedings.
“We decided to take it now” out of prudence, Emond said of the writeoff. “The last chapter hasn’t been written.”
He said his team conducted extensive due diligence with outside experts and consultants. They were aware of management and regulatory issues at Celsius and underestimated the time it would take to resolve them, he said, adding the Caisse was keen on “seizing the potential of block chain technology” and perhaps the investment in Celsius had been made “too soon” in the company’s development.
He noted that the investment was a very small part of a large venture portfolio that has produced 35 per cent returns over the past five years.
“In these disruptive technologies, there’s ups and downs…. Some big winners and many losers,” Emond said.
Although the Caisse posted an overall return in negative territory for the first six months of the year, the performance exceeded that of its benchmark portfolio — which posted a negative return of 10.5 per cent.
“Over five and 10 years, annualized returns were 6.1 per cent and 8.3 per cent respectively, also outpacing benchmark portfolio returns,” the pension manager noted.
Emond said the Caisse is managing the “turbulence” with a combination of asset diversification and strategic adjustments made since the COVID-19 pandemic began.
“For the past two years, we’ve been working in an environment of extremes characterized by particularly fast and pronounced changes. These unusual and unstable conditions will persist for some time,” he said.
“In the short term, we’ll be watching what central banks do to contain inflation and how that impacts the economy.”
During the first six months of the year, negative returns in equities and fixed income were partially offset by gains in the Caisse’s investments in real assets including infrastructure and real estate.
The pension giant posted a negative return of 13.1 per cent in fixed income, which beat the negative 15.1 per cent return for its benchmark portfolio. This represented nearly $3 billion in “value added” attributable to all credit activities, the Caisse said.
A negative return of 16 per cent in equities beat the negative 17.2 per cent return in the benchmark portfolio.
The Caisse’s real estate and infrastructure portfolios, meanwhile, generated a 7.9 per cent six-month return, “demonstrating their diversifying role which contributes to limiting inflation’s impact on the total portfolio.”
The real asset class performance also beat the benchmark portfolio’s return, which was 2.4 per cent.
“So that asset class played its role. The two portfolios are doing well,” Emond said.
He said it is challenging to compare the short-term performance of Canadian pension funds because they have e different mandates and investment models. The Ontario Teachers’ Pension Plan, for example, has less exposure to equity markets than the Caisse and more exposure to natural resources and commodities, which performed well in the first half of the year.
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