Sept. 19, 2024 - ATB Capital Markets' Fall 2024 Energy Sector Survey (the "Energy Survey" or "Survey") reveals low-to-mid single digit growth expectations in Canada next year, softened investor sector sentiment, along with catalysts and opportunities ahead.

• 75 per cent of respondents expect WTI crude prices to average above $75/bbl over the next three to five years.
• 38 per cent of respondents expect energy to outperform the TSX/S&P 500 over the next 12 months, revealing a 29 percentage point decline in investor optimism compared to ATB Capital Markets' Spring Energy Survey results.
• 53 per cent of E&P respondents view Canada's Bill C-59 as "very impactful," with survey results finding a sizable reduction in the willingness of energy companies to invest in environmental technologies and improve ESG disclosures.
• Survey respondents ranked "federal energy and environmental policies and regulations" as the top risk to the industry over the next three to five years.
• Institutional investors ranked share repurchases as their top capital allocation preference of energy companies.

"Our bi-annual Energy Sector Survey highlights changes in the industry sentiment as a result of the economic and regulatory environment; however, ATB's survey findings continue to allow us to provide sound advice and solutions for our clients. Energy is a critical sector of our business, and we remain dedicated to providing our clients with critical insights to help them succeed," says Darren Eurich, CEO of ATB Capital Markets.

Waqar Syed, Managing Director of Energy Services at ATB Capital Markets, added, "While investor sentiment has weakened, institutional investors are generally positive and aligned with a 2025 outlook demonstrating moderate sector growth. ATB will be watching pivotal events in the near future and the impact on North America's energy sector."

Led by ATB Capital Markets' analyst Tim Monachello and conducted from August 28 to September 9, 2024, the semi-annual survey gathered insights from executives representing 33 energy services companies, 38 exploration and production (E&P) companies, and 39 institutional investors.

Among the survey findings:

Sentiment Moderated in the Fall 2024 Survey Amid Lower Crude Price Expectations
Most major sentiment indicators moderated in the fall 2024 survey alongside a 17 per cent slide in WTI crude prices since the spring 2024 survey. Long-term sentiment for crude prices weakened with just 75 per cent of respondents expecting WTI crude prices to average above US$75/bbl over the next three to five years, down from 91 per cent over the past two survey periods. While E&P sentiment remained generally optimistic, the weakened commodity price view was reflected in a moderation in E&P sentiment indicators with 58 per cent of E&Ps characterizing their outlooks as "improving" over the next six months, down from 88 per cent in the spring 2024 survey. In addition, a modestly larger portion of E&Ps noted worsened outlooks (29 per cent) over the past three months than improved outlooks (26 per cent).

Institutional investors marked the most meaningful reduction in sentiment with just 38 per cent of respondents expected energy to outperform the TSX/S&P 500 over the next 12 months, down from 67 per cent in the spring 2024 survey; with the associated index falling to the lowest level in survey history at 12.8, suggesting that on-balance investors still remain modestly bullish on energy investments vs the broad market.

Energy services were the only segment that observed improved sentiment in the fall 2024 survey, though sentiment for energy services was the weakest of the groups during the spring 2024 survey period. Nevertheless, energy services respondents on average noted improved outlooks over the past three months and are more united in a view toward increasing activity over the next six months.

2025 Poised for Low-to-Mid-Single Digit Growth in Canada
The fall 2024 survey provided an early glimpse into 2025 including a view to 1) expectations for 3 per cent-5 per cent field activity growth in 2025 over 2024; 2) mid-single digit production growth for Canadian E&Ps on average; and 3) expectations of flat y/y per well development costs and low-single digit service price inflation.

Environmental Investments and Disclosures Lose Momentum amid "Significant" Impact from Bill C-59 
The fall 2024 survey polled E&Ps about the impact of Bill C-59 on their environmental reporting practices with 53 per cent of respondents viewing it as "very impactful" and 29 per cent viewing it as either moderately or marginally impactful. Concurrently, the fall 2024 survey results showed a sizable reduction in the willingness of energy companies to invest in environmental technologies based on an ESG mandate over the next year with just 17 per cent of E&Ps and energy services respondents noting intentions to invest, down from 34 per cent in the spring 2024 survey; while 70 per cent were decidedly not planning to invest, up significantly from 50 per cent in the spring 2024 survey. Further, only 11 per cent of E&Ps and energy services respondents have plans to increase ESG related disclosures over the next year, down from 30 per cent in the spring 2024 survey.

U.S. and Canadian Federal Elections Could be Catalysts for Energy Sector
The fall 2024 survey highlighted the potential impacts to the energy sector of upcoming federal elections. Regarding the 2024 U.S. federal election, respondents were largely united that a Republican party victory would have more positive implications than a Democratic party win, with 44 per cent of respondents viewing a Republican party win as a positive development for energy companies and energy equity performance. Only 9 per cent view it as negative, while the largest contingent of respondents (40 per cent) view a Democratic party win as neutral, while 11 per cent view it as positive and 29 per cent view it as a negative potential development.

Regarding the Canadian federal election to be held on or before October 20, 2025, the survey showed that the energy industry would likely have a positive view of a change in government with the survey ranking "federal energy and environmental policies and regulations" as the top ranked risk to the industry over the next three to five years and "changes to federal and energy and environmental policies and regulations" as the third most prominent opportunity over the period. This conclusion was supported by a disproportionately high level of write-in comments.

Investors Favour E&P as Top Energy Investment Sector
Institutional investors ranked E&Ps as the top ranked energy sub sector in terms of both likelihood to invest, and expected equity performance over the next 12 months. Midstream companies were ranked second in terms of likelihood to invest, but third in terms of expected upside behind energy services that were ranked third in terms of likelihood to invest and second for expected equity performance.