September 27, 2023
Calgary — ATB Capital Markets Inc. (“ATB Capital Markets”), the capital markets arm of ATB Financial, hosted two Institutional Investor Conferences in New York last week, with management teams from the Life Sciences and Energy sectors presenting over two days.
“Our conference participants benefited from our industry analysts’ deep insights, complemented by perspectives from North America’s leading management teams,” said Darren Eurich, CEO of ATB Capital Markets. “The unique challenges in the Life Sciences and Energy sectors present emerging opportunities as the landscape for both industries continues to evolve. Our unwavering commitment to fostering the continued growth and sophistication of these sectors allows us to guide our clients through these dynamic shifts.”
Life Sciences Outlook
On September 20, the ATB Capital Markets Life Sciences Institutional Investor Conference, held in person in New York City, featured a cross-section of Canadian, International, and U.S. Multi-State Operators (“MSOs”), showcasing market-leading companies in both the recreational and medical cannabis space.
- U.S. Cannabis Market: The recent U.S. Department of Health and Human Services (HHS) recommendation to reschedule cannabis to a Schedule III drug has improved the outlook for the sector. Conference participants see this move as potentially improving cash flow generation and creating additional equity value through the elimination of tax constraints imposed by 280E. They also view potential adult-use legalisation in Ohio, Pennsylvania, and Florida as accelerating industry growth that has otherwise been largely absent in 2023. Unlicensed sales continue to challenge the industry, which should be successfully addressed with improved regulatory conditions. With major regulatory improvements expected to occur in the next 6-12 months, the panellists agreed the long-term growth opportunity in the U.S. remains attractive.
- Canadian Cannabis Market: While the market remains challenging, following an industry-wide developmental cycle of oversupply, fragmentation and price competition, participants were optimistic about the growth potential in Canada, with some panellists estimating the industry could grow into a $10 billion business. Meanwhile, continued consolidation presents a potential tailwind for retailers, giving way to better valuations and strengthening the value of large retail chains. In terms of expansion, Canadian cannabis companies are considering opportunities overseas—namely in European medical cannabis markets due to higher margin profiles, production knowledge and regulatory alignment with Europe—and monitoring the recent regulatory developments in the U.S.
“The incredible engagement at our Life Sciences conference reflects the upbeat sentiment of companies and investors over the regulatory progress in the U.S. and international markets. We left the discussions with an even higher conviction about the compelling investment opportunities cannabis companies presented and the near-term catalysts that could mark an inflection point for the sector," said Frederico Gomes, Director of Institutional Research, Life Sciences.
On September 21, the ATB Capital Markets Energy Institutional Investor Conference highlighted 13 prominent oil and gas producers and investment opportunities in Canada's secure, reliable energy sector. The event explored sector trends and opportunities while also evaluating the Canadian energy industry's critical role in global energy security.
- Capital Budget Season Previews 2024 Outlook: As the Q3 2023 reporting season approaches, company announcements on capital spend and production growth plans for 2024 are front of mind, with key implications for free cash flow and return of capital to shareholders outlooks, will play a pivotal role in shaping the sector’s direction.
- Focus on Upcoming Projects: while there was diversity of strategies among participants, discussions were predominantly constructive, in general, highlighting the relative inventory depth and business sustainability merits of the Western Canadian Sedimentary Basin (“WCSB”) when compared to their peers in the lower 48 states. The improving pricing risk profile was emphasized, given the near-term completion of the Trans Mountain Expansion (“TMX”) pipeline.
- Full Steam Ahead on LNG Canada: Producers are gearing up production in the Northeastern British Columbia region in anticipation of LNG Canada, which stands as the largest Canadian export project under construction. The project's substantial expansion potential is expected to continue supporting development in the WCSB+ for decades to come.
“The notable level of interest shown by institutional investors at this conference speaks directly to the high quality of assets and expertise in the Canadian upstream oil and gas industry," said Patrick O’Rourke, Managing Director of Institutional Research, Exploration & Production. "The world needs secure, reliable and responsible energy, and Canada plays a pivotal role in meeting that demand for many decades to come. We see the growth-oriented companies we showcased in New York as focused on value creation and critical to the important role Canada will play in energy security going forward. We expect the TMX expansion and launch of LNG Canada to support the continued evolution of the Canadian energy landscape."