Highlights from the Energy sector.

William Lacey, CFA; Waqar Syed; Patrick O'Rourke, CFA; Tim Monachello, CFA; Nate Heywood, CFA

ATB Capital Markets hosted the second day of its 9th Annual Institutional Investor Conference on Wednesday, January 13. We had presentations from seven panels, with participation from 23 companies, and hosted two fireside chats with Cenovus and MEG Energy. Overall, discussions from the conference had a cautiously optimistic tone, with energy services companies pointing to Canada for having a better outlook than the US (after several years of underperformance), largely on the back of structural improvements to pipeline egress, and speaking to their ability to generate free cash flow going forward. On the energy infrastructure side, we held three panel discussions which centered around capital allocation, diversification, and sustainability. Meanwhile, our panel discussion with three royalty companies offered unique insights into expected activity levels in the Western Canada Sedimentary Basin (WCSB) heading into 2021. The fireside chats were centered around how producers have shifted corporate strategy from growth to sustainability, and the role energy producers will play in Canada in order to meet future emissions targets. In the full report, we highlight the key takeaways and themes discussed throughout the day.

Highlights

• Energy Services: Panelists believed that after several years of underperformance, Canada has a better outlook than the US, owing largely to structural improvements in pipeline egress. In the US, panelists believed activity would mark a moderate recovery in 2021, but Exploration & Production (E&P) companies were likely to be less reactive to commodity price improvements. Two stocks that we highlight following the panels are: Trican, a pure play Canadian pumper, who is fully contracted for Q1/21, and expects 10% type net price increases owing to market tightness; and TechnipFMC that is seeing strong offshore FEED orders, offers multiple catalysts (upcoming spin-off that offers positive revaluation opportunity, likely multi-billion dollar LNG project award in Qatar), and has a $68 billion opportunity set through 2030, offering the highest exposure to energy transition in our coverage.
• Energy Infrastructure (EI): The EI portion of the conference consisted of three panel discussions focused on dynamic capital allocation, asset diversification, and the pursuit of sustainability. The capital allocation panel was directed at understanding near-term corporate priorities and balancing growth programs with alternative capital deployments. The asset diversification panel covered the mitigation of pandemic related risks, outlook on growth, and how improving market fundamentals will impact operations in 2021. Lastly, the sustainability panel highlighted the importance of ESG to power producers and users alike and featured an in-depth discussion on future power generating and storage technologies.
• Exploration and Production (E&P) and Royalty Companies: ATB Capital Markets kicked off the day with a panel discussion with speakers from Canadian based royalty companies. The panel consisted of David Spyker (FRU), Andrew Phillips (PSK), and Marty Staples (TPZ). With large asset bases across the WCSB, and a close eye on drilling activity on their lands, the group was able to provide some unique insights on drilling activity heading into 2021. The panel also highlighted their viewpoints on capital access with royalty companies offering a unique source of capital for E&P companies in an environment that has recently seen a lack of access to capital on both the equity and credit sides. Additionally, the panel discussed their respective business models, pointing to elements it looks for in its counterparties, as well as the assets that underpin them. ATB also hosted two fireside chats. For the first chat, Cenovus Energy's Kam Sandhar, Executive Vice President, Strategy and Corporate Development, sat down to discuss the company’s newly obtained assets from Husky, how Cenovus addresses ESG, and how Cenovus plans to allocate capital within its portfolio in the near future. In the second fireside chat, MEG Energy’s Derek Evans, President and CEO, sat down to discuss corporate strategy, emissions, and the industry’s shift of focus from growth to sustainability.