On September 21, ATB Capital Markets Inc. hosted its 2023 Energy Institutional Investor Conference in New York, showcasing 13 top oil and gas producers in the Canadian energy sector. Key themes across the slate of meetings included a strong focus on the upcoming capital budget season and choice of capital allocation (capex, dividends, debt repayment, and share repurchases), along with the impacts of LNG Canada and the Trans Mountain Expansion (TMX) pipeline coming online in the near-term. Despite a wide variety of strategies across the corporate participants, the discussions were largely constructive with regard to the WCSB given the combination of relative inventory depth and business sustainability merits relative to L48 peers and receding egress/pricing risk given a near-term horizon that includes a clear line of sight to both the TMX expansions and impacts on liquids markets alongside the impending impact of LNG Canada on Western Canadian Gas markets. 

Key Themes:  

Heading into Capital Budget Season
The Q3/23 reporting season is just around the corner, marking the start of formal guidance communication on 2024. We expect companies to address such topics as growth ambitions and their impacts on FCF, and the return of capital to shareholders.  

Focus on TMX
A number of the event's participants have material exposure to the condensate market in Western Canada, and with the expectation that TMX will come into service in early 2024 (depending on the results of the recent hearing), the additional egress capacity of 590 mboe/d is set to drive incremental condensate demand from local markets. We typically expect a barrel of diluted bitumen to comprise ~25%-31% condensate, implying that as much as an additional ~150 mbbl/d of diluent will be required to fill the pipeline, given the limited condensate return mechanism associated with the pipe.  

Full Steam Ahead on LNG Canada
NEBC has been topical this year, given the resolution with the Blueberry River First Nation and the area’s proximity to the west coast of Canada to access export terminals. Producers are starting to ramp up production in the NEBC region in anticipation of LNG Canada, the largest Canadian export project under construction, with material expansion potential to continue to support development in the WCSB for decades to come