Canadian Energy Sector Sees Renewed Investor Interest as U.S. Shale Production Declines
CALGARY – A wave of investment is returning to Canada’s oil and gas sector as concerns mount over declining production rates in U.S. shale formations, coupled with a more supportive regulatory habitat in Canada. Recent multibillion-dollar deals, like Ovintiv‘s acquisition of NuVista Energy, signal a shift in investor sentiment, reversing a trend that saw capital flow south during the shale boom.
For the past decade,Canadian energy projects were hampered by new laws and rulings that discouraged international investment,according to Jeremy McCrea,an energy analyst at BMO Nesbitt Burns. Though, he notes a recent change, stating, “we’ve seen more operators take an interest in Canadian oil and gas,” driven in part by “a federal government that’s looking to be more workable with the oil and gas industry and more keen to get our product to market here.”
This renewed interest coincides with challenges facing U.S. shale producers. Companies like Pioneer Natural Resources Co. (PXD-N) and EOG Resources Inc. (EOG-N) pioneered fracking techniques that propelled the U.S. to become the world’s largest oil producer. Though, shale wells are known for their rapid depletion rates, and this is now becoming a reality. EOG Resources, a shale pioneer, is estimated to have only three or four years of quality drilling locations remaining, contributing to a 10% decline in its share price this year.
During the U.S. shale boom, many international players shifted focus, also citing insufficient Canadian export infrastructure and increasingly stringent regulations, including environmental, social, and governance (ESG) guidelines, as deterrents to investment in canadian energy assets.
Now, that earlier retreat is being viewed as favorable, as Canadian companies possess considerable undeveloped resources. Ovintiv’s CEO highlighted this potential during the NuVista acquisition announcement, describing NuVista’s Montney portfolio as “one of the highest quality undeveloped acreage positions in North America and the overlap with our existing land makes us the natural owner.”
