Eight Calgary-based energy companies delisted from S&P/TSX composite index
CALGARY – It’s the latest sign of how much Canada’s oil and gas sector is struggling.
On Monday, eight Canadian oil companies based in Calgary were delisted from the S&P/TSX Composite Index because their market capitalization had dropped below minimum requirements.
"This is almost an inevitable outcome," said Jeremy McCrae, energy analyst with Raymond James. "For the most part, a lot of institutional investors have seen non-stop regulation hurdles that have faced the energy sector and, as a result, a lot of them have left the space and this is almost an outcome that a lot of us expected to come."
McCrae adds that attracting investment has been difficult amid concerns of pipeline capacity with delays on the Trans Mountain Expansion Project.
Other concerns for investors lie with an increased focus on climate change as well as an uptick in carbon taxing.
The companies delisted from the S&P/TSX composite index include:
- Birchcliff Energy Ltd.
- Development Corp.
- Ensign Energy Services Inc.
- Kelt Exploration Ltd.
- NuVista Energy Ltd.
- NexGen Energy Ltd.
- Precision Drilling Corp.
- Peyto Exploration
- TORC Oil & Gas Ltd.
All eight companies operate in the field of oil and gas or drilling. Their exclusion means they will miss out on investment from index-tracking passive funds.
McCrae says these companies have been forced to spend their own cash flow, take on more debt and streamline their operations to become more efficient.
"These companies are really churning out real profit here now and as a result investors will start to realize this is actually a good place to invest," said McCrae. "That will take time and you do need some clarity on some of the regulations and that will be the catalyst on how to bring money back to the sector here."
Until that happens, these companies will have to wait one year to have the chance to be re-listed back on the S&P/TSX composite index. They will only be re-admitted if their value is at least 0.04 per cent of the index or equivalent to having a value of around just under $1 billion CAD (US$754.26 million).