Alberta poised for new oil rush, analyst says
Jacqueline Thorpe
Donald Coxe, global portfolio strategist for BMO Financial Group, says, "If you can own only one kind of oil stock ... it should be one that owns 60 or 90 years reserves."
The great Canadian oil rush may have faded this fall but one leading investment strategist thinks it could come screaming back by next summer.
Donald Coxe, global portfolio strategist for BMO Financial Group and chairman of Harris Investment Management Inc., says a new wave of international interest in the oilsands sector could get rolling after the U.S. Securities and Exchange Commission makes a crucial decision on reserves next June.
That's when the SEC will rule whether Alberta's unconventional oilsands deposits can be included in company reserves for reporting purposes, part of a bigger review the SEC is doing on oil company reporting under the Sarbanes-Oxley Act
"Once the SEC has made its decision, the oilsands of Alberta will be the focal point for one of the largest-scale competitions for energy resources we have ever seen," Mr. Coxe told the Economic Club of Toronto yesterday. "Some of that is going to be a little controversial. Some of it's going to get ugly, but from an investor's standpoint ... if you can own only one kind of oil stock, it shouldn't be a royalty trust which has a reserve life index of seven or eight years ... it should be one that owns 60 or 90 years reserves."
Various international bodies have gradually begun recognizing some of Alberta's oilsands as proven deposits, including the International Monetary Fund and the U.S. Energy Information Administration.
But the SEC decision will be crucial for the major international oil companies to be able to boost their price-earnings ratios, Mr. Coxe said. The reserve life index of the 12 biggest oil companies has been falling for the past seven years, but they made more than US$100-billion in profit last year and have US$110-billion in cash.
With Venezuela and Russia looking increasing unattractive for political reasons, Alberta is going to be the main game in town.
"Canada is going to face a new kind of importance in the world because, you see, we've always been a small-scale producer," Mr. Coxe said.
Mr. Cox said he had little doubt Christopher Cox, the new head of the SEC, would rule in favour of recognizing oilsands because it will be in the United States' strategic interests to do so.
Mr. Coxe is steadfast in his view that the price of oil will resume its upward trend, thanks to the incredible economic growth of China and India.
"It's not a matter of when oil is going to touch US$100 a barrel -- though obviously it's going to do that some day -- it's to get people realizing this is not a spike, not like past developments like the Yom Kippur War or the invasion of Kuwait," Mr. Coxe said. "What we've done is transformed the demand side of the equation for oil permanently."
Other pearls from Mr. Coxe:
- "When, not if, the residents of the coastal cities of China, that's 165 million people, have the same percentage of automobiles as South Koreans have today, we'll need two new Saudi Arabias operating flat out."
- He quoted Chris Patten, chancellor of Oxford University, who recently said that for the past 2,000 years, more than half of global gross domestic product has come from China and India, with the exception of two centuries, the past two.
- The environmental movement has held back the building of new oil-refining capacity in the United States. He said the NIMBY movement -- Not In My Back Yard -- morphed into the BANANA movement -- Build Absolutely Nothing Anywhere -- and now it's the NOPE movement -- Not On This Planet Either.
- Gold is going up -- and decoupling from the U.S. dollar -- simply because of demand from China and India. China has a savings rate of 40% and its stock markets are in the tank. Where else are you going to put your money?
- U.S. consumer debt is swelling by the minute, but it's usually bad business loans that cause financial crises. The entire U.S. consumer sector is unlikely to default on its loans at once.
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Rogue
AI
