10-31-2019, 10:33 AM
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#4321
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Franchise Player
Join Date: Jan 2013
Location: Cape Breton Island
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Quote:
Originally Posted by you&me
OK, so to get this back on track -
You give off the impression that you are not very familiar with the basic principles and functions of investment capital - is this a fair characterization?
I say this because you don't seem to acknowledge or understand the concept of capital fluidity, meaning (as explained by others in this thread) that investment capital is finite and as such, with take the path of least resistance to generate returns. This isn't (only) Canadians investing in the O&G sector... This is Korean hedge funds, British private equity firms, American pension funds, and regular citizens from all over the world... There is literally no limit to where and in what any of these investment entities could choose to deploy their capital.
If your job is to manage other people's money, and you have $100 to deploy, do you invest in a jurisdiction that is already downtrodden, has recently undergone an unprecedented change in government and that new government has campaigned on a promise to review a royalty structure - because they think they deserve more - that has a direct impact on your investment returns?
Or do you invest your money in a different jurisdiction, with a stable regulatory environment, stable and expanding access to markets and certainty with regards to government intervention in your investment return (i.e. carbon taxes and royalty reviews)?
You don't invest in the first because a) there are better options and b) you don't have to.
Everyone can acknowledge there are a number of issues facing the O&G sector in Alberta, some of which are in our control, some of which are not... But the last thing the industry needed was the government further contributing to those issues...
If I've misread your understanding of capital investment and corporate decision making, I apologize. Please feel free to provide an explanation of why you feel things like the royalty review don't really influence the decisions of investors.
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I have absolutely no idea how capital investment works, I don't work in that field, in the O&G field, and the things you've described to me in your post all seem reasonable and are things that I probably already have a general understanding of just reading this thread, others like it, and following the news.
The disagreement is with wild and imo hysterical hyperbole that the royalty did permanent damage. The royalty review seems like a perfect excuse for conservatives to blame the NDP for something that is largely outside the control of premiers of our province. We need pipelines. We need the support of the Canadian public to ship our product to the world, and to do so through other peoples back yards. We aren't going to get there by insulting people, yelling in their face, and threatening WEXIT.
Did the royalty process hurt the O&G industry? Maybe? It's sort of impossible to say because the provinces O&G sector has been on a pretty steady downward trend, and even engaging in a debate over the influence of one government action from 4 years ago seems like passing the buck and not trying to focus on the real issues.
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10-31-2019, 10:35 AM
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#4322
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#1 Goaltender
Join Date: Jan 2009
Location: Calgary
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Quote:
Originally Posted by OMG!WTF!
You realize Stelmach had to completely reverse every single change to royalties he ever made right? Like everything he ever touched turned to such garbage that BC and Sask out paced our investment for like four years. So yes, the conservative royalty review was even dumber. Just the way Stelmach kept saying "a larger piece of a bigger pie" in his hillbilly dumb accent still sounds like nails on a chalkboard to me.
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That my point though. Things went back to normal after Stelmach reversed the changes. Somehow, though, when Notley decided to keep things the same the damage was permanent?
Look, the problem here is nobody wants to buy Alberta oil. Our main customer is now our biggest competition. On top of that, our oil (correctly or not) is seen as the dirtiest oil in the world. All the pipelines in the world won't fix any of this.
The previous government's attempt to diversity the economy was what was needed. Not a "war room" and reduced taxes.
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10-31-2019, 10:55 AM
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#4323
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Franchise Player
Join Date: Sep 2009
Location: Calgary
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Quote:
Originally Posted by _Q_
So the royalty review in 2015 permanently drove business away because it was done by the NDP. The royalty review in 2007 did nothing long term because it was done by the conservatives.
Likewise, increasing taxes by Notley is permanently driving away business. The tax reduction by Kenney will do nothing.
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Let's not inject a logical fallacy to our debate. A whataboutism dosen't help here.
The decisions of past governments are not immune to analysis and criticism, but that is beside the point right now. Because they were not the governments that implemented the policies that have driven us to this most recent inflection point. (For what it's worth, I think Stelmach and Redford were atrocious, as was the PC party at that time).
The point being made right now, in this thread, was whether or not the government of Alberta in 2015 made the right decision at the time, given the aggregate circumstance at play in the province, to institute measures empirically known to drive away capital investment. The evidence is clear that they pushed ideology at the expense of rational policy.
Then, the next step in the analysis is whether or not the federal government, in 2015, given the factors at play in the country, further exacerbated the problem with their own policies.
Hindsight analysis indicates that on the aggregate, the actions taken at a provincial and federal level in 2015 and on wards are severely impacting capital investment in our country (and not just in the energy sector).
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Last edited by IliketoPuck; 10-31-2019 at 10:58 AM.
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10-31-2019, 11:01 AM
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#4324
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Franchise Player
Join Date: Mar 2007
Location: Income Tax Central
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Quote:
Originally Posted by IliketoPuck
Let's not inject a logical fallacy to our debate. A whataboutism dosen't help here.
The decisions of past governments are not immune to analysis and criticism, but that is beside the point right now. Because they were not the governments that implemented the policies that have driven us to this most recent inflection point. (For what it's worth, I think Stelmach and Redford were atrocious, as was the PC party at that time).
The point being made right now, in this thread, was whether or not the government of Alberta in 2015 made the right decision at the time, given the aggregate circumstance at play in the province, to institute measures empirically known to drive away capital investment. The evidence is clear that they pushed ideology at the expense of rational policy.
Then, the next step in the analysis is whether or not the federal government, in 2015, given the factors at play in the country, further exacerbated the problem with their own policies.
Hindsight analysis indicates that on the aggregate, the actions taken at a provincial and federal level in 2015 and on wards are severely impacting capital investment in our country (and not just in the energy sector).
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Lets not forget that the Royalty review was being done concurrently with the Power Producer Contracts fiasco.
We looked all hot awesome for Capital Investment for a while there. The Government was changing the rules on everyone.
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10-31-2019, 11:08 AM
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#4325
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First Line Centre
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Quote:
Originally Posted by _Q_
Look, the problem here is nobody wants to buy Alberta oil. Our main customer is now our biggest competition. On top of that, our oil (correctly or not) is seen as the dirtiest oil in the world. All the pipelines in the world won't fix any of this.
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They actually want to buy it, they just can't get enough of it because we don't have pipeline capacity to ship it there.
I agree though that the tax cut may be overkill, not to mention how distasteful it makes the cuts look. I think they should have just gone to the original 10%.
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10-31-2019, 11:09 AM
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#4326
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Franchise Player
Join Date: Mar 2007
Location: Calgary
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The 2007 royalty review was negatively received and caused investment to decline despite it being during the era of $80-100 oil.
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10-31-2019, 11:10 AM
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#4327
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Franchise Player
Join Date: Dec 2005
Location: Moscow
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Quote:
Originally Posted by IliketoPuck
We yelled it from the rooftops for months after the NDP got elected. And then even more so after the Liberals got in.
The asinine thing is that people in this country think that the capital leaving Canada is constrained only to the energy industry.
This is what happens when a country shows itself to be hostile to investment.
Capital takes the path of least resistance to profit. That's how the world works. Bury your head in the sand and call yourself special, it doesn't change reality.
Canada represents a jurisdiction with too many risks associated with government policies to justify investment, when all else being equal, you can just move your capital somewhere else and make a better and easier return.
I don't know what it is, but people in Canada have this complex where we think we are special and the rest of the world gives a rip about what we have to say.
We aren't. If we don't make it as easy as possible for investors to make the choice to come to our country, they won't. There's plenty of other places for them to make money globally.
This is the impact of the near sighted policies implemented at the provincial and federal level over the past four years. The impact was not immediate, but looking back, I think it is pretty clear what the result has been.
We all like our standard of living in Canada, but some people have lost sight of what it takes to make it a reality.
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Quote:
Defying global patterns, Canada’s attraction of foreign direct investment in 2018 increased by an impressive 60 per cent.
Yes, a year-over-year increase of 60 per cent for global investment into Canada that eclipsed the 10-year average by 11 per cent. Remarkably, this happened in a year when global capital flows into developed economies dropped by 40 per cent, and capital outflows from China into Canada dropped by more than 20 per cent.
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https://www.theglobeandmail.com/busi...ent-last-year/
What am I missing?
EDIT: Or were your comments specific to the energy industry? Probably.
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"Life of Russian hockey veterans is very hard," said Soviet hockey star Sergei Makarov. "Most of them don't have enough to eat these days. These old players are Russian legends."
Last edited by Makarov; 10-31-2019 at 11:13 AM.
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10-31-2019, 11:20 AM
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#4328
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Powerplay Quarterback
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Quote:
Originally Posted by _Q_
That my point though. Things went back to normal after Stelmach reversed the changes. Somehow, though, when Notley decided to keep things the same the damage was permanent?
Look, the problem here is nobody wants to buy Alberta oil. Our main customer is now our biggest competition. On top of that, our oil (correctly or not) is seen as the dirtiest oil in the world. All the pipelines in the world won't fix any of this.
The previous government's attempt to diversity the economy was what was needed. Not a "war room" and reduced taxes.
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Some posters keep trying to look at the royalty review as a single factor, which it is not. These investment decisions are made based on a complex calculation of all factors, which are not only limited to the factors that affect the market for O&G in Alberta, but also every other O&G jurisdiction in the world as well as every other investment opportunity in the world.
In your own post, you pointed out some differences in the market between 2007 and 2015. We were lucky in 2007 because the O&G market in Alberta wasn't facing as many head winds, the Permian hadn't fully opened up and world oil prices were stronger (~$80) and heading upward, and the differential wasn't yet as affected by pipeline capacity.
So yes, same action, far different circumstances and far different consequences.
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10-31-2019, 11:28 AM
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#4329
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Powerplay Quarterback
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Quote:
Originally Posted by Makarov
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You're missing context that year-over-year changes don't reflect.
Even after the 60% increase last year, DFI is still down roughly 50% since 2016...
Nice try though...
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10-31-2019, 11:41 AM
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#4330
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Looooooooooooooch
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Quote:
Originally Posted by you&me
You're missing context that year-over-year changes don't reflect.
Even after the 60% increase last year, DFI is still down roughly 50% since 2016...
Nice try though...
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Do you have figures/tables to back this up? I'm looking at the 2018 DFI stats and can't see that drastic decrease anywhere, unless I'm misunderstanding it.
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10-31-2019, 11:45 AM
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#4331
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Crash and Bang Winger
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Quote:
Originally Posted by you&me
You're missing context that year-over-year changes don't reflect.
Even after the 60% increase last year, DFI is still down roughly 50% since 2016...
Nice try though...
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Can you elaborate? Are you saying that there was a big crash in 2017, and that DFI was >2x 2018 levels in 2016, or is it something else?
Regardless, the article has the following to say about Canada:
Quote:
or example, investments in manufacturing increased by 450 per cent since 2016 and Canada’s technology sector has captured unprecedented global attention. This growth builds on long-running successes such as the Scientific Research and Experimental Development (SR&ED) program, as well as aggressive new tax measures. For new investment projects, Canada’s marginal effective tax rate is now at 13.8 per cent, almost five full points below the U.S. and lowest in the Group of Seven. More than just being competitive, we lead the way with the tax measure that is the single most determinant factor in attracting the next investment dollar.
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This seems to counter IliketoPuck's narrative of Canada being "a jurisdiction with too many risks associated with government policies to justify investment, when all else being equal, you can just move your capital somewhere else and make a better and easier return." It does seem to support a narrative of low taxes attracting investment, though.
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10-31-2019, 11:57 AM
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#4332
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Franchise Player
Join Date: Dec 2005
Location: Moscow
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Quote:
Originally Posted by you&me
You're missing context that year-over-year changes don't reflect.
Even after the 60% increase last year, DFI is still down roughly 50% since 2016...
Nice try though...
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Nice try doing what? Trying to understand something better? Is that a crime on this forum these days?
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"Life of Russian hockey veterans is very hard," said Soviet hockey star Sergei Makarov. "Most of them don't have enough to eat these days. These old players are Russian legends."
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10-31-2019, 12:20 PM
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#4333
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First Line Centre
Join Date: Feb 2013
Location: BELTLINE
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Quote:
Originally Posted by _Q_
That my point though. Things went back to normal after Stelmach reversed the changes. Somehow, though, when Notley decided to keep things the same the damage was permanent?
Look, the problem here is nobody wants to buy Alberta oil. Our main customer is now our biggest competition. On top of that, our oil (correctly or not) is seen as the dirtiest oil in the world. All the pipelines in the world won't fix any of this.
The previous government's attempt to diversity the economy was what was needed. Not a "war room" and reduced taxes.
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First of all, lots of people want to buy Alberta oil. They just can't.
On the royalty review, I brought it up as but one part of Notley's disastrous resume in response to Iggycity taking a swipe at Kenney in regards to EnCana leaving. The truth is, none of our premiers have as much say as we think they do, any efforts for or against O&G is vastly outweighed by our benevolent federal government and they've ####ed us hard for four years. It's going to take a decade to repair this self inflicted damage. Ultimately it really pisses me off because us squabbling about Notley vs Kenney, or the corporate tax cut to try and get companies to stay in this dysfunctional jurisdiction, or what was cut and by how much from our Prov budget, is all caused by the failure to get pipeline capacity. Everything feeds off of that, we're all pissed off about different things but all those things spawn from the same failure.
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10-31-2019, 12:30 PM
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#4334
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Franchise Player
Join Date: Jun 2004
Location: SW Ontario
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Quote:
Originally Posted by delayedreflex
Can you elaborate? Are you saying that there was a big crash in 2017, and that DFI was >2x 2018 levels in 2016, or is it something else?
Regardless, the article has the following to say about Canada:
This seems to counter IliketoPuck's narrative of Canada being "a jurisdiction with too many risks associated with government policies to justify investment, when all else being equal, you can just move your capital somewhere else and make a better and easier return." It does seem to support a narrative of low taxes attracting investment, though.
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Yes - that post was taking O&G issues and carrying them over to other industries where its just not true.
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10-31-2019, 03:25 PM
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#4335
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Franchise Player
Join Date: Sep 2009
Location: Calgary
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Quote:
Originally Posted by Makarov
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The y/y increase is nice, but as mentioned, it is just a snap shot in time. Context is important.
Plus, that article is an opinion piece by the CEO of invest in Canada, a government funded initiative to recruit investment. By default it has to be a rainbows and sunshine piece that makes everyone feel good. So the goalposts get moved. No big deal, but again, context.
Ultimately, today, one of Canada's largest, and most historic, energy companies decided it was easier to re-domicile to the U.S. in order to gain access to capital markets there, because they can't access them here.
How much clearer a signal is needed? I mean, really. This is exactly what we've been talking about for years with respect to the impact of government policies on capital investment. Here it is. Right now. Today.
Encana:
Created from the merger of PanCanadian Energy Company and Alberta Energy Company in April 2002. Now to be re-domiciled in the U.S. (because they can actually get capital there), under a new name (that doesn't have any Canadian connotations, deliberately).
__________________
Pylon on the Edmonton Oilers:
"I am actually more excited for the Oilers game tomorrow than the Flames game. I am praying for multiple jersey tosses. The Oilers are my new favourite team for all the wrong reasons. I hate them so much I love them."
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10-31-2019, 03:27 PM
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#4336
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Franchise Player
Join Date: Sep 2009
Location: Calgary
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And going back, this is a company that literally was created due to our nation building railroad project.
And now it's name is Ovintiv. Whatever that means.
__________________
Pylon on the Edmonton Oilers:
"I am actually more excited for the Oilers game tomorrow than the Flames game. I am praying for multiple jersey tosses. The Oilers are my new favourite team for all the wrong reasons. I hate them so much I love them."
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10-31-2019, 03:45 PM
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#4337
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Powerplay Quarterback
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I don't think this piece by former Encana CEO has been posted but I think it's a great article on its history and importance to Canada.
https://business.financialpost.com/o...nks-to-trudeau
Given that it was published last November, it's remarkably prophetic.
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10-31-2019, 03:48 PM
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#4338
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Norm!
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https://globalnews.ca/news/6110110/o...GlobalEdmonton
Quote:
he association representing oil and gas service companies is predicting a 10 per cent fall from current depressed levels of drilling in Canada next year.The Petroleum Services Association of Canada says it expects a total of 4,500 wells to be drilled in Canada in 2020, down from 5,000 wells this year and 6,950 in 2018.
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Quote:
PSAC CEO Gary Mar says the outlook for 2020 is worse than this year because producers are spending their cash on buying back their own shares, paying dividends and reducing debt rather than investing in growing production.
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__________________
My name is Ozymandias, King of Kings;
Look on my Works, ye Mighty, and despair!
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10-31-2019, 07:01 PM
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#4339
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#1 Goaltender
Join Date: Nov 2005
Location: the middle
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https://twitter.com/user/status/1189922592150446080
And this doesn’t even include the huge drop in price since 2008 they saw.
Seems like, based on their recent history of strategic decisions, EnCana moving to the US is a harbinger for a full on Democratic sweep in a Green Revolution south of the border.
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10-31-2019, 07:10 PM
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#4340
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Franchise Player
Join Date: Dec 2006
Location: Calgary, Alberta
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Quote:
Originally Posted by Roughneck
https://twitter.com/user/status/1189922592150446080
And this doesn’t even include the huge drop in price since 2008 they saw.
Seems like, based on their recent history of strategic decisions, EnCana moving to the US is a harbinger for a full on Democratic sweep in a Green Revolution south of the border.
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Haha, that would be the icing on the cake. Warren somehow becomes president and actually bans fracking. I have a hard time seeing that path coming, but it would sure be a shot in the arm for Calgary and Canadian energy.
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