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Time for Canadian Energy to “Re-Tool” and Look for Silver Linings Among Dark Clouds – William J. Lacey

By William J. Lacey

For those who are old enough to remember there is the famous adage in Alberta,  “Please God let there be another Oil Boom. I promise not to piss it all away next time”. If you listen in the hallways around downtown Calgary, imparticular, that seems to be a common refrain these days. The pain has been real, and has manifested itself through increasing unemployment rates, the rising levels of personal and corporate insolvency, through to the more challenging statistics of escalating suicide rates, domestic abuse and failed marriages. But the stark and harsh reality is that there is no mystical horseman on the horizon, looking to ride in and save the day. Whether it is the closure of equity markets, the rising cost of debt markets, the increasing challenges associated with older assets, and the growth in “environmental” investing, the currents against the industry are real and they are here to stay.

It is time to tear off the Band-Aid and move on. No, there is not going to be another junior oil and gas boom in this province, and those businesses that are here are going to have to keep doing their jobs better and better, not only to maintain their existing shareholders but also because it is the right thing to do. Do I believe that the world is going to transition off of oil and gas in the foreseeable future? Not in my lifetime. But I do believe that the external focus on the industry is here to stay, and we must be the best in class in order to keep doing what we are doing. Moreover, though I think Alberta is going through a painful transition, oil and gas (and all of its wonderful associated products) will remain a core part of our identity for many years to come. Companies the likes of Cenovus, Canadian Natural, Imperial, Suncor and Husky, with their long-life assets and integrated operations will continue to be the core of this province going forward. Moreover, the “smaller” entrepreneurial companies the likes of Whitecap, ARC, Crescent Point, MEG, Tourmaline and TORC et al, will continue to find a way to succeed. Why? Because they have the assets, the scale and the diversity required to prosper.

Despite all of the malaise and navel gazing that is going on throughout the province, and the talk of separation and the angst being created from a disingenuous and dysfunctional relationship between ourselves and the Federal Government of the day, I am actually very optimistic about the opportunities that lay before us. First and foremost, Alberta has one of the best educated workforces that anyone looking to start a business could hope to have. Finance, engineering, geology, technology, professional services – we have it all. Moreover, we have a population that understands and embraces risk, and is willing to roll the dice to create an opportunity. Furthermore, we have the infrastructure in place to build those businesses, from the deep-rooted connections in Wall Street and Bay Street, to the intellectual and relationship talent that is needed to raise that risk capital. We have the tools to succeed. We were the trailblazers in raising venture capital, long before in became trendy to do so in The Valley, and it gave rise to the likes of Peters & Co. and FirstEnergy Capital who helped raise billions for those trailblazers. Yes, there is some re-tooling required, and it won’t be easy, but Alberta is a province that will not back down from a challenge. Hell, we’ll embrace it.

Whether it is top tier education from the likes of the University of Alberta and their world leading research in Artificial Intelligence, to Google opening a DeepMind lab in Edmonton, to the cutting-edge work that has been done by the likes of the Creative Destruction Lab in Calgary, there are some tremendous things going on it this province. Look around you and you will hear of lots of tremendously innovative companies starting up, like Attabotics who is designing a robotic warehousing and fulfillment system to revolutionize supply chain management and has grown to over 100 employees. Calgary based Solium became one of the largest providers of stock option management programs in the world and continues to hire. If you look, you will suddenly you become aware of a whole plethora of opportunities that are fomenting just below the surface, looking for an opportunity to erupt. Yes, we need to re-examine tax incentives to attract some of those next generation opportunities, but tax incentives only reduce a burden, they don’t create an outflow. Moreover, there are a lot of ancillary benefits that come with new investment, from increased spending, to investment in other sectors. Remember, a tax incentive is only a benefit when you are in the position to pay taxes in the first place. An empty office generates nothing.

Fatigue has been a part of my world for the past five years, and to state the obvious – I’m tired of it. We must continue to advocate for an industry that operates under some of the highest standards in the world and who can play an important role going forward in terms of both making a real impact to global clean energy needs as well as the meaningful contributions that we as Canadians continue to enjoy. But we must also start to look forward. We need to take that “get up and go” mentality and apply it to the next generation of Alberta, one which I hope my children will have an opportunity to be a part of.

William J. Lacey is the Chief Financial Officer of Steelhead Petroleum
Connect with him on Linkedin

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