Posthaste: A Canadian energy rebound is on the horizon — but so is a surge in protests in British Columbia
Could this be Canada’s year? After playing second fiddle to the United States for years, Stifel GMP Research says the S&P/TSX index could hit 20,000, and beat the U.S. benchmark in 2020.
“Returns for the S&P/TSX at 20 per cent could be double those from the S&P 500; representing just the second year since 2010 that Canada outperformed (the U.S.),” wrote Stephen Harris, an analyst at Stifel, in a note to clients published this morning.
“We think this could — finally — be the year that Canadian energy stocks outperform after a truly horrible decade. The outlook for Canadian energy producers does not need to be strong for the stocks to outperform. It just needs to less bad than it was in 2019.”
With growth stocks increasingly expensive compared to value stocks, Harris says he see potential for a rebound in value stock performance this year — financials and resources — which should boost relative performance in Canada.
“Finally, with a slew of energy infrastructure projects reaching completion between now and 2022, we see Canada’s beleaguered energy sector as offering strong potential for a rebound this year,” Harris noted.
Eight Capital Research also sees green shoots of recovery in Canadian heavy oil, especially if major heavy oil producer Iraq is sanctioned by the United States in the aftermath of Washington’s conflict with Iran.
In addition, shallower decline rates of Canadian oilsands compared with U.S. shale means that maintenance/sustaining needs are higher for U.S. shale producers, especially owing to steep first year decline rates of shale plays.
“This would also shed light on oilsands producers’ free cash flow being more sustainable,” wrote Phil Skolnick, Eight Capital analyst, in a note to clients.
Stifel’s Harris says that investor sentiment towards the Canadian stockmarket should show improvement thanks to the ratification of NAFTA 2.0, possible easing by the Bank of Canada, some rebound in the underperformance of value versus growth, and renewed interest in Canadian resource stocks, particularly energy.
It’s hardly going to be smooth sailing, though, as protests flare up around key energy projects in British Columbia, such as Site C, the LNG project and Trans Mountain pipeline. A United Nations committee working to end racism is urging Canada to immediately stop the construction of three major resource projects until it obtains approval from affected First Nations, reports The Canadian Press.
The committee, made up of 18 experts, says in a written directive last month that it is concerned by the approval and construction of the three projects without the free, prior and informed consent of impacted Indigenous groups (also see below for more Indigenous indignation over the Coastal Gas Link projects).
Here’s what you need to know this morning:
Deputy Prime Minister Chrystia Freeland meets with Alberta Premier Jason Kenney
The hereditary chiefs of the Wet’suwet’en First Nation provide an update on their eviction notice to Coastal GasLink from its territory over construction of a new gas pipeline in Smithers, B.C.
Statistics Canada to release international merchandise trade figures for November at 8:30 a.m. ET
RBC Capital Markets holds 2020 bank CEO conference in Toronto
Gateway Casinos and Leisure Acquisition joint conference call about proposed deal announced Dec. 27 in Toronto
A breakaway First Nations group has issued an eviction notice to a consortium building the $6.6-billion Coastal GasLink project and warned the RCMP to “refrain from interference” in its territory, reports Geoffrey Morgan.
On Friday, five hereditary Wet’suwet’en chiefs sent a letter to Calgary-based pipeline giant TC Energy Corp. informing the company building Coastal GasLink that the chiefs were withdrawing from an agreement signed in April 2019 and telling the company to vacate a camp by Friday, Jan. 10, 2020. Continue reading