Jason Kenney is up in arms. Liberal energy policies are why Encana has headed south, he says. But, Alan Freeman writes, you could have seen this coming long ago:
Encana Inc.’s fate was probably sealed last year when its CEO, a Texan named Doug Suttles, announced that he was leaving Calgary and settling in Denver.
“We’re not moving other staff and no, we’re not relocating our head office,” a spokesperson for Encana told the Financial Post at the time. “There’s a definitive no to that.”
Right. If you believed that one, you’d probably believe Peter MacKay is a loyal follower of Andrew Scheer and never would think of undermining the Conservative Party leader to pursue his own infinite ambitions.
Encana has been investing a lot of capital in the United States:
The fact that Suttles had spent much of his time since being appointed Encana’s CEO dumping Canadian assets and bulking up on U.S. properties should have been another sign that this company wasn’t going to stick around in Alberta for long. According to Bloomberg, 80 per cent of Encana’s oil production now comes from the U.S.
From what I can see, Encana’s leadership had decided some time ago that its future wasn’t in Canada. Part of it had to do with betting big time, and badly, on being a natural gas producer in Canada just as the shale gas industry took off in the U.S. Its efforts to transform itself have so far been a failure and the market doesn’t seem any more convinced after yesterday’s announcement. Its shares dropped as much as 9.3 per cent, its biggest drop this year.
Companies move for lots of reasons. But I don’t think we should put too much stock in the timing in Encana’s case. Companies mull over these decisions for months, if not years. It wasn’t Justin Trudeau’s narrow election win that was the key to when Encana announced it was fleeing Canada. It was Encana’s PR advisers.
Encana encapsulates what is amiss in Aberta's oil economy. Even if the Trans Mountain pipeline gets built, Alberta oil -- particularly tar sands oil -- is being priced out of the market:
Alberta is still likely to be seen as a high-cost producer whose future depends in large parts on the oilsands, which is viewed not just by environmentalists but multinational oil companies and pension funds as a suboptimal investment in face of climate change concerns.
Kenney and Albertans have bet on the 21st century equivalent of buggy whips. You can see how this story will end.
Image: The Robin Report