Energy giant Chevron Corp.‘s decision to sell US$6.5-billion worth of oil and gas assets to Canadian Natural Resources Ltd. means the number of foreign entities remaining in the oilsands has shrunk to just a handful of players.

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Foreign companies are exiting the oilsands — and maybe investors too Back to video

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ExxonMobil Corp. and its Canadian affiliate Imperial Oil Ltd. top the list of foreign firms, with a combined production volume of around 450,000 barrels per day (bbl/d) in 2023. A trio of Chinese state-owned companies, CNOOC International Ltd., PetroChina Co. Ltd. and Sinopec Canada Energy Ltd., accounted for more than 150,000 bbl/d last year, representing nearly five per cent of the total oilsands production.

Other significant foreign entities include oil major ConocoPhillips, Shell PLC (which continues to operate and own a minority stake in the Scotford bitumen upgrader and the Quest Carbon Capture and Storage facility) and Korea National Oil Corp. subsidiary Harvest Operations Corp.

It’s not just foreign oil companies that are exiting the oilsands, but possibly foreign investors, too.

There was a relatively high level of selling of Canadian energy stocks by foreign mutual funds and exchange-traded funds (ETFs) in the first six months of the year, according to an analysis by CIBC Capital Markets.

The selling of Canadian energy names overall was “materially larger — three-to-five times as large,” CIBC analyst Ian de Verteuil said in a note to investors on Monday.

“Our analysis suggests foreign MFs and ETFs did meaningfully sell Canadian energy stocks in the first half of 2024 (circa $5 billion),” he said, noting that Canadian oilsands major CNRL was the single-largest net sell. “It’s unclear what caused this, but possible factors include egress challenges, government policy and changing relative valuation.”

More broadly, the sector has also had to contend with growing criticism over its intensive per-barrel emissions and the need for them to substantially invest in decarbonization, with much of that criticism focused on the increasing oil production from Canadian-headquartered operators.

Canadian ownership of the oilsands is at around 77 per cent of production, according to a 2022 analysis in Oilsands Magazine, a share that has only increased with major divestments by TotalEnergies Co. and now Chevron.

Just three companies, Suncor Energy Inc., CNRL and Cenovus Energy Inc., account for around two-thirds of all Canadian oilsands production. The Calgary-based energy companies have been snapping up interests and assets as the foreign share of oilsands production has fallen.

“The Canadian companies have been well-positioned to take these positions. They understand the resource. They know how to develop it,” said Richard Masson, an executive fellow of the University of Calgary’s school of public policy and former chief executive of the Alberta Petroleum Marketing Commission.

“They can see value from something that others might not perceive as valuable,” he said, adding that the concentration of ownership is creating new economies of scale.

But despite the headwinds facing the sector — and the likelihood that oil price volatility is likely to persist amid rising political tensions in the Middle East — some domestic investors remain bullish on Canadian energy due to the large number of producers with balance sheets capable of supporting stable dividends and robust share buyback programs.

Canadian oilsands majors (including Imperial) generated stable free funds flow of $5.5 billion in the third quarter of this year, repurchasing around $3.6 billion of their own shares, up sharply from about $2 billion in the second quarter, RBC analyst Greg Pardy said in a note subtitled, Unapologetically bullish on Canada.

“(W)estern Canada is long export pipeline for the first time in well over a decade,” he said, referring to the Trans Mountain Pipeline Expansion that began flowing in May. “Oilsands producers have enhanced global market optionality for their crude streams and greater surety that WCS-WTI spreads should remain contained.”

• Email: mpotkins@postmedia.com

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