“This is not about sending a message or a shot across the bow.”—Murray Edwards, billionaire oil tycoon
Are you kidding me?
Murray Edwards’ message couldn’t have been clearer if he’d fired a cannonball with neener neener written on it into Premier Notley’s office.
Murray Edwards is the chairman of the board of CNRL, a multibillion dollar oilsands producer. Last week CNRL issued a press release deferring its annual investors’ open house because the uncertainty surrounding the NDP government’s review of royalties, taxation, environmental and greenhouse gas policies meant it couldn’t finalize future capital allocation plans.
When was the last time you saw CNRL, or any oil producer for that matter, issue a press release saying it’s hosting an investors’ open house let alone cancelling one. The answer is never. That’s because it’s not mandatory to hold investors’ open houses under Canadian or US securities laws.
Consequently when a company hosts an investors’ open house it’s a touchy-feely event that gives investors a chance to get to know the company “up close and personal”.
The senior management team is on its best behavior. The CEO, CFO and VPs make presentations on their current and future plans with respect to finance, marketing, operations and R&D. Every presentation is introduced with the usual legalese that gives the company enough leeway to escape liability if things don’t turn out as expected.
Open houses are also an opportunity for the executives to bond with the investors over lunch, dinner and more often than not, the golf course.
If all goes well the investors are left with the impression that their investment is in good hands.
So what’s the impact of Mr Edwards deferring the investors’ open house? Nothing…other than sending Premier Notley a message which in this case appears to be “I’m Murray Edwards and I’m miffed”.
“Invitation only” conferences
The fact Mr Edwards’ “uncertainty” argument is nothing more than a smokescreen became apparent when Mr Edwards did not cancel CNRL’s participation in two investor conferences that actually matter.
Right after the election CNRL participated in the Citi Global Energy and Utilities Conference in Boston. In June CNRL will be participating in the RBC Capital Markets’ Global Energy and Power Executive Conference in New York.
These “invitation only” conferences are hosted by major financial investors like CitiGroup, RBC and Goldman Sachs. They are so prestigious that companies issue press releases telling all and sundry that their CEOs, CFOs and executives will be chairing a panel or making a presentation.
If Mr Edwards is so concerned about the uncertainty created by the NDP government why is he sanguine about allowing CNRL to participate in the Citi and RBC conferences where his executives will surely be asked to discuss the impact of the election of an NDP government on the company’s prospects?
Oh the uncertainty!
To be fair, CNRL, like all oil producers, is grappling with the uncertainty caused by low oil prices, the lack of pipeline access to new markets, the cost of transportation by rail and forest fires in northern Alberta which cut production by 10%.
But it’s hard to believe that the election of the NDP is the straw that broke the camel’s back.
The NDP will raise corporate taxes to 12%. This is a certainty that should be included in CNRL’s future capital allocation plans. Perhaps CNRL can use some of the $228 million it will save as a result of tax law changes in the United Kingdom which reduced the corporate tax rate on North Sea oil and gas production from 62% to 50% (that’s not a typo!) and the petroleum revenue tax from 50% to 35% (again, not a typo).
Energy Minister Marg McCuaig-Boyd says the royalty review is a priority. She expects to have a good road map in place within six months. The government is pressing ahead with revisions to the environmental and greenhouse gas regulations.
Rushing the process simply to assuage Mr Edwards’ concerns would be imprudent.
In the interim CNRL is not paralyzed by the lack of certainty around royalties, environmental and GHG regulations. It can and will do what all public companies do in similar circumstances. It will make reasonable assumptions, set out the high, medium, and low cases and report the results couched in so many weasel words that no one can hold CNRL to its numbers if it turns out they were wrong.
The real nature of the debate
Premier Notley responded to Murray Edwards’ decision to defer the investors’ open house by saying: “Everyone has their interests, and this is a political debate as well as an economic debate, and I welcome all contributions.”
This is indeed a political debate. Companies that work with the government will have an opportunity to participate fully in the debate. Corporations that lob cannonballs into the premiers’ office should expect to have them lobbed right back.
Premier Notley is much too gracious to say this, so Ms Soapbox will say it for her: neener neener!