Newspaper article The Canadian Press

Oilpatch Firms Selling Stock to Shore Up Finances, but Who's Buying?

Newspaper article The Canadian Press

Oilpatch Firms Selling Stock to Shore Up Finances, but Who's Buying?

Article excerpt

Oilpatch raising equity to shore up finances

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CALGARY - Energy firms have been looking to raise billions in financing by selling big chunks of their own stock -- betting that investors smell a buying opportunity.

There's been a flurry of equity offerings in recent weeks as the oilpatch looks for ways to cope with low oil prices.

Over the past month alone, Encana Corp. (TSX:ECA), Cenovus Energy Inc. (TSX:CVE) and Baytex Energy Corp. (TSX:BTE) have collectively announced about $3.3 billion in "bought deals." All three have said they'd use the funds for debt repayment.

In a bought deal, banks normally team up to buy a block of shares from a company, which they are then responsible for selling to investors. The banks usually snap up those shares at a discount, since they're are on the hook if the offering is a dud. The hefty sums earned in commissions help offset the risks the banks take on.

"They have to be reasonably sure that the deal can get done," said Les Stelmach, portfolio manager at Franklin Bissett Investment Management.

The fact that the stock has been moving reasonably well sends an encouraging signal.

"Given the weakness in commodity prices, I suppose that's reassuring that people are interested and they want to put money to work in the sector."

Encana and Cenovus' deals have closed, with Baytex's expected to wrap up early next month.

"The view they're expressing is that this is the floor. This is the lowest it's going to go," said John Stephenson, president and CEO of Stephenson & Co.

Stephenson doesn't necessarily share that world view -- he thinks it will likely get worse in the oilpatch before it gets better.

"If you want to have energy in your portfolio, you can get these same companies still on sale -- maybe even at a better discount -- in four months time and you'll have had four months less heartache. …

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