Eight energy firms dropped from Canada's main equity index

Ensign Energy Services

23/09/2019 20:30

By Nia Williams
    CALGARY, Alberta, Sept 23 (Reuters) - Eight Canadian energy
companies were booted out of the S&P/TSX Composite Index on
Monday because their market capitalization has dropped below
minimum requirements, the latest sign of difficulties facing the
country's oil and gas sector.
    Analysts said the rebalancing of Canada's flagship index
underlined the challenge to energy companies in attracting
investment amid concerns about lack of new oil pipeline capacity
and a glut of cheap North American natural gas.
    Canada holds the world's third-largest crude reserves but
has seen capital investment and energy stocks plummet over the
last five years.    
    The companies affected are Birchcliff Energy  BIR.TO ,
Ensign Energy Services  ESI.TO , Kelt Exploration Ltd  KEL.TO ,
Nuvista Energy Ltd  NVA.TO , NexGen Energy Ltd  NXE.TO ,
Precision Drilling Corp  PD.TO , Peyto Exploration and
Development Corp  PEY.TO  and TORC Oil and Gas Ltd  TOG.TO .
    Their exclusion means they will miss out on investment from
index-tracking passive funds, said Jeremy McCrea, an analyst
with Raymond James.
    "To raise capital for any energy company here in the last
few years has been extremely difficult and this is one more nail
in the coffin in their ability to access equity," he added.
    The composite index is rebalanced quarterly. Companies are
removed if their market capitalization based on float-adjusted
shares falls below 0.025% of the overall value of the index. 
    Firms have to wait a year to get back into the index and
will only be admitted if their value is at least 0.04% of the
index. McCrea said that would be equivalent to just under C$1
billion ($754.26 million).
    "Energy companies in Canada have taken quite a bit of a hit
lately. It's simply a matter of their stock prices having fallen
to the point where their market capitalization is no longer
eligible," said S&P Global spokesman Ray McConville.
   Energy makes up 17% of the index, down from 25% four years
ago. McConville could not say whether so many energy firms had
ever been removed in one hit before.
    Travis McPherson, vice president of corporate development at
NexGen Energy, said being removed from the index did not affect
their business at all "other than the unfortunate short-term
impact to the share price as a result of short-term investors
pre-positioning ahead of any action."
    Birchcliff Energy investor relations manager Jesse Doenz
said there will be "absolutely zero impact" on the company as a
result of the rebalancing.
    The other companies did not immediately respond to requests
for comment.

($1 = 1.3258 Canadian dollars)

 (Reporting by Nia Williams
Editing by Alistair Bell)
 ((nia.williams@thomsonreuters.com; +1 403 531 1624; Reuters
Messaging: nia.williams.thomsonreuters.com@reuters.net))