Eight energy firms dropped from Canada's main equity index (updated)

Kelt Exploration

23/09/2019 22:58

(Adds comment from Kelt Exploration and NuVista Energy)
    By Nia Williams
    CALGARY, Alberta, Sept 23 (Reuters) - Eight Canadian energy
companies were booted out of the S&P/TSX Composite Index
 .GSPTSE  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 inexpensive North American natural gas.
    Canada holds the world's third-largest crude reserves but
the country's capital investment and energy stocks have
plummeted over the last five years.    
    The companies affected are Birchcliff Energy Ltd  BIR.TO ,
Ensign Energy Services Inc  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 & 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 float-adjusted market capitalization falls
below 0.025% of the overall value of the index. 
    Firms have to wait a year to get back in and will be
admitted only 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," said S&P Global spokesman Ray McConville. "It's simply
a matter of their stock prices having fallen to the point where
their market capitalization is no longer eligible."
    Energy makes up 17% of the index, down from 25% in 2014.
McConville could not say whether so many energy firms had ever
been removed in one hit before.
    "We do not believe that inclusion or exclusion from the
index impacts the ability to raise capital, however, ETF
(exchange-traded) funds that tracked the TSX Composite Index
will no longer hold these energy names now that they are no
longer part of the index," Kelt Exploration spokeswomen Sara
Stark said in an email.
    Travis McPherson, vice president of corporate development at
NexGen Energy, said being removed from the index did not affect
its 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 and NuVista Energy said there would be no
impact.
    The other companies did not immediately respond to requests
for comment.
 ($1 = 1.3258 Canadian dollars)

 (Reporting by Nia Williams in Calgary, Alberta
Editing by Alistair Bell and Matthew Lewis)
 ((nia.williams@thomsonreuters.com; +1 403 531 1624; Reuters
Messaging: nia.williams.thomsonreuters.com@reuters.net))