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Sep 21, 2015

CIRI: highs & (oil price) lows

When the most stable country in OPEC is Venezuela, you know you’re in trouble

A report from Canadian IR body’s annual IR conference held in Banff, Alberta

Sometimes a corporate blow can also be a professional triumph. The opening speaker at CIRI’s 28th annual conference, held May 30-June 2, was Baytex Energy CEO Jim Bowzer, who gave the perfect example. In December 2014, after oil prices had crashed and producers slashed their 2015 budgets, most of them sat on the details until January. But Brian Ector, Baytex’s head of IR, pushed management hard to go on the road and show the new budget to the Street within a matter of days. ‘It was one of the most strategic moves we’ve made,’ Bowzer told the 209 IROs and service providers at the conference.

Hearing from investment pros is a perk of CIRI’s annual conferences, and a session titled ‘In conversation with the Street’ included Derek Wheatley, an energy sales specialist from Scotiabank, and John Cole, a liability trader from RBC Capital Markets. The nugget in this session came with Wheatley exhorting IROs to ‘understand the ledger’ when they work with the sell side. ‘You need to pay the firms that influence your stock, even those that aren’t supportive,’ he said – emphasizing that he meant with access and roadshows, not cash.

The conference organizers expected a debate when they put TMX Group’s Kevin Sampson on the same stage as Jos Schmitt, CEO of Aequitas Innovations, who is notoriously critical of Canada’s main exchange. There were glimmers of a duel, but the key players mostly danced around the issues. Even Victoria Pinnington from the Investment Industry Regulatory Organization of Canada, which has been studying high-frequency trading (HFT), seemed to filibuster. It all left the audience wondering: does Canada have a problem with predatory HFT? Does the TSX help facilitate it? Does Aequitas’ just-launched Neo Exchange stop it? Sampson and Schmitt joked they would figure it out at the party.

Macro risks in Europe, central bank policy divergence, conflict in the Middle East – these were just a few of the heavy topics that enlivened a session with two economists. ‘The US is the dog that wags a lot of tails here north of the border,’ said Todd Hirsch, chief economist for ATB Financial, an Alberta government bank. And this being Alberta, oil loomed large. ‘When the most stable country in OPEC is Venezuela, you know you’re in trouble,’ quipped Deborah Yedlin, a writer for the Calgary Herald.
Later, activism came up for debate.

‘There is improvement, but it’s coming from investors, not companies. I would expect them to be more proactive,’ said Helen Beck from the Caisse de Depot Quebec pension fund. She explained how the Caisse is an avid supporter of McKinsey and the Canada Pension Plan Investment Board’s initiative, Focusing Capital on the Long Term, with a new relationship committee helping to decide the level of engagement to pursue with different companies.

As IROs heard an inspirational closing speech by Olympic speed-skating medalist Kristina Groves, they were left with a sense of pressure from both ends of the investment spectrum. Even long-term-oriented pension funds demand heightened engagement and are ready to ‘read the riot act,’ as Beck put it, to misbehaving companies.

This article appeared in the fall 2015 print issue of IR Magazine

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