The following is an excerpt from Canaccord Genuity's Morning Coffee newsletter.
“We’ve written several times now that West Coast LNG development will be a key theme in Canadian markets for 2014.
For even more bullish commentary on the coming LNG wave, we direct you to Peter Tertzakian, the Chief Energy Economist at ARC Financial, one of the pre-eminent though leaders on Canadian LNG. Tertzakian recently published two must read articles: “Surf’s up on LNG Spending” and “LNG Ahoy!”
“LNG is the big story that will really that will really start to gather momentum this year….the building of 14 LNG projects to completion is wholly unrealistic.
But two or three – a couple in Kitimat and one in Prince Rupert – can be envisioned over the next decade…..If three projects get the green light, the implied wave of capital crests at $16 billion per year in 2017.
Let’s consider some comparative perspectives. Spending by oil and gas companies in B.C. is typically only $6 billion a year, so the magnitude of what’s to come could be nearly triple at the peak. How about the speed of the wave?
What happened during Alberta’s early oil sands development provides a comparative vignette: Three LNG projects will generate a steeper spending swell than what the Fort McMurray area experienced a decade ago.”
Tertzakian adds (in LNG Ahoy!), “[I]t’s not realistic to slam a region with a multi-billion-dollar wave of services, heavy equipment, and skilled labour with all else being equal. Public infrastructure like roads, schools, fire stations, recreational facilities, medical care, regulatory bureaucracy, to name a few essential services, are proactively needed to absorb and manage the influx.
In fact, the propensity of LNG developers to remain interested in progressing their projects will depend on governments at all levels to invest in public works – preferably in anticipation of the wave. So in that context the adage, “If you build it, they will come,” my well be appropriate.”
Key beneficiaries of the LNG wave according to Canaccord Genuity analysts:
1 NEBC Montney players are going to be the key beneficiaries from this LNG theme on the upstream side. The Montney is geographically best positioned to feed LNG export terminals. Focus stocks from Canaccord Genuity Energy Research universe with material positions in the NEBC Montney play include:
Crew Energy Inc. (
TSX: T.CR,
Stock Forum),
Painted Pony Petroleum Ltd. (
TSX: T.PPY,
Stock Forum) and
Arc Resources Ltd. (
TSX: T.ARX,
Stock Forum);
2 Amongst oilfield services names;
Trinidad Drilling Ltd. (
TSX: T.TDG,
Stock Forum) and
Western Energy Services Corp. (
TSX: T.WRG,
Stock Forum), are also well represented in the Montney and these companies are positioned to win LNG-related rig mandates; and:
3 Although no more than three LNG export terminals are likely to be built, the investment required in nonetheless significant and should represent solid opportunities for
Petrowest Corp. (
TSX: T.PRW,
Stock Forum),
Fluor Corp. (
NYSE: FLR,
Stock Forum),
Aecon Group Inc. (
TSX: T.ARE,
Stock Forum)
Churchill Corp. (
TSX: T.CUQ,
Stock Forum),
WesternOne Inc. (
TSX: T.WEQ,
Stock Forum) and
Finning International Inc. (
TSX: T.FTT,
Stock Forum).