CVCA Q3 2017 Quarterly Exclusive: Oil, Gas and Power – A Tale Of Two Bounces
This article is part of a new series, CVCA Quarterly Exclusive, written and published by the Canadian Venture Capital and Private Equity Association. This series provides an analysis of the CVCA’s most recently published VC & PE Canadian Market Overview through expert commentary and perspectives.
The momentum of private equity investment in Q3 continued the previously reported “bounce” over the previous year bringing the YTD 2017 total to $20.9B over 447 deals, already 52% higher than the $13.8B invested over 543 deals in 2016.
Sectoral distribution of deal flow continued to favour industrial and manufacturing which received 19 percent followed by information and communications technology (ICT) with a 16% share. This is a steady increase in these sectors since 2013 where industrial and manufacturing captured only a 14% share and ICT investment a 10% of total volume of deals.
There was no sign of a similar bounce in the oil, gas and power in 2017, the traditional sector leader for PE investment as it continued its slump in 2017. It only received 9% of deal flow and 14% of dollars invested, down from 25% and 31% respectively in 2014.
According to the Fraser Institute’s just released 11th annual Global Petroleum survey, Canada is suffering relative to an investment friendlier magnet south of the border. “The shackles are being taken off the U.S. energy sector, which spells trouble for Canadian jurisdictions trying to attract oil and gas investment dollars,” said Kenneth Green, senior director of the Fraser Institute’s Centre for Natural Resources and co-author of the report in a release.
Bain & Company, a global management consultancy agency, painted a more cautiously optimistic view in its Accelerating Capital: 2018 Oil & Gas Industry Planning Outlook report stating that the oil sands are expected to experience “quiet momentum” in 2018. The industry’s slow reversal on its halt on spending in light of firming oil prices have set the stage for a quiet bounce in next year: “For a smooth ride in 2018, oil and gas industry planners will need to carefully study their route, set off early to miss the traffic buildup and accelerate capital deployment gently to hit an optimal pace of strategy delivery.”
To read more about Canadian private equity activity YTD in 2017, read the full CVCA Q32017 VC & PE Canadian Market Overview here.