Advocacy group's report on AIMCo's investment in risky oil/gas junior producers raise questions

Markham interviews Duncan Kinney, executive director of left-leaning Progress Alberta, about his organization's new report, Alberta’s Failed Oil and Gas Bailout.

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Progress Alberta press release

Alberta Invested $1.1 billion in three years to small and midsize oil and gas companies— one went bankrupt, more are likely to follow while share prices have tanked, according to new report

CALGARY, April 22, 2020 /CNW/ - A new report shows that every publicly traded oil and gas company that the Alberta Investment Management Corporation (AIMCo) has invested in—more than $1.1 billion dollars over the past three and half years—under an invest local directive brought forward in 2015 has seen its share price tumble. One of those companies, Trident Exploration, filed for bankruptcy in 2019 despite receiving $60 million from AIMCo. Funding from AIMCo comes from pensions and the Heritage Fund.

Further, Junior producers Journey Energy, Pieridae Energy and Razor Energy all received favourable debt negotiations late last year, while Calfrac Well Services, an oilfield services company based in Calgary, gave $50,000 to a pro-Jason Kenney PAC after receiving more than $228 million in investment from AIMCo. The company also relocated a large portion of its operations to the United States.

"AIMCo has been engaging in this bailout of Alberta's oil and gas industry for several years, losing tens of millions in the process," said Duncan Kinney of Progress Alberta, which authored the report. "This should serve as a clear warning to the federal government as it works out the details of its own financial bailout of oil and gas companies."

Late last week, Prime Minister Trudeau said the federal government would work through Export Development Canada and the Business Development Bank of Canada to expand access to credit for small and medium-sized oil and gas companies. So far no dollar amount has been provided, along with the financial mechanisms the government plans to use.

The report entitled Alberta's Failed Oil and Gas Bailout shows that due to the low price of oil and gas and reduced activity in the oil patch, many of the companies were struggling long before COVID-19 and the Saudi Arabia/Russia price war. With these latest developments, AIMCo stands to lose a significant amount as additional companies file for bankruptcy or are acquired at low prices by larger companies.

The report also found that the companies AIMCo has invested in have more than $3.1 billion in environmental liabilities based on research by the Alberta Liabilities Disclosure Project.

"The answer is not to keep trying to prop up Alberta's oil and gas industry with huge sums of money, but to fund a transition so these companies can adapt and function in a low carbon economy," said Kinney.