Copyright of the Daily Oil Bulletin 2017
Alliance To Offer More Than Loans To Assist Beleaguered Oilpatch
It will take a team effort to help Alberta oil and natural gas companies get through the current downturn but government-backed organizations are there to help, a Petroleum Services Association of Canada-sponsored forum heard Friday.
“Getting through these turbulent times is going to be a team effort and by working together we can help Alberta businesses emerge stronger than in the present situation,” said Laura Didyk, vice-president, finance and consulting, Alberta South for the Business Development Bankof Canada (BDC).
PSAC members attending the forum also heard presentations from representatives of ATB FinancialBusiness, Export Development Canada (EDC), and the Canadian Trade Commissioner Service (TCS), part of Global Affairs Canada, who explained how their organizations can assist Alberta oil and gas companies.
ATB Financial, BDC and EDC have formed an alliance, Partnering to Enhance Access to Capital and Support, to help companies to succeed, grow and diversify with access to capital and loans, business and technical services and expertise, said Mark Salkeld, PSAC president and chief executive officer.
The partnership will build on the members’ existing supports and programs to develop initiatives for small and medium-sized Alberta businesses in the areas of innovation, export development, delivery of co-ordinated business services, collaborative solutions for enhanced venture capital and other financing challenges.
“Once you are into one of us, you are going to be into all of us — that’s what we committed to do and you are going to get that help and we are going to be held accountable,” said Ed Straw, vice-president of strategic business solutions for ATB Financial Business.
“Hope is not a strategy,” he said. “We are not going to be able to do anything in this province if we simply sit back and wait for things to happen.”
“What this partnership wants to really prove to you is that there is hope of finding new market opportunities and doing innovation and really getting the capital that you need to drive your business forward and change what you are doing,” said Straw.
“If you have a plan, if you have an opportunity, …, [if] you have got opportunities and new markets, you want to do innovation, [then] there’s a lot of people that want to step up and make that happen,” he said. “They are willing to take more risk with you to give you that hope and to put that hope into a plan. The best thing to feed hope is action.”
The critical needs in Alberta are for new market opportunities, innovation funding and access to capital, Straw suggested.
His company recently hired a director of strategic markets, Qasim Rasi, to drive new market opportunities, taking existing products and services into new jurisdictions or innovating completely and starting something different, working with EDC and Global Affairs Canada.
The economic downturn also has given companies an opportunity to slow down and to look at how to really drive innovation, the forum was told. “For the longest time, we were just working to get things out the door,” he said. “We weren’t doing things as good or as efficiently as we could; we just wanted to get it done.”
Alberta is the most innovative province in Canada and probably one of the best jurisdictions in the world for stepping up and being entrepreneurial and making innovation happen, according to Straw. “We just need to work a lot better to make sure that it does happen.”
ATB Financial is working on building a platform in which a company can go in and do queries, indicating its stage of development and what it is looking for and it will come up with contacts from among the 123 agencies involved in funding innovation. The website will have pictures, people and case studies to show what it can get done.
For example, Mitacs, a Canadian non-profit research organization, will find researchers who will come and do applied research in a company for two or three months to solve a particular problem. “And anything that they create [intellectual property] is yours,” said Straw.
Technology funding from different sources can range from a $5,000 micro-voucher to millions of dollars for commercialization and ATB Financial has been working with Alberta Innovates – Technology Futures and EDC to make sure everyone across the province has an opportunity to access it.
In terms of access to capital, the partnership was designed in part to enable ATB to do things together that it couldn’t do by itself and it has several opportunities on the go right now for what it calls “sharing risk,” said Straw.
As Canada’s only bank dedicated to entrepreneurs, BDC offers loans, investment and advisory services to small and medium-sized businesses across the country and in the past several months has instituted several initiatives to provide support to businesses in the oil and gas sector.
A year ago, BCD began a relief program, offering businesses pre-approved working capital loans and postponed repayment options, specifically in the oil and gas sector, but felt more was needed.
In November, it allocated an additional $500 million in financing and advisory solutions to support businesses affected by low oil prices. These funds can be used to help companies diversify their operations, increase operational and environmental efficiency, improve financial management or purchase new technology and equipment. Five months later, BDC has authorized more than $140 million from this envelope.
The bank also encourages its clients to take advantage of its consulting offerings in areas such as financial management, operational efficiency and technology adoption. “Our intent is to provide businesses with the financing and the consulting services they require to emerge stronger from the current economic situation,” said Didyk.
As part of a recent agreement with the Alberta government to provide access to capital and advisory services to Alberta businesses, BDC will be increasing the amount of venture capital allocated specifically to Alberta. It also will continue to leverage the Alberta Innovates –Technology Futures program to provide Alberta businesses with access to both financing and consulting. “We are also in constant communication with ATB to refer suitable opportunities and alternately to help more businesses through co-lending and to share our risk.”
In addition, BDC is in the process of developing both financial and non-financial opportunities to enhance export development opportunities to small and medium-sized companies in Alberta.
“We are telling all our clients in Alberta that when the times get rough, one of the best strategies is to have a long-term view,” said Didyk. “With times a little slower, this is the time to take the time to breathe, to find new areas and to capitalize on your strengths. We recommend not getting defensive and taking drastic action that will hurt you later.”
BDC research has shown that diversification is the best way to grow a stronger and more resilient business during tough economic times, she said. That involves avoiding reliance on a single client, developing multiple products and service lines, operating in more than one sector, having clients with a physical presence in more than one city and selling internationally. “Even a modest degree of diversification is associated with superior financial performance, regardless of the size of the business.”
Export Development Canada
The mandate of EDC is to support, either directly or indirectly, Canada’s export trade and Canadian capacity to engage in that trade and its goal is to create benefits for Canada, said Mark Senn, regional vice-president for Western Canada. To qualify for EDC assistance, EDC requires that companies are either shipping directly to export markets and have foreign purchase orders to back that up or is the first line of supply or support to a company that is exporting.
EDC provided an additional $750 million to provide support in the form of loans, guarantees and increased insurance mainly to Canadian small and medium-sized businesses. The funding is designed to assist companies to increase exports, provide the financial flexibility to survive through the downturn, increase their corporate productivity and operating efficiency, diversify to new customers or other industries, and implement environmentally sustainable practices.
EDC wants to have the money fully disbursed by mid-2017. “My account managers, as well as the credit people, are trying to make this work,” he said. “This is an incredible opportunity for us to stand by Canadian companies and provide liquidity and help them grow overseas and if we don’t to that, it’s not going to happen.”
In the question period that followed, Senn suggested that Iran is an especially interesting export market, especially for Alberta, which prior to the Iranian revolution had a lot of engineering and equipment in the country. “This is a great opportunity to give them an opportunity to deal with great technology” without Iran having to deal with the United States, he said. “This is a good time to connect: start early.”
In the oil and gas sector, EDC also is trying to work with the domestic banks to see if there is a way it can provide some supplemental guarantees or share a part of the security or provide a carved-out working capital facility so they don’t pull out as they did in the 2008 downturn, said Senn.
At the same time, EDC does not want to be a lender of last resort, he emphasized. “If you have no financial institutions, it’s very difficult for EDC to come in on the way down and bail out the banks,” Senn said. “This is not about bailing out the banks; it’s about working with you to see a better tomorrow.”
Canadian Trade Commissioner Service
The CTC provides four key services: preparation for international markets (mainly on the ground in Canada), market-potential assessment (mainly in posts abroad), qualified contacts and problem solving. A trade commissioner abroad can provide advice, information and contacts needed to implement an export strategy, said Amanda McNaughton, acting regional director, Prairies and N.W.T.
In Canada, the agency can help validate market research a company has done and help finalize decisions, provide key contacts and introductions to useful contacts abroad.
“It’s worth your time — especially as we don’t cost you anything except time,” she said, pointing out that companies that work with CTC successfully access an average 36 per cent more markets abroad and the value of those exports is increased by 18 per cent.
In January 2016, the federal government announced the CanExport program that will provide $50 million over five years to help Canadian small and medium-sized enterprises take advantage of global business opportunities. The project must go beyond an applicant’s core activities, represent new or expanded initiatives, and yield incremental results.