Sponsored Content: ATB's Collaborative Banking In An Age Of Oil And Gas Price Volatility

As the dust settles on another volatile year in Alberta’s energy industry, Kevin Kynoch is optimistic. As the new Managing Director, Energy, of ATB’s Corporate Financial Services, Kynoch has established a career helping energy companies navigate tough times. Now, he is looking forward to positioning for a recovery. “We're seeing a material improvement in the Alberta economy. Alberta appears to be out of recession,” says Kynoch.

While still fraught with challenges, including restricted market access that is negatively impacting Canadian commodity pricing, evolving environmental rules, uncertain NAFTA talks and competition from a swift ramp up in U.S. oil and gas production, things are looking up. “Our credit portfolio has stabilized as the number of newly impaired loans slows. Our provisioning for loan losses is down 60 per cent compared to last year and our oil and gas loan commitments have increased by about nine per cent.”

Taking on new clients and expanding existing loan commitments are signs that ATB is open for energy business. At least part of this renewed confidence comes from experience over the last two years. A deep-dive understanding of their oil and gas clients’ businesses—whether from touring field operations, accompanying clients to investment conferences, or just upping the frequency of communication to gain insight and understanding of the business—allowed ATB to “have our clients' backs, at a time they needed it most." Kynoch says.

So how will Kynoch and his team change strategy to address this emerging recovery? Embracing technology and collaboration are key themes in Alberta's oil and gas industry efforts to reduce costs, improve efficiencies and boost returns. This is also the core value of ATB Financial and, together with strengthening commodity prices, it guides a renewed appetite for oil and gas lending.

Difficult, respectful conversations

Kynoch joined ATB's Turnaround Assistance Group at the bottom of the downturn and had a front-row seat to the challenges faced by energy companies. The team worked with 40 to 50 companies in various states of financial challenge, some resulting in successful outcomes.

“Our goal was to provide strength to our clients during a very challenging period. This was a time when other financial institutions turned away. We knew we had to lean in and communicate, not stand back. The world had changed so fast, and they needed significant attention. That's not typically the time when people love talking to their banker,” says Kynoch.

“We had many very difficult, but respectful, conversations. We worked in partnership with companies facing distress. And, in hindsight, I think we were very successful”, says Kynoch, "Consistent communication and accessible support was critical. I would not have wanted to be on that journey as part of any other team."

When discussing the importance of local support and decision-making, Kynoch’s past experience with two major banks headquartered in Eastern Canada  gives him the benefit of comparison.

In 1998, when oil prices dropped to $10.82 and forecasts called even lower prices, “I was in a large bank facing industry collapse, working on a portfolio of companies that were in reasonably good stead. But when a change of strategy came from head office, we redirected our activity away from the oil and gas industry . In this most recent downturn, I was pleased to see that this was not the case at ATB,” Kynoch says.

Through time at a boutique energy lender and a large integrated corporate investment bank, Kynoch knew he had found his calling in oil and gas banking and sought a broader experience as the income trust era unfolded, along with the first wave of oilsands growth. “We were intensely busy and I was fortunate to pick up a very useful toolkit through this experience,” Kynoch says.

During this time ATB, the largest Alberta-based financial institution, was expanding its capabilities to include syndicated loans, derivatives, and full corporate investment banking through its association with AltaCorp. The relationship focused, supportive culture with local decision-making was a perfect fit for Kynoch, the native Calgarian. He joined in 2012 and hasn’t looked back.

Stepping up

As the energy industry takes a collective breath and begins to see a light in 2018, Kynoch feels strongly about sticking to his strategy. “Relationship banking is a competitive advantage for our clients. We have a deep understanding of their broader business plans. We surround them with expertise and services to meet their unique needs,” Kynoch says. “For example, if I'm lending to a natural gas producer, we present a full product suite that includes hedging of natural gas prices. Otherwise, we’re doing a disservice to the client. It’s our objective to ensure we're having regular and active dialogue around price risk management.”

“By focusing on relationships and surrounding clients with a full suite of solutions, we support our clients as they grow. An example being our local loan syndications group that supports our client’s seamless transition from a single bank to a multi-bank syndicated loan structure,” says Kynoch. It can also mean stepping up to the plate and taking on additional exposure at a crucial time.

“In the first half of 2017, we were working with a company to get across the finish line on a senior debt and second lien debt transaction. Then oil prices took a dip mid-year. When we got to the closing table, a bank withdrew from the transaction in the 11th hour,” Kynoch says.

Having a full understanding of their client's business and local access to ATB's credit committee allowed Kynoch's team to fund the shortfall and get the deal done. Later, ATB found a participant to take the portion it temporarily carried.

“I view my job largely as listening to my clients, translating that into an understanding of their needs, and coming back with financial solutions,” Kynoch says. “We're ensuring that we have a focused lens into all parts of the industry. By staying close to our clients, we’re knowledgeable about their business plans and all of the moving parts. It's that level of collaboration that our clients have come to count on.”


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