ATB Capital Markets Spring Energy Sector Survey Reveals Steady Confidence in Canadian Energy Sector Amid Rising Uncertainties
- E&P companies remain focused on production growth, with 79% expecting to grow production over the next 12 months, averaging 6% growth
- 75% of energy services companies expect activity growth in 2025, averaging 1%-2%
- 85% of respondents expect tariffs to negatively impact E&P cash flows by 10% or less, with Canadian retaliatory tariffs seen as a more significant threat to activity levels than U.S. tariffs
- Federal energy and environmental policy is identified as the top risk by 54% of respondents, while tariffs were ranked as a top risk for only 10% of respondents
- LNG exports are increasingly viewed as significant, with 54% of energy services companies considering them as a key factor driving 2025 activity, up from 33% in fall 2024
- 90% believe North American E&Ps will follow low-growth, high shareholder-return strategies over the next 3-5 years, with 33% of buyside respondents planning to increase energy exposure
CALGARY, AB, April 10, 2025 /CNW/ - ATB Capital Markets' Spring 2025 Energy Sector Survey (the "Energy Survey" or "Survey") reveals a resilient outlook for the Canadian energy sector, with expectations of low-to-mid single-digit growth in 2025 despite increasing market uncertainties.
"Our Spring 2025 Survey shows that Canada's energy sector remains remarkably resilient despite growing global uncertainties. ATB Capital Markets is committed to helping clients navigate this next phase, where steady growth meets rising complexity, with critical insights and tailored solutions to help them succeed in this evolving landscape," says Darren Eurich, CEO of ATB Capital Markets.
Waqar Syed, Managing Director, Energy Technology & Services and Head of Institutional Equity Research at ATB Capital Markets added, "What stands out in this survey is the measured optimism from producers and while capital spending and production are showing resiliency in 2025, concerns about trade, inflation, and policy direction are mounting, particularly as we look toward 2026."
Led by ATB Capital Markets' analyst Tim Monachello and conducted from March 13 to March 27, 2025, the semi-annual survey gathered insights from executives representing 26 energy services companies, 34 exploration and production (E&P) companies, and 40 institutional investors.
Among the survey findings:
Moderate Growth Expected in 2025: The survey reveals a stable outlook for Canadian energy companies despite increasing market uncertainties. With an assumed WTI price range of US$65 to US$75 per barrel, Canadian energy producers are planning for mid-single-digit growth in exploration and development (E&D) capital spending and production over the next year. This trajectory was expected to remain resilient despite potential moderate cash flow impacts from tariffs. 75% of energy services companies anticipate activity growth of less than 5% year-over-year, with an average growth rate of 1%-2%. Furthermore, 79% of Canadian E&P companies expect to grow production over the next year, with a production-weighted average growth expectation of 6%, while maintaining capital spending plans. Gas-weighted producers are forecasting higher E&D capital expenditure growth in 2025 compared to their oil-weighted counterparts.
Tariffs Viewed as a Moderate Headwind: Tariffs are expected to have a moderate impact on exploration and production (E&P) cash flows, with approximately 85% of respondents anticipating a negative impact of 10% or less. On a production-weighted basis, an average tariff-related capital expenditure reduction of roughly 2% is estimated for 2025, with gas-weighted producers suggesting a 1% reduction and oil-weighted producers a 4% reduction. Additionally, Canadian retaliatory tariffs on US imports are perceived as a more substantial threat to Canadian activity levels than US tariffs, with 42% of respondents viewing them as significantly negative, compared to only 8% for US tariffs.
Investor Sentiment Improved: Buyside sentiment has improved since the fall of 2024, with increased bullishness toward energy investing and a view that energy equities are undervalued. An overwhelming 90% of respondents believe North American E&Ps will focus on low-growth, high shareholder-return strategies, though public E&Ps are increasingly prioritizing growth capital expenditures while energy services companies are focusing on debt repayment and share repurchases. The percentage of public E&Ps actively pursuing mergers and acquisitions dropped to 10% from 28%, but those open to opportunities rose to 86% from 66% compared to the previous survey.
Federal Policies Highlighted as Key Swing-Factor for Long-Term Outlook: For the sixth consecutive survey, federal energy and environmental policies have been identified as the top risk for the Canadian energy sector, with 54% of respondents ranking them as their primary concern. Additionally, changes in these policies are viewed as the second most significant opportunity, with 47% of respondents highlighting them as the top opportunity. In comparison, tariffs are considered the top risk by only 10% of respondents and are ranked among the top three risks by just 23%.
LNG Exports to Drive 2025 Activity amid Skepticism about Oil Pipeline Revivals: The survey reveals skepticism about the revival of major oil pipeline projects, with Northern Gateway seen as more likely than Keystone XL or Energy East. However, there is strong consensus that both the LNG Canada phase two and Ksi Lisims LNG projects will proceed, with nearly all respondents (99%) expecting a positive final investment decision for LNG Canada phase two, and 97% anticipate the same for the Ksi Lisims project. Additionally, energy services respondents increasingly believe LNG exports will significantly impact 2025 and 2026 activity levels. In terms of crude pipeline capacity, a majority (58%) of respondents believe the industry will face crude pipeline capacity constraints before the end of 2028.
Energy Transition Losing Relevance in Canadian Energy Outlook: Energy transition and hydrocarbon demand are viewed as the least prominent risks for the Canadian energy sector over the next three to five years, with a significant portion of respondents ranking them last. None of the E&P respondents plan to increase ESG disclosure, with only 3% of E&P respondents intending to invest in environmental technologies based on an ESG mandate. In alignment with buyside preferences for energy sector capital deployment, diversification and energy transition rank as the lowest capital priorities for all public and private E&Ps and energy services groups.
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