A pair of pumpjacks pump oil from an old well on a farmer's frozen field in a Pembina oil field near Pigeon Lake, Alberta, Canada on Friday, Feb. 17, 2012.Norm Betts/Bloomberg
Export Development Canada is designating $750-million to provide financial services, including loans and guarantees, to small and medium-sized Canadian energy firms trying to weather the oil price drop.
As companies and workers in Alberta and other crude-producing regions struggle to stay afloat, the federal crown corporation said it wants to help stressed firms that have a survival plan make it through an increasingly difficult economic period.
EDC provides financing, guarantees, bonding instruments, and insurance, usually to Canadian companies with a clear link to international business opportunities. However, for this specific program, companies need only to be "exported-minded," or part of the oil-supply chain.
This includes drillers and oil-field service companies – sectors that have experienced some of the worst profit and job losses in the downturn.
Most Canadian-produced oil, noted EDC spokesman Phil Taylor, is exported.
"The difference here is we realize that if you're a smaller company in the oil and gas sector, particularly on the supply and services side, your balance sheet is probably stressed right now," Mr. Taylor said.
"We're going to have to be a little more creative and a little more flexible with all of our offerings to be able to help these companies in a meaningful way."
EDC does not receive funding from the federal government but is self-financed through the fees and interest charged on its loans and insurance policies. Mr. Taylor said the crown corporation's board and chief executive made this decision to proceed with this program and "this is not a political thing."
However, EDC is stepping in at a time when commercial lenders are expressing concern about their exposure to Canada's oil and gas sector.
This is not the first time EDC has made a decision to focus some of its resources on a troubled sector of the Canadian economy. In past years, it has been the auto and the lumber industry.
For the oil and gas program announced Thursday, emphasis will be placed on companies making investments in four key areas: infrastructure that will increase market access for resources, new technology that will help diversify products to different industries, productivity and environmental sustainability.
Kelly Cryderman