Canaccord Genuity cut key staff in its Canadian energy franchise this week as part of the investment dealer’s plan to find $20-million in savings amid a worsening outlook for Alberta’s already-struggling oil patch.
Neil Duffy, who was managing director of energy banking in Calgary, was among those who have left the shop, according to a source familiar with the matter. Mr. Duffy had been with Canaccord since early 2016. Simon Akit, Toronto-based managing director of energy sales, was also among those who departed, sources said.
Meanwhile, Canaccord has suspended research coverage of 18 oil and gas companies, including such big names as Canadian Natural Resources Ltd., Husky Energy Inc. and Cenovus Energy Inc. The coverage had been led by Dennis Fong, who has resigned to become an energy analyst at Canadian Imperial Bank of Commerce. It was not immediately known if a search for a replacement was in the works.
Mr. Duffy’s departure follows that of Trevor Anderson, who was co-director of energy banking in the Calgary office, and left the company last fall.
The recent staff reductions are part of a broader effort to cut costs and come alongside several other layoffs at the firm this week, mostly of junior analysts covering sectors such as industrials and small-cap cannabis. Canaccord declined to comment on the layoffs and departures.
The investment bank was already targeting $20-million in cost savings before COVID-19 hit markets in March. On an earnings call with analysts last week, chief executive Dan Daviau said that the company would speed up these cost-cutting measures to deal with the economic uncertainty caused by the pandemic.
“I wish we’d kind of been through COVID and we’re kind of sitting here and we knew where new business levels should be and then we can manage our costs and budget appropriately,” Mr. Daviau said on the call.
“But we don’t know, that’s the dead honest truth. So, what we’re doing right now is saying, ‘Let’s cut all those costs right now.’ We don’t have to kind of ease into it through the year. Let’s just kind of get it all done," Mr. Daviau said.
The COVID-19 crisis has hit independent investment houses dealing in energy hard, but many had struggled for at least half a decade before. The Canadian energy industry, once a wellspring of fees from equity issues, sales and trading, and mergers and acquisition advisory, lost its lustre with major investors after years of delay in adding pipeline capacity to export markets. That severely restricted the companies’ access to capital.
After a punishing oil price slump began in 2014, numerous shops downsized, were taken over by larger rivals or shut their doors altogether as business slowed and became dominated by bank-owned dealers.
This year, there have been few stock issues or takeover deals, with a handful of notable exceptions such as ARC Financial-backed Longshore Resources Ltd.'s consolidation of three small producers, Rifle Shot Oil Corp., Primavera Resources Corp. and Steelhead Petroleum Ltd., announced this week. More such consolidation in the oil patch is expected in the coming months as government support programs expire and weaker companies seek rescue.
However, the pandemic put a lid on what little activity there was as oil prices crashed and producers concentrated on dealing with lenders and deciding which portions of their production they would have to shut down.
Canaccord’s Canadian capital markets division managed to replace much of its lost energy revenue with fees from cannabis underwriting in the leadup to marijuana legalization in 2018. Cannabis financing, however, has slowed dramatically over the past year and Canaccord’s Canadian investment banking revenue has dropped sharply.
In the three months ended March 31, the company’s Canadian capital markets division generated $39.1-million in revenue, down 28 per cent compared with the same period last year. That compares with $105.6-million in U.S. capital markets revenue in the quarter, which was up 43.8 per cent year over year.
The staff reductions come in the same week as Canaccord announced it hired veteran deal maker and GMP Capital cofounder Gene McBurney to expand operations in Latin America and the Caribbean.
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