Pipelines run at the McKay River Suncor oil sands operations near Fort McMurray, Alta., on Sept. 17, 2014.Todd Korol/Reuters
A COVID-19 vaccine getting close to fruition is the shot in the arm that global economies have been praying for. It took no time on Monday for that to become glaringly obvious.
Apart from being the obvious boon to humanity in the fight against a virus that has sickened tens of millions of people and killed more than 1.25 million, an effective inoculation would spell a recovery from an economic disaster that has laid low numerous industries, especially those connected to travel.
One of the many dark aspects of the coronavirus is the tension it has created between public-health officials looking to stop the spread through tougher restrictions on movement and people everywhere whose livelihoods hang by a thread.
With developer Pfizer Inc. reporting its COVID-19 vaccine is more than 90-per-cent effective based on initial trial results, there’s new hope this awful era could be nearing the beginning of its end. Pfizer and its partner, BioNTech SE of Germany, reported they found no serious safety complications in their vaccine and expect to seek U.S. clearance for emergency use. That could mean widespread distribution in 2021.
Nowhere is optimism reflected more than in energy markets, which zoomed upward on predictions that people will be able to move around en masse at some point in the not-too-distant future. In Canada, hard-hit oil and gas companies surged, propelled by the same excitement.
U.S. benchmark crude oil jumped 8.5 per cent to settle at US$40.29 a barrel, a level that leaves behind last week’s angst about the outcome of the U.S. presidential election but keeps a little uncertainty at play in the form of a Joe Biden administration in Washington.
The oil price is still well below the level that allows brisk growth in global oil production. Also, president-elect Mr. Biden has been clear he aims to speed the transition to more green technologies as he recommits the United States to fighting climate change alongside its international allies. But investors were not deterred from piling into energy shares on expectations that, after months of fear about more cost-cutting, layoffs and insolvency, all is not so bleak.
That’s not to say there aren’t more of those things in the offing with some companies too far afoul of their debt obligations to recover. But investors looked beyond that on Monday.
The S&P/TSX Capped Energy Index surged 16 per cent, with some of the sectors top names leading the rally. Suncor Energy Inc. leapt almost 25 per cent, Canadian Natural Resources Ltd. climbed nearly 23 per cent and Cenovus Energy Inc. jumped 20 per cent. The latter’s gain helped drive up Husky Energy Inc.'s shares by 21.5 per cent, in line with the share-exchange ratio that Cenovus is using to acquire Husky stock in its takeover announced two weeks ago.
The timing of the market rally could not have been better for a small producer called Headwater Exploration Inc., which is led by the executives that ran Raging River Exploration before it was taken over by Baytex Energy Corp. in 2018.
The company announced it had bought a package of oil-producing properties in northern Alberta from Cenovus in a $100-million deal. It will pay for some of the traction in its own shares and Cenovus executives will hold two seats on Headwater’s board.
In recent years, energy companies that have made acquisitions have been punished in the market for prioritizing growth over preservation, but Headwater’s shares rose 26 per cent to a new high. Part of that is owing to the assets it is acquiring in a prospect that is called Clearwater, which has attracted industry buzz. It has been some time since investors became excited about an exploration play.
It’s a long way from the energy sector’s dark days of April, when oil prices briefly fell below zero. And for investors now, it’s more than enough to start laying bets on recovery.
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Jeffrey Jones