Joe Durante joined Sprott
Toscana as CEO in 2003 and is based in Calgary, Alberta. Joe works closely with
Rick Rule, Chairman of Sprott Global Resource Investments Ltd. on opportunities
in the oil and gas sector.
Western Canada is one of the most important
locations for oil and gas production in the world. This region produced around
3.2 million barrels of crude oil per day in 20131, principally from
Alberta. That is around 40% of production in the US during that period.2
Sprott Toscana is a leading lender to oil and gas
projects in Western Canada, providing companies with development capital, most
often in the form of loans. They use this capital to pay for drilling
operations, oil and gas rigs, pipelines, roads, power lines, labor, and
permitting costs.
Other companies, instead of borrowing, choose to
sell off some of their mature projects in order to build or expand new
operations. An affiliate of Sprott Toscana, Toscana Energy Income Corp., buys
those that are attractive and receives the revenue for the rest of the production
life – or can sell them off later at a potential gain.
The Canadian oil and gas sector has been out of
favor with investors for the last several years. Canadian crude oil fetches a
lower price than crude that flows from West Texas, or Brent crude. The lack of
transportation infrastructure to bring oil and gas out of the basin has led to
a back log of oil and gas, which sells at a discount. In fact, the lack of
pipelines is the main reason transporting oil by train has become widespread.
Negative sentiment around Canadian oil and gas
companies has led to a unique opportunity in the past several years, says Joe.
“There are fewer competing participants in this
sector, meaning there is less available capital for these projects. This allows
us to demand higher returns on our loans, be more discerning about which deals
we accept, and to acquire assets relatively cheaply,” said Joe on a recent call
from Calgary, Canada.
Getting into attractive deals can be daunting,
especially for investors who are not ‘in-the-know,’ he adds.
“There’s a saying that ‘good deals never make it
out of Calgary.’ In the oil and gas sector in Alberta, access to deal flow is
usually limited by ‘who you know.’ So having a network of contacts, like the
one I’ve built up over 25 years in the industry, is a huge advantage. It has
given us a competitive edge.”
When deals pass a certain threshold in size – a
loan of over $25 million, for instance – Sprott Toscana may seek other
investors to join alongside it, in order to raise greater amounts of money.
If a loan is ‘syndicated,’ other investors,
including retail investors of Sprott Global Resource Investments Ltd., may also
have the opportunity be able to participate in these deals.
Where are the biggest opportunities today?
“Fewer investors are following the oil and gas
sector in Alberta and British Columbia than in the US,” he explained, “but this
is one the most important regions for oil and gas production in the world and
new technology has drastically increased the amount of opportunity.
“We’re seeing a big move into liquids-rich natural
gas deposits in Northwestern Alberta and Northeastern British Columbia,” said
Joe.
Natural gas ‘liquids’ are by-products of
high-energy-content natural gas. These by-products (known as condensate, butane,
pentane and propane) generate additional revenue for natural gas producers and
substantially improve the operating margins from these wells.
“I think ‘liquids-rich’ oil and gas producers will
be some of the top performers going forward.
“The ‘shale game’ is real, and I believe it’s the
future for oil and gas producers in North America,” he added.
Joseph S. Durante has over 24 years of experience in Canada’s oil and gas industry.
Since 2003, he has been the Chief Executive Officer of Toscana. Prior to
joining Toscana, Mr. Durante was the Managing Director of Norrep Resource
Management Inc., a private consulting corporation. Mr. Durante was also a
co-founder and Chairman of Fairmont Energy Inc., a public junior exploration
and production company acquired by Delphi Energy Inc. Mr. Durante is
currently the Chief Executive Officer of Maple Leaf Energy Income Management
Corp, the general partner of Maple Leaf Energy Income Limited
Partnerships.
1http://www.neb-one.gc.ca/clf-nsi/rnrgynfmtn/sttstc/crdlndptrlmprdct/stmtdprdctn-eng.html
2http://www.eia.gov/dnav/pet/pet_crd_crpdn_adc_mbblpd_a.htm
This information is for information purposes only
and is not intended to be an offer or solicitation for the sale of any
financial product or service or a recommendation or determination by Sprott
Global Resource Investments Ltd. that any investment strategy is suitable for a
specific investor. Investors should seek financial advice regarding the
suitability of any investment strategy based on the objectives of the investor,
financial situation, investment horizon, and their particular needs. This
information is not intended to provide financial, tax, legal, accounting or
other professional advice since such advice always requires consideration of
individual circumstances. The products discussed herein are not insured by the
FDIC or any other governmental agency, are subject to risks, including a
possible loss of the principal amount invested.
Generally, natural resources investments are more
volatile on a daily basis and have higher headline risk than other sectors as
they tend to be more sensitive to economic data, political and regulatory
events as well as underlying commodity prices. Natural resource investments are
influenced by the price of underlying commodities like oil, gas, metals, coal,
etc.; several of which trade on various exchanges and have price fluctuations
based on short-term dynamics partly driven by demand/supply and nowadays also
by investment flows. Natural resource investments tend to react more
sensitively to global events and economic data than other sectors, whether it
is a natural disaster like an earthquake, political upheaval in the Middle East
or release of employment data in the U.S. Low priced securities can be very
risky and may result in the loss of part or all of your investment.
Because of significant volatility, large dealer spreads and very limited
market liquidity, typically you will not be able to sell a low priced
security immediately back to the dealer at the same price it sold the stock to
you. In some cases, the stock may fall quickly in value. Investing in foreign
markets may entail greater risks than those normally associated with domestic
markets, such as political, currency, economic and market risks. You should
carefully consider whether trading in low priced and international securities
is suitable for you in light of your circumstances and financial resources.
Past performance is no guarantee of future returns. Sprott Global, entities
that it controls, family, friends, employees, associates, and others may hold
positions in the securities it recommends to clients, and may sell the same at
any time.
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