Big news last week as Rick Peterson announced he will be handing over the reins of the grassroots organization “Suits and Boots” to Rick Grafton, CEO of Grafton Asset Management. Peterson originally founded Suits and Boots to provide a strong voice for Western Canada and bring together white-collar investment & energy executives with blue-collar workers and with those appreciative of the Canadian energy sector. Regarding his successes with Suits and Boots, Peterson is deservedly proud.
“It delivers the power of uniting individual people and giving them a voice. It shows what a true grassroots organization can accomplish with a lot of work. If there is a cause or any issue that people can really identify with locally, the ability to affect change is a powerful tool.”.
Suits and Boots started in April 2018 when Kinder Morgan pulled out of the Trans Mountain pipeline in 2018. At the time, the idea that a pipeline giant like Kinder Morgan would abandon a substantial asset like the Trans Mountain pipeline shocked the industry. Kinder Morgan stated concerns over BC regulatory that not only was threatening to delay construction of the Trans Mountain Expansion Project indefinitely but also would impair the company’s ability to operate. They ultimately sold their remaining Canadian assets in 2019.
Suits and Boots took the initiative to “push back” for the Energy industry as anti-TMEP protestors were consistently getting wide media coverage with little industry perspective to balance it. The emergence of Bill C-69- the Impact Assessment Act during incredibly challenging times for the energy industry and the Western Canadian economy was a call to action for Peterson.
“Everybody knew somebody who’d been affected by jobs disappearing and C-69 became a focus of their frustration. When we mounted what we thought would be a little phone-in campaign to Senators, it turned out to be probably the biggest grassroots direct lobbying of Parliament Hill that Canada has ever seen. Many senators from both sides of the aisle reported getting hundreds of phone calls a day. It was a huge honor that our group (Suits and Boots) was invited to testify in front of the Senate.”
Ultimately Bill C-69 wasn’t killed but there was a sense that Suits and Boots contributed to get Senators to make amendments to C-69. Suits was also able to do a bit of work in the 2019 federal election and has expanded its scope of interest to develop a cross-Canada dialogue about the resource sector. They’ve also gotten behind the idea of Green bonds, a type of fixed-income instrument that is specifically earmarked to raise money for climate and environmental projects and encourage sustainability developed by Cam Bailey, an energy capital markets advisor. Peterson characterizes the work of Suits and Boots as “the first period of what is a real long-term viable solution”.
Turning to Rick’s work with Peterson Capital, his focus has been on the micro-cap, small and mid-cap sectors, raising funds and increasing capital market support. In his view, the challenges for oil and gas companies for the rest of 2020 and beyond are many.
“It’s going to be tough and right now I think there is a big bull market in natural gas starting. I think that a lot of companies have disappeared and are not going to be back. But if I had to look at areas that I think are strong, I think the Montney is one. A lot of the impediments to natural gas are now gone. People who examine the market and make capital decisions are telling me it’s a great time to go long on natural gas.”
Peterson’s thoughts on the current credit crunch and economic challenges faced by Canadian companies are tempered but hopeful.
“I think the lesson coming out of the pandemic is the importance of savings and cash. We had a long period where we lived on cheap and easily accessible credit. High debt on a corporate balance sheet is death right now. Companies that have flexible debt, no debt, or the ability to repay debt I think are good. The dividend payments are going to be going down a little. People will be hoarding cash and reinvesting back into the company. Looking at the large markets right now – the Dow, the TSX the S&P are hitting all-time highs but that’s due to a small number of tech stocks. I think the day will come where we will see a revaluation of those. We are now getting asset revaluations globally- gold and commodities have had a good run and some of the base metals & iron ore. We are coming back into a cycle where cash and commodities are going to be of interest. For Canada, that could turn out to be a good thing. “
For so many in the Energy industry, it is impossible to turn attention away from questions around global demand recovery. Indications are that we are still seeing the first wave of the pandemic. COVID -19 cases are still building in some areas and there are signs of a second wave. There are concerns that we may see demand for oil flattening again. Peterson offers his take on the word on the street and in industry.
“I’m not an economist and I’m not a global forecaster but what I hear from CEOs of public companies that are trying to do long term planning right now is that we are not even through this first wave of this pandemic. I just see companies being so very careful with their planning. Canadians have to be very careful from a political viewpoint. We absolutely have to focus on attracting investment capital and jobs. This comes back to strategies I have been talking about like a zero corporate income tax federally. That is what the federal government essentially did when they waived the income tax payments. They have held back on interest payments on debt and they held back the use of capital that companies can better put elsewhere. The $43B dollar amount of corporate income tax that the Canadian government collected in the last fiscal year is nothing in a $340B stimulus package. The whole conversation around tax incentives and bringing money in the door is so important right now because the same old approaches won’t work. We have to attract jobs.”
Peterson emphasizes that in Alberta, not only do we still have to support our energy industry but also that our energy industry has to pivot towards nuclear, hydrogen and carbon capture. He is a big proponent of natural gas as a great feedstock for hydrogen and says hydrogen is the way of the future. He points out that Alberta in Canada will look significantly different in the next decade than it has in the last decade and that it’s up to political leadership to make sure we are ahead of the curve and not chasing it. Peterson has been able to assemble a good deal of reports and information that are useful to Industry via Suits and Boots. On their OP-ED webpage, one article–“The Right Fight”-addresses about how protest groups have quietly defunded the energy industry and diverted $14.1 Trillion in investment away from fossil fuels. Author Cam Bailey commented that there was a role played by unreliable ESG reporting and insufficient data quality and comparability which are huge obstacles for an investor looking to create ESG viable investment strategies. The article mentions that currently, there is a large gap in the confidence in data quality between issuers and investors according to a study completed by PWC that indicated that while issuers had 100% confidence in the quality of their disclosed ESG data, investors had a 29% confidence level in the same data. A separate study by EY indicated that only 7% of investors were satisfied by the disclosure level of ESG data. Peterson has his insights into the misapplications of ESG information.
“ ESG screens are poorly designed and everybody seems to follow them in blind faith. In the investment business, people take them to be the holy grail. An ESG screen has to look at each individual emission and each individual standard. You have lobbyists changing the ESG screens with no input from the industries themselves. The Green Bond is Cam Bailey’s solution and he is raising this critical issue at the right time“
Rick Peterson has a new chapter and a new website of initiatives. In his Blog- “The Bottom Line” the most recent post – “Monty Python and the Royal Bank of Canada” has some jaw-dropping reporting on the millions of dollars of CEWS COVID relief money that is going to major, already profitable companies.
Excerpt from the blog:
- Rogers Communications had a revenue decline of 17% in the quarter ending June 2020 as compared to 2019. But it still had net income (profit) of $279 million and paid most of that ($252 million) in dividends. Despite that, under the new rules, Rogers will qualify for a nice government subsidy cheque of $25 million for the month of July alone.
- Royal Bank of Canada, one of Canada’s largest corporations and by far our biggest bank. RBC had a quarterly revenue decline of 10 per cent to the end of April 2020. If that decline persists into July, RBC will receive $40 million from the government even though it made $1.5 billion and paid it all out in dividends.
Peterson does not hold back in his assessment of the shortcomings of the CEWS program.
“RBC and Rogers both run businesses in protected industries. They are not competing against the big American, Asian or European businesses. They are making exorbitant amounts of money and they are getting government money in addition -massive amounts $40M or $25M going out the door. We really have to be careful about shelling it out too fast. Why would the government change from 30% decline in revenue qualifier to a zero % decline in revenue? The big gap that we are seeing is independent small business owners who pay themselves in dividends are being overlooked. They are ineligible in every single program so far.”
So, what’s ahead now for his next chapter? Rick Peterson has had ambitions to take his pro-energy narrative to Ottawa for a while.
“In my next chapter, I would really like to have a voice at the table in a Conservative government. Edmonton Strathcona is an amazing riding. It fits very closely with my values. I have a very progressive social approach to conservative issues while being a strong fiscal conservative. I’m fully bilingual having spent time in France and really appreciate a riding with the heaviest concentration of francophones in Edmonton. A bilingual voice from Edmonton combined with a voice for the Energy sector is going to be of great interest in Ottawa. As an MP, I would love to be able to raise issues for our government and try to get as many things done that can advance those interests. It is a real litmus test for Conservatives that if they can win in Strathcona, they can win other urban ridings in Canada. “
Perhaps Rick Peterson will be able to add an energy informed voice to Parliament in Ottawa soon.
Maureen McCall is an energy professional who writes on issues affecting the energy industry.