Demand destruction for oil will likely kick in this fall: Jason Schenker
The biggest party in Canada’s oil patch is staging a comeback this year, fueled by soaring energy prices and a population eager to mark the end of two years of pandemic lockdowns.
The 110 year-old Calgary Stampede is pulling out every nostalgic stop, from chuck wagons, to rodeos, to tapping movie cowboy Kevin Costner as parade marshal. Long a barometer of the Canadian oil sector’s health, this year’s festivities take place as oil trades above US$100 a barrel, helping the province of Alberta post its first budget surplus in seven years.
Whether it also marks a last hurrah for the industry is an open question. Longer-term, Canada’s oil sector is facing an existential challenge as the world shifts away from fossil fuels and investors shun the spending excesses of the past.
“I am expecting this stampede will be good because people are tired of being cooped up,” said Vern Kimball, who served as chief executive officer of the stampede during the most recent oil run-up from 2006 to 2015. But oil companies understand that high prices “come and they go,” sometimes in a matter of months, he said. “People in the oil patch are talking about paying down debt and returning money to shareholders.”
That’s a far cry from past decades, when global energy companies invested billions in the oil sands and investment banks vied to host the biggest and best stampede events. Invitation-only parties like FirstRowdy, hosted by FirstEnergy Capital Corp. -- now Stifel FirstEnergy -- became legendary for attracting thousands of boisterous attendees, rivaled only by Firewater Friday, thrown by Peters & Co. Ltd.
Entry donations went to charities, helping the community as well as generating business at a time of massive deal flow, Brett Wilson, a FirstEnergy founder, said by phone. “We were raising hundreds of thousands of dollars off what was usually just a drunk-fest.”
Today things look a bit different. Stung by years of depressed oil prices, Calgary-based companies are being disciplined even as commodity prices roar higher. FirstRowdy hasn’t returned since it was canceled in 2016 although Peters & Co.’s event will be back this year.
Following a much-slimmed-down version of the stampede last year, and a complete cancellation of the event in 2020, organizers are expecting more than a million visitors in 2022, in line with pre-pandemic stampedes.
But hotel bookings and room rates indicate that this year’s event will be the biggest in six or seven years, said Sol Zia, executive director at the Calgary Hotel Association. Many domestic visitors are expected, especially from Quebec, as well as more US travelers although impacts from the pandemic will mean fewer overseas visitors, he said.
“We are not seeing anything like 20 or 30 years ago,” he said. “Corporate government and what is considered acceptable has changed.”
Stanley Park Investments Ltd., joint venture partners in six Holiday Inn hotels in Calgary, expects to be fully booked by the time the stampede starts. However, higher labor, energy and insurance costs will likely mean the event will be less profitable than in the past, said Nellie Dhanji, vice president of operations and legal counsel.
Blazing Saddle Western Display, which decorates parties with fire retardant straw bales and other western-themed decor, hired fewer staff than in the past after seeing business evaporate during the pandemic, owner Sheena Tetley said by phone. As a consequence, they were unable to meet demand and now have a waiting list for the first time since the business opened in 2008. “We are turning down people left, right and center,” she said.
Companies including oil sands producer Suncor Energy Inc. and pipeline giant TC Energy Corp. are sponsoring fairground days as well as parties and pancake breakfasts for employees. Cenovus Energy Inc. signed a new four-year sponsorship agreement that includes sponsoring the “Saddle Bronc,” in which a rider tries to stay on a bucking horse at the daily rodeo, and is holding its first in-person event for staff in two years.
The average auction bid to put a corporate logo on one of the chuck wagons that are raced each night at the fairgrounds was almost $78,000, the ninth highest average in the 42 year history of the auction, according to the World Professional Chuckwagon Association. And the Best Damn Stampede Party will likely see the earliest ticket sellout in more than 30 years, with 3,500 people expected to attend, organizer Robert Laidlaw, of Acumen Capital Partners, said.
“There is a huge buzz going on in the city,” Laidlaw said. “Things are better for the energy sector and people have been pent up for three years now and can finally go out and have some fun.”