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Bank of Canada sees the commodity sector shrinking as part of the overall economy

Models run by Bank of Canada predict that it could take two years for the country to recovery from the dramatic downturn in oil prices. Bank of Canada Deputy Governor Lynn Patterson estimated the commodity sector may only account for 40% of exports by 2020, down from 50% in 2014, reports Edmonton Journal.

“It’s difficult for us to be precise about the timing and the underlying shifts of the economy,” said Patterson. “But our best guess is that this full adjustment will take longer than two years, which is our normal forecast horizon.”

“Lower commodity prices will lower incomes and are likely to lower the economy’s potential output,” Patterson said. “The extent to which potential GPD is permanently lower will depend on how much capacity is rebuilt in the non-commodity sector.”

Patterson said a drop in investment in the oil and gas sector could lead to unmet demand in the future, pushing prices higher in the medium term. She added that the bank does not see oil prices returning to peaks seen in 2014.

Select Canadian companies selling record levels of equity

Canada, TransCanada pipeline acquisition

Colombia Pipeline Acquisition

While Bank of Canada’s models show low levels of investor appetite in the Canadian oil and gas sector, those same companies reported the best quarter for deal making in 20 years, reports Financial Post. As many as 16 oil and gas equity financing deals raised more than $8 billion in the first three months of the year – the sector’s best ever quarterly record since at least 1993. The equity raised in the first quarter is nearly as much as the $8.6 billion raised in total in 2015.

The impressive number comes from just a select few companies, however. Midstream companies like TransCanada Corp. (ticker: TRP), Enbridge Inc. (ticker: ENB) and Pembina Pipeline Corp. (ticker: PBA), accounted for 85% of the equity raised.

“People talk about a record quarter in the energy space, but [except] for those three deals, it would have been a very tepid quarter for energy deals,” said Ross Bently, a partner at Blake, Cassels & Greydon LLP.

TransCanada recently announced the acquisition of Columbia Pipeline Group for total consideration of US$13 billion, expanding its U.S. footprint by 15,000 miles. In order to finance the deal, TRP raised $4.4 billion in equity in a deal which closed April 1.

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