In the oil patch, a gusher of stock salesProducers raise billions to pay debt and fund growth, but shareholders often hit with losses

6-/.'e-k,. onz z7n7 3/ =fffi.flfiR 2?/6Finadcing frenzy: Oil companies tap the market with big share issuesS&P/TSX ENERGY INDEXDaily closes

Feb. 17,2015:Cenovus Energy lnc.

$1.50-billionMarch 4,2015rEncana Corp. Sept 8;101G

3,000 -' - $1.44billion Crescent Point Energy C-orp.

$65!*nillion

March 11,2015:Baylex Energy Corp.

$632.5-million

2,000 -"*'-..'.'-.,

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-24.676 -2O.lyo ',6.77o

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ff ig players in the CairadianfD energy sector have pumpedout a slew ofstock sales to paydown debt and fund new produc-tion projects. While oil executivespitch these deals as paving theway for growth, investors have yetto be rewarded for their faith.

Canada's largest oil producershave done 13 public equity salesof $3oo-million or more in thepast r8 months, and on averagethese stocks have droppedapproximately rz per cent fromwhen theywere announced.Investors keep stepping up to buythe new issues in expectation ofarebound in commodity pricesafter crude oil fell from $roo(U.S.) early in 2015 to about,$44.50today.

The oil patch has dominated themarket for'new stock issues.Bloomberg data showthat energycompanies, including utilities,accounted for halfofall Canadianstock sales by value so far thisyear, with energy producers rais-ing at least $rz-billion (Canadian)in large equity offerings since thestart ofzor5.

Calgary-based Encana Corp. isthe latest oil company to tapinvestors, raising $r-billion (U.S.)late Monday, with half the cashearmarked for paying down thecompany's gs.z-billion debt andthe remainder pledged to expandproduction.Oil patch, Page 18

Encana's plan all about Texas, Page 4

May 26,2015:Crescent Poinl Energy Corp.

$660.1-million

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Suncor,Enew Inc.

$2,8&billion , , ,

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$:t,rl-a*1.91', ,

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CenovusThe oil sands giant was the firstcompany to raise big money inthe oil downturn, and investorswere caught off guard

EncanaSaddled with debt, Encanafollowed Cenovus's lead andsuccessfully raised equity a fewweeks later

SuncorAfter suwiving the zor5storm, Suncor took advantageof better oil prices to raisefresh funds in Iune

fROTPAGET

Oil patch: 'The industry tends to destroy shareholder value'

\\ This includes a significant// investment in the Permianbasin in Texas, where Encanadropped more than $6-billion onan acquisition in zor4, just aheadof a slump in oil prices.

This is the second large equityoffering from Encana in as manyyears, and buyers of last year's of-fering are underwater on theinvestment. The company soldshares Monday for $g.gs each; inMarch, zor5, the company raised$r.+a-billion (Canadian) by sell-ing shares at $14.6o each. Encanashares closed TUesday down 7per cent at $9.rr (U.S.) or $rz.o+(Canadian).

While selling shares allowedEncana to expand its oil fieldswithout borrowing more money, "

analysts said the equity offeringcomes at a cost to shareholders.Robert Mark, director of researchat wealth manager MacDougall

"It's great for the company - youcan go out and get this capital,but it's lousy for the sharehold-ers. You're diluting them just todo your capital program."

The Encana share sale on Mon-day was also a sign that it is diffi-cult for energy companies toraise money by selling assets dur-ing a downturn, an option manyenergy company CEOs raisgdearlier this year when they talkedabout raising cash to fundgrowth projects. Michael Dunn,an analyst at First Energy Capital,said Thesday: "Going forward, wedon't really see any non-coreasset sales that would move theneedle in terms of proceeds."

Investors who bought Encanaat its recent lows, rather thanthrough its stock sales, havedone well, as Mr. Dunn said:"With the share price up 228 percent relative to its low in late Feb-

opportune time to issue equity."Oil and gas c0mpanies tend to

be serial issuers of equity, tap-ping markets frequently to fundgrowth, and poor performancefrom recent underwritings hasfund managers openly grum-bling.

Some investors point to Cres-cent Point Energy Corp., whichsold $6So-million (Canadian) ofstock earlier this month and hassubsequently seen its share pricefall by rz per cent. Crescent Pointhad also previously cut its divi-dend, and completed a previousequity offering last year. RyanBushell, a vice-president andportfolio manager at Leon Frazer& Associates, said the mostrecent Crescent Point share salewas "ill-timed" and "frustratingfor the market."

Disappointing performancefrom oil and gas stocks has some

exposure to those companiesand their management teams,and simply buy the underlyingcommodity to play a potentialrebound in the Canadian energysector.

"As an investor, I'd rather justbuy oil," said Martin Pelletier, aCalgary-based portfolio managerat TriVest Wealth Counsel, whohas sold off much of his energyexposure. "If I'm going to comeback in lto the market],I'mgoing to do it on oil rather than aproducer."

The fact that shareholders keepstepping up for oil and gas stockofferings has some asset manag-ers shaking their heads. '

"If energy investors cared aboutreturns on capital, they wouldn'tinvest in energy," said Darcy Mor-ris, co-founder of Ewing Morris &Co. Investment Partners. "Inaggregate, the industry tends to