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Darcy Morris Beverly Chandler, Opalesque London:

Participants at the Opalesque 2012 Canada Roundtable, sponsored by Kaufman Rossin Fund Services and Eurex heard Darcy Morris, Co-Founder of Ewing Morris Investment Partners, discussing investing in the Canadian energy sector.

Morris said: "If you come to Canada to hunt for investment opportunity the odds are pretty high that you will be looking into the energy space" and went on to share his view on the sector. "When evaluating an energy company, most investors tend to focus on the economics of existing assets, sometimes assigning extra value for undeveloped land. However, many oil and gas wells deplete at 20-30% annually which means existing assets will disappear within five years."

Morris believes that management is therefore tasked with reallocating the capital earned from drilled wells every year. "And they invest a lot of capital! For example, EnCana, which is currently worth $15 billion, reinvests about $5 billion annually. Considering the magnitude of spending that can occur, the future value of an energy company will be heavily influenced by its future investment decisions."

As a result, Morris and his partner John Ewing focus their attention on the capital allocation record of the manage......................

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