The Vancouver Stock Exchange: Its Role In Financing Oil And Gas Ventures
Authors: Courtney Joyce 
Published: March 2010

DEVELOPMENT of Canada's resource industries has traditionally been fostered by the raising of risk capital. The growth of junior companies has been nurtured by the entrepreneurial speculation of risk takers. Developed out of the growing "need for a market place to facilitate trade and commerce in the pioneer Canadian West the Vancouver Stock Exchange was incorporated by a Special Act of the British Columbia Legislature on April 25, 1907. Over the last 76 years, the V.S.E. has played an essential role in the Financing of resources and industry. Traditionally, the Exchange has specialized in emerging companies with both Canadian and foreign assets.

While mining has, over the long run, been the backbone of the Vancouver Stock Exchange, oil and gas concerns have been part of the Vancouver Board since the beginning. The Dingman (Turner Valley) shallow wet gas discovery in 1914 was the first in a chain of events involving the V.S.E. The next boom, the 1924 discovery of Mississippian ("Mother Lode") wet gas, spawned many new companies. Wainwright in 1926 and Lloydminster in 1935 contributed to speculation and yet another group of fledgling firms interested in heavy oil The year 1936 saw the discovery of down-flank light-gravity crude at Turner Valley, with the revival and reorganization of some of the original firms.

Since Leduc in 1947, there has been a succession of new listings for Canadian companies. But in 1973, OPEC changed traditional financial activity forever, with increases in crude prices. This, in turn, made plays, which had hitherto been "uneconomic", very attractive Lo entrepreneurs. Over the next seven years, escalating prices, seemingly unlimited markets and innovative tax shelters (drilling funds) combined to create record levels of financing (see above). Unfortunately, this heady combination would later spell doom for many of the companies who had overcommitted themselves.

Statistics for 1981 show that approximately two-thirds of the approved V.S.E. financings that year were for petroleum exploration and development, mainly in the U.S. But by late 1981, a combination of climbing interest rates, reduced energy demand in the U.S., flattening oil and gas prices and disastrous repercussions from the NEP resulted in a serious slow-down of all activity on the Vancouver Stock Exchange. Worst of all, this domino effect had a depressing effect on over-extended companies With their unfulfilled expectations of cash flows and high reserves.

After bottoming out in mid-1982, record trading levels were being reestablished by the end of that year. This was due mainly to renewed interest in gold and silver (e.g. Hemlo discovery in northern Ontario).

The first eight months of 1983 saw a continuation of this record activity in Vancouver with the dramatic return of the venture capital market. Coincident with the unprecedented trading volumes are sustained high levels of listings and financings activity (including new listing applications and Statements of Material Facts). Unlike recent years, however, the majority of 1983 funds (estimates range between two-thirds and three-quarters) are being spent on exploration for precious mineral deposits rather than oil and gas.