Resource World Magazine

a p r i l / m a y 2 0 1 5 www.resourceworld.com 57 the oil patch report B r u c e L a n t z T he oil and gas industry is struggling through a downturn, mining is in a state of flux, and forestry has a bright future – maybe. Oil prices are below $50, natural gas is below $3, coal is just over $41 and lumber is at $283, well below the $337 it fetched in January. Resource industry experts have seen it before and they know business must go on, sooner or later. Since that takes money, the resource industry market is fertile ground for lenders who aren't scared off by the occasional lack of stability in the resource sector. EnTEr dYnamic capiTal. Founded in 2009, by Cory Pfannmuller, on the heels of the financial crisis, Dynamic Capital funding has grown to a six-partner firm that's now a well-established indepen- dent equipment financing and leasing firm in Western Canada. It has a strong track record of industry experience and a proven set of creative and flexible financing solu- tions for the transportation, construction, oil and gas, mining and forestry sectors. Its growth has been strong, with $200 million in business transactions in 2014 based on customer growth that shot to 500 last year from 350 in 2013. 2014 was a record year for Dynamic Capital and the future looks just as bright. "We started at a time when very few lenders were kicking money out the door," said partner and treasurer Dustin White, "and our approach was appreciated. We're playing the long game with a value propo- sition based on relationships. We know that with industry and commodities, what goes down will come up, and the softness we're seeing now creates more opportuni- ties than when markets are strong." There's no doubt that the resource industries, whatever their shape and size, are in a down cycle these days. Oil and gas, which ranks at the top of Dynamic's playl- ist (followed, in order, by construction, forestry and trucking) faces challenges with regard to pricing and distribution, plus the inevitable attacks by a plethora of environmental groups. That has resulted in a tightening of money markets. "When everything's good there's lots of competition, lots of fast and easy money," said White. "But in the past couple of months we've seen lenders tighten up. And when covenant lenders cut down it opens doors for us." Dynamic, with offices in Grande Prairie, Edmonton, Kelowna and Prince George – while actively looking to expand into Southern Alberta and Saskatchewan – believes it has the experience to struc- ture and close a wide variety of financing solutions including capital and operat- ing leases, term loans, debt repackaging/ restructuring, share purchases and work- ing capital raises. They look at cash and cash flow, along with shedding assets but at lower prices. Current deals are focusing on debt restructuring, debt refinancing, and both proactive and reactive measures. "We take managed risk and through that gain loyalty," said White. The busi- ness has grown "substantially", with 80-90% of their business coming from repeat customers. "We give people another option," he added. "We have 40 years plus of industry experience and we think a lit- tle differently. We're deal junkies." A recent report by Ernst & Young, Funding Challenges in the Oil & Gas Sector, suggested that while most companies have in place a corporate revolving credit facility (often syndicated across a number of banks) that gives them financial flexibility for their day-to-day operations, "in the current neg- ative stock market sentiment towards the industry, companies may benefit from yet more diverse sources of funding". The report went on to say "…caution around risk management and the pres- sure to deliver an appropriate return has led banks to tighten lending standards, particularly for small-to-medium-sized borrowers. In response, companies have started to access alternative sources of finance, such as the bond market, project partners, private equity and export credit agencies. There is now both more compe- tition for funding and also a wider range of debt and equity providers serving the market." Given the fluctuations besetting the resource sector today, optimism may seem to be in short supply, especially for juniors and service companies. Noting that Western Canada is so tied into resources that the "cheerleader syndrome" often comes into play, White said the current weakness is a short-term characteristic. "It's putting stress especially on energy clients, who see their capital exposure soft- ening, but history shows us that things will rebound," he explained. "So they can be using that softness to gain market share." Dynamic Capital, White notes, is a "young company with young, bright minds that aren't hampered by a ton of bureaucracy, who aren't tied to the bum- pers of the big companies, and who can make quick decisions and react quickly" to changing circumstances. "And we have a lot of fun doing it." n Dustin White, partner/treasurer, Dynamic Capital Dynamic Capital funding companies despite downturn

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