Calgary is the most "over-banked" city in North America, claims George Gosbee, chairman, president and chief executive of Calgary-based Tristone Capital. But he isn't complaining. Gosbee has built Tristone from a standing start less than four years ago into the second-most active energy-investment bank in town. It closed 90 transactions last year, ranked second in property dispositions and was in the top three for equity underwriting. "We have so much trapped capital here that can't leave Canada, due to pension-fund laws. So if a portfolio manager has $3 billion and 80% of that has to remain in Canada, that's a lot of easy capital [for energy companies to access]," he says. Canadian start-ups can easily access private capital. "All it takes is 100 guys with C$100,000 each and you're in business." They can also go public easily, even when they produce only 100 barrels of oil equivalent (BOE) per day. At this year's Canadian Association of Petroleum Producers (CAPP) investment symposium, 51 junior companies made presentations. Many were formed since 2000. Gosbee charges that inefficiencies result. "We produce 3% of the world's oil and gas but use 8% of our capital to do it. Calgary is all about arbitrage-the entire Western Canadian Sedimentary Basin is just trading assets back and forth. I think 8% of all Canadian production-on a BOE basis-trades every year, whereas in the U.S., 4% is traded. "This is a frothy market because the trusts have such a low cost of capital. That leads to transactional benchmarks that are too high. I don't think the juniors can grow fast enough to accommodate the trusts' need to buy reserves." Tristone has 60 employees in Calgary who do equity research, sales and trading, underwriting and M&A advisory. Gosbee plans to hire some equity analysts in the firm's new Houston office, to complement the M&A advisory team leaders he already has hired, Miles Redfield and Doug Perley.