Exxon Mobil Corp.’s acquisition of Pioneer Natural Resources in a US$59.5 billion mega-deal is being seen by some as a major vote of confidence in fossil fuels that also bodes well for the Canadian oilpatch.
The U.S. multinational oil giant announced the all-stock deal Wednesday, its largest buyout since acquiring Mobil two decades ago and a move that will create a colossal hydraulic fracturing (fracking) operator in West Texas.
Observers have framed the deal as Exxon doubling down on fossil fuels at a time when the world is seeking to transition to lower-carbon energy sources in order to slow the pace of climate change.
Dan Tsubouchi, Calgary-based principal and chief market strategist with SAF Group, said in an interview that Exxon is clearly confident that global demand for oil will remain strong in at least the immediate future.
“They’re spending US$60 billion today,” Tsubouchi said. “They wouldn’t do that if they didn’t see at least a 10-to-15-year window for oil.”
That “stronger for longer” outlook is due to a variety of factors, Tsubouchi said, including the fact that many of the technologies necessary for the energy transition — including hydrogen development, sustainable aviation fuel and more — have been slower to roll out than advocates may have hoped.
That combined with the war in Ukraine has led to global energy security concerns, spiking prices and leaving oil and gas companies flush with cash.
Exxon itself posted unprecedented profits last year of US$55.7 billion, breezing past its previous record of US$45.22 billion in 2008 when oil prices hit record highs.
“Demand for oil is not going away as quickly as people assumed,” Tsubouchi said, adding that in the wake of the Exxon-Pioneer merger, he wouldn’t be surprised to see an uptick in merger and acquisition activity north of the border.
In particular, he said such deal-making might occur in the Montney region of northeast B.C. and northwest Alberta, where horizontal fracking technology similar to what Exxon will be using in the Permian opens up opportunities for companies to increase production in a relatively cost-efficient manner.
Tsubouchi said oilsands bulls could also be looking to increase production in the coming years, though he said that will likely be accomplished through incremental add-ons to existing facilities — not through the whole-scale construction of a new oilsands mine.
“These companies aren’t going to go into something like the mega-projects of the past,” he said.
“But they will look at short-cycle projects where they can take advantage of a 10-15 year window, just like Exxon has.”
Canadian oil and gas executives have been vocal recently about they what they see as an increasingly rosy outlook for fossil fuels.
Last week, Enbridge CEO Greg Ebel spoke to the Toronto Region Board of Trade about why he thinks a Canadian liquefied natural gas (LNG) industry could be part of the solution for the global energy crisis.
And Suncor Energy Inc.’s chief executive Rich Kruger told analysts on a conference call earlier this year that while lower emissions energy is important, the way for Suncor to win in today’s business environment is to focus on its core oilsands assets.
“Outwardly, the oil bulls are growing,” said Duncan Kenyon of Investors for Paris Compliance, which takes financial positions in Canadian companies in an effort to hold them accountable to their net-zero emissions promises.
“It’s obviously great times for them right now and there are short-term gains to be had.”
But Kenyon said the very fact that companies are favouring short-cycle, disciplined growth over big-spend, long-cycle projects shows there is still a lot of uncertainty in the industry about the pace and scale of the coming energy transition and how the oil industry will be affected.
“I think the industry and investors in this sector are really struggling to understand what’s happening and how to prepare for these emerging risks,” he said.
“And these are emerging risks that have the potential to flip-flop the energy system on its head, and fossil fuels end up on the bottom.”
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
