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Historic profits in oilpatch on track to continue as global oil demand set to jump yet again



One by one, oil companies in Canada and around the world are releasing their latest financial results, which show 2022 was the most profitable year in the history of the oilpatch.

Commodity prices have softened to start 2023, but this year is already shaping up to be nearly as rosy as demand for gasoline, diesel and other fuels remains robust and could soar even higher in the months ahead.

There are many ways the sector could spend those hefty returns, but so far companies seem unwilling to waver from their primary strategy of paying down debt and passing on a good chunk of those profits to shareholders.

The industry currently faces a bit of a conundrum, said Jeremy McCrea, managing director of energy research with financial services firm Raymond James: The world’s energy consumption is rising, but companies are reluctant to ramp up spending to dramatically boost oil and natural gas production.


Instead, they are enjoying the jumbo profits — while they last.

“I suspect we’re going to keep seeing those results going forward,” said McCrea, who is based in Calgary. “As these companies see these profits, there’s not a motivation to suddenly go and say, ‘Let’s go spend a bunch of money here now and potentially not make these profits over the next few years.'”

Big money for Big Oil

This week, Canadian oilsands heavyweights Suncor Energy and Cenovus Energy became the latest companies to post exorbitant profit levels, as both Calgary-based firms rode towering oil prices throughout last year.

In total, the global industry’s profits last year reached about $4 trillion US, according to the International Energy Agency (IEA), compared with an average of $1.5 trillion in recent years.

The organization expects oil consumption to jump in 2023, mainly the result of China’s economy revving up as COVID-19 pandemic restrictions are lifted. World consumption will climb by two million barrels a day, the IEA said, to an average of 101.9 million a day.

A man wearing a blue uniform and a face mask assembles machinery parts in a factory.
Workers assemble machinery parts at a pneumatic engineering factory in Beijing on Jan. 10. The International Energy Agency expects global oil consumption to jump in 2023, mainly the result of China’s economy revving up as COVID-19 pandemic restrictions are lifted. (Andy Wong/The Associated Press)

“Following Beijing’s late-2022 about-turn on its stringent anti-COVID restrictions, we expect Chinese oil demand to quickly pick up steam,” the agency said in a recent report.

At the same time, Russia’s oil production may decline as financial sanctions increase following its invasion of Ukraine on Feb. 24, 2022. Those are a few of the reasons why some in the industry expect oil prices to remain strong this year.

“Our view is that we’re still in a constructive pricing environment,” Kris Smith, Suncor’s interim president and CEO, said during a conference call with analysts. “Obviously, [it’s] not going to be what we saw in terms of the records of 2022.”

A barrel of West Texas Intermediate, the North American benchmark, traded above $75 US this week, compared with an average of about $95 last year.

How to spend profits

The sector is facing pressure to use those profits in a variety of ways. There are calls for increased investment in renewable energy and to take much more meaningful action on climate change by cutting emissions.

At the same time, some political leaders want the sector to boost production to lower energy costs for consumers and for companies to pay higher taxes to help countries cope with affordability concerns.

In Canada, those profits could also be used to address environmental liabilities as tens of thousands of old oil and gas wells are in need of reclamation, and tailings ponds in the oilsands continue to grow.

An "Out of Service" tag is attached to an orphan oil well.
There are tens of thousands of orphan and inactive oil and gas wells in Canada that are in need of reclamation. Critics say the industry could use its profits to address environmental liabilities. (Kyle Bakx/CBC)

For most oilpatch companies around the world, the financial priorities for the year ahead are unchanged from 2022, as they keep expenses in check, pay down debt and give much of the spare cash to investors.

Last year, Suncor cut its debt by more than $2.5 billion (leaving a balance of $13.6 billion), while giving investors more than $8 billion through dividends and buying back shares.

It’s those kinds of profits, however, that also have politicians in several countries eyeing, or implementing, windfall taxes on oil companies.

Seeking Ottawa’s help

Canadian oil and natural gas production was largely unchanged last year, despite calls by the federal government to turn on the taps to help alleviate Europe’s energy crisis following Russia’s invasion of Ukraine.

Production is expected to increase by about four per cent in 2023, according to the ARC Energy Research Institute, based in Calgary.

Total profits in the Canadian oilpatch are expected to reach about $78 billion this year, which over the last decade would only be topped by an estimated $120 billion in 2022, according to ARC’s most recent research report.

The level of spending by the industry is expected to climb as drilling activity picks up, although it will be a modest increase.

A woman with short blond hair and wearing a business suit sits at a desk with computer monitors.
Jackie Forrest is executive director of the ARC Energy Research Institute in Calgary. The organization says that this year, oil and gas production in Canada is expected to increase by about four per cent and total profits are forecast to reach about $78 billion. (Colin Hall/CBC)

“We have constraints all over North America,” said Jackie Forrest, ARC’s executive director. “The oilfield service industry has been through a couple of successive downturns now and people have left the industry. So even if companies wanted to spend more money, I don’t think there’s enough equipment or people in the field,” she said.

The cash windfall is not dissuading oilsands companies from approaching the federal government for more funding to reduce emissions.

Executives are lobbying Ottawa for a more robust commitment to subsidize the cost and operation of carbon capture and storage facilities, similar to the financial support offered in the United States.

“I’m optimistic that if it’s not in the budget speech, it will be soon thereafter that we will get not just clarity but resolution — so we can move forward on these projects,” Imperial Oil president and CEO Brad Corson said last month, about wanting more federal and provincial government support before oilsands companies decide to spend billions of dollars on a proposed carbon capture facility in Alberta.

A carbon capture facility. The emissions are captured from an upgrader facility that converts oilsands bitumen into synthetic crude oil.
The oilpatch wants Ottawa to provide more subsidies to support the construction and operation of carbon capture and storage facilities, similar to the financial support provided in the United States. (Kyle Bakx/CBC)

Some critics, including federal Environment Minister Steven Guilbeault, say the oilpatch already has plenty of spare cash and isn’t moving fast enough to address climate change. That’s why some would prefer the federal government tax the industry’s profit and invest directly in environmental projects.

The oilsands represent about 11 per cent of Canada’s total greenhouse gas emissions, while the rest of the oil industry and all of the natural gas industry account for 15 per cent.


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Sharp hike in federal alcohol excise duty will drive up price of booze, Ottawa distilleries and breweries say – Ottawa Citizen



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For Ottawa distilleries and breweries, April 1 each year brings, rather than jokes or pranks, increases in the federal excise duty they must pay. This year, the especially steep hike is no laughing matter.

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The alcohol excise duties imposed on manufacturers are adjusted annually based on inflation. But while booze businesses have coped in recent years with two-per-cent increases, this year’s duty is set to increase 6.3 per cent as of Saturday.

The result, Ottawa distilleries and breweries say, will be more expensive alcoholic beverages for consumers, including restaurants, bars and the general public, as manufacturers who are still coping with pandemic-induced pressures, are forced to recoup the latest additional expenses.

“It’s pretty much a foregone conclusion that prices across the board have to go up. They have to,” says Marc Plante, a co-owner of Stray Dog Brewing Company in Orléans. “It’s not going to be, ‘Boom! Here comes the increase,’ and everyone’s going to see it. It will be slow. It will be subtle.”

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Citing a press secretary for Finance Minister Chrystia Freeland and Canada Revenue Agency figures, the Canadian Press reported that the increased federal excise tax works out to less than a penny on a can of beer and three cents on a 750-mL bottle of wine.

Still, Plante says the beers his micro-brewery makes will be more expensive “eventually,” although he can’t when the hike will happen or how big it will be. Stray Dog, which launched in 2017, has held its prices stable for several years, absorbing increased expenses and even debts incurred during the pandemic, Plante says.

He compares his company’s efforts to cope with COVID-19 to “a death by a thousand cuts.”

“Unfortunately, there’s only so much that small businesses like mine can absorb, and so we have to start passing some of those costs down to the consumers,” he says.

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On a litre of wine, the excise duty rate is increasing to $0.731 from $0.688, or a little over four cents, according to figures provided by the Canada Revenue Agency. For a 750 ml bottle of wine, the increase would be closer to three cents.

Plante says he feels sorry for consumers. “The way inflation is right now, consumers are the ones getting the hits the hardest,” he says. Calling beer “one of the few pleasures in life,” and adds: “When you start pricing that out of people’s wallets, what do they have left?”

He adds that he feels worse for distilleries, who face a tougher tax regimen than do breweries and wineries.

“I would never get into that business,” he says.

The Ontario Spirits Tax is 61.5 per cent on the cost of the goods. Given that, Adam Brierley, founder of Ogham Craft Spirits in Kanata, says that if he tries to recoup the extra 25 cents of excise duty per bottle imposed this year, he’ll be taxed provincially for that effort and need to raise his prices again to break even.

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“On the surface, we’re talking about 25 cents a bottle, but there are ripple effects,” Brierley says. “It’s just another thing that continues to kick the industry while it’s down.”

The increased excise duty hits distillers even as the costs of bottles, labels, grains, botanicals and more are getting more expensive, driving down profit margins, says Brierley, who launched Ogham in late 2021.

He figures that he will maintain the prices of some of his products until the current batch is sold, and then re-assess. The price of upcoming products will increase, he says, giving the example of Ogham’s maple eau de vie, currently priced at $60 but likely to rise by $5 or more due to the excise hike and the increased cost of maple syrup.

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John Criswick, co-founder of Perth-based Top Shelf Distillers, says he intends to hold the line and not raise the price of Top Shelf’s products “for now.”

Still, he faults the increased excise duty for helping to increase liquor prices and, with them, inflation.

Brierley contends that while excise duty increases are pegged to inflation, he would have liked to have seen the federal government freeze the increase at two per cent, as in recent years.

Greg Lipin, a co-founder of North of 7 Distillery on St. Laurent Boulevard, says Canadian craft distillers as a whole want relief from the federal excise regimen, which applies equally to mega-distilleries and to comparatively much smaller operations such as theirs.

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In the U.S., there’s one rate for craft distillers and another for bigger players, “which is what we’re looking for,” Lipin says.

During its decade of being in business, North of 7 has not changed its prices, preferring to absorb tax hikes, Lipin says.

“I haven’t entertained raising the prices of my products. But I will at some point, with these increases,” he says.

Rod Castro, the owner of 10Fourteen and Pubblico Eatery, two Wellington Street West restaurants, said the spike in the excise duty should not be surprising, as it follows on recent reports on the negative impact of alcohol and revised recommendations for alcohol consumption.

Still, he says: “As is usual, the government fails to really show they have a care or have a pulse for small- and medium-sized businesses and burden us as they do the consumer.”

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Twitter source code leaked online: legal filing




Some parts of Twitter’s source code — the fundamental computer code on which the social network runs — were leaked online, the social media company said in a legal filing on Sunday.

According to the legal document, filed with the U.S. District Court of the Northern District of California, Twitter had asked GitHub, an internet hosting service for software development, to take down the code where it was posted. The platform complied and said the content had been disabled, according to the filing. Twitter also asked the court to identify the alleged infringer or infringers who posted Twitter’s source code on systems operated by GitHub without Twitter’s authorization.

Twitter noted in the filing that the postings infringe copyrights held by Twitter.


The leak creates more challenges for billionaire Elon Musk, who bought Twitter last October for US$44 billion and has had massive layoffs since then.

The news was first reported by the New York Times.


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Thousands without power after Ontario windstorm



More than 10,000 customers remain without power in Ontario today after strong winds hit the southern and eastern parts of the province on Saturday.

Hydro One spokeswoman Bianca Teixeira says more than 11,500 customers are without power as of 9:30 a.m.

She says there are more than 300 active outages and utility crews are working to restore power to customers.

The outages stretch from just outside Ottawa to Pembroke, Parry Sound and Kingston and are scattered across the Greater Toronto and Hamilton Area to parts of Niagara and westward to just outside Windsor.


Environment Canada issued wind warnings on Saturday for areas including Kingston, Prince Edward County, Niagara Region, Hamilton, London, Middlesex, Chatham-Kent and Windsor.

The agency said affected areas would experience strong southwesterly winds gusting up to 90 or 100 km/h beginning Saturday evening.

This report by The Canadian Press was first published March 26, 2023.


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