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Is there a future for the oilsands after Frontier? The answer is complicated – National Post

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OTTAWA — The decision by Teck Resources to shelve its $20-billion Frontier mine prompted outrage in Alberta, as well as deeper questions about whether there is a future for the broader oilsands industry.

While Frontier was viewed by some as a critical piece of the industry over the next 40 years, a closer review of the long list of stalled projects in northern Alberta paints a different picture — one in which the mine faced long odds in a rapidly changing market.

The National Post counted a total of 41 oilsands projects in northern Alberta currently approved by regulators, drawing from data provided by the Pembina Institute, the Alberta Energy Regulator, the Impact Assessment Agency of Canada, and other public sources. Another 25 projects await approval while 27 projects, including Frontier, have been withdrawn by proponents.

Few of those approved projects are likely to proceed, analysts say, owing in large part to a flood of new oil supply early this decade that sent oil prices plummeting in 2014. The collapse prompted tens of thousands of layoffs in Alberta — as well as a shift in thinking in Calgary’s corporate towers that favours smaller and more manageable projects.

Adding to those market woes, Canada has been locked in decades of regulatory and legal morass that has plagued major pipeline proposals like the Trans Mountain expansion, Keystone XL and Northern Gateway. Not only were Canadian producers navigating lower oil prices, but a lack of available pipeline capacity forced them to accept prices far below the industry average — at times as much as US$40 per barrel less than their U.S. rivals.

As a result, nearly all of the projects approved in the province remain dormant. Several proponents have gone bankrupt, while some permits have been revoked after sitting for more than 10 years. A select few, perhaps including Suncor’s Meadow Creek East project, could still move ahead.

“There are fewer companies left here, and so there are only so many projects that proponents can execute,” said Kevin Birn, analyst at IHS Markit in Calgary.

But even if oil prices rise, much of the trouble facing the oilsands will persist. Pipeline delays, largely brought on by legal challenges by First Nations communities, has seriously damaged Canada’s reputation as a viable investment destination.

“For many years in Canada, that uncertainty has resulted in a substantial amount of risk to projects,” said Jihad Traya, energy adviser for Solomon Associates in Calgary. “It tarnishes any project — I don’t care if it’s oilsands or if it’s a port in Hudson Bay.”

There are only so many projects that proponents can execute

The decision by Teck to pull the plug on Frontier, just days before Prime Minister Justin Trudeau was set to make a decision on the mine, spoke to the heated nature of these project delays. Don Lindsay, the chief executive of Teck, said the project put the company “squarely at the nexus” of deep-lying tensions in Canada around the future of fossil fuel development and concerns over climate change.

Even so, the oilsands is likely to remain a growth industry. IHS predicts oilsands production will reach four million barrels per day in 2030, up from around 3.1 million barrels today.

And despite headline-grabbing pledges by various governments, including Trudeau, to reach net-zero emissions by 2050, global oil demand is still set to grow steadily as populations in Africa and elsewhere rise, adding millions of new drivers to the roads. Even after widespread regulatory intervention in recent years, electric vehicles still make up just a tiny sliver of the global vehicle fleet.

Even so, oilsands growth will be slower than in previous years. Birn expects the oilsands to add about 80,000 barrels per day of new production every year over the next decade, compared with 160,000 barrels of new production between 2011 and 2020.


The oilsands is likely to remain a growth industry.

Julia Kilpatrick/Postmedia/File

Most of the expansion will come from smaller, nimbler “bolt-on” expansion projects, likely put forward by oilsands giants like Suncor Energy, Canadian Natural Resources, and Cenovus Energy, which will add to their existing operations.

Others, like the 10,000-barrel-per-day Thickwood project proposed by Sunshine Oilsands, or British Petroleum’s Terre de Grace, will likely fall into the scrap heap.

Frontier, which would have produced 260,000 barrels per day at full capacity, was something of an anomaly in the region. A comparable project, the $11-billion Joslyn oil sands mine proposed by French energy giant Total SA, was shelved in 2014. Most analysts believe Frontier would require substantially higher oil prices in order to be economically viable.

Birn said a major project like Frontier would take four to five years to build, requiring huge sums of up-front capital to clear land, build access roads, fabricate steel modules, and get the project running.

“It is a significant hurdle to get over,” he said.

Uncertainty has resulted in a substantial amount of risk

Many companies are instead proposing thermal, or steam-driven, projects built in modest increments between 10,000 and 40,000 barrels per day, according to the list of approved projects. Such projects to can be added on to existing projects in around two years, and don’t require approval from the federal government.

But anxieties over climate change could prove to be the most intractable battle the oilsands will face in coming years.

As Liberal ministers were mulling the Frontier decision, Environment Minister Jonathan Wilkinson had warned his Alberta counterpart that the province was at “significant risk” of exceeding its 100-million-tonne cap on oilsands emissions by 2030.

Determining which projects will eventually move ahead in the future will depend on a complicated blend of economics, regulatory uncertainty, First Nations land claims and environmental policy.

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Google delays return to office in Europe, Middle East, Africa – Business Insider

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Alphabet Inc‘s Google is postponing its return-to-office plan for offices in Europe, the Middle East and Africa on concerns over the Omicron variant of the coronavirus, Business Insider reported on Thursday, citing a memo it obtained.

 

(Reporting by Deborah Sophia in Bengaluru; Editing by Amy Caren Daniel)

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Canada’s CIBC misses profit estimates as costs climb, TD beats

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Canadian Imperial Bank of Commerce (CIBC) posted disappointing fourth-quarter earnings on Thursday as expenses and retail banking bad debt provisions rose, while bigger rival Toronto-Dominion Bank beat expectations.

Both banks joined rivals in announcing share buybacks and raising dividends, which they are now able to do since the financial regulator’s restriction on capital distributions was

lifted last month.

TD, Canada‘s second-biggest bank, posted lower margins in Canada, but it surprised with a 5 basis-point margin expansion in its U.S. retail business from the prior quarter. It also released C$123 million ($96 million) of reserves previously set aside to cover loan losses.

CIBC, the country’s fifth-largest bank, reported 10% revenue growth, but that was clouded by a 13% increase in expenses. It also took C$78 million of provisions, higher than expected, as a 36% jump in money set aside in its Canadian banking unit offset releases in other divisions.

CIBC said it expects expense growth in fiscal 2022 to rise to the mid-single digits, but aims to deliver positive medium-term operating leverage, with revenue growth outpacing expense expansion.

“While we may have periods of negative operating leverage earlier in the year, we will target positive operating leverage across our business through the course of next year,” Chief Financial Officer Hratch Panossian said on an analyst call.

TD shares jumped 3.8% to C$95.48 in morning trading in Toronto, while CIBC fell 2.5% to C$137.61. The broader stock benchmark rose 0.9%.

TD said it would increase its dividend by 12.7%, and would buy back up to 50 million, or 2.7%, of outstanding shares.

CIBC will raise its dividend by 10.2$ to C$1.61 per share and said it would buy back up to 10 million shares, about 2.2% of outstanding stock.

Canadian banks have largely posted better-than-expected earnings in past quarters, but have faced pressures from low margins and higher variable compensation costs this quarter, with some of the boost from their capital markets businesses and reserve releases in prior periods receding.

The recovery in Canadian non-mortgage lending that investors had been hoping for is materializing, albeit at different rates.

Canadian credit card lending at both banks rose 3.1% from the prior quarter. TD’s business lending grew 2.6% from the previous quarter, the same pace as mortgage growth. CIBC’s corporate lending grew a more muted 0.85%, compared with a 3.4% increase in home loans.

TD said adjusted net income rose to C$2.09 a share from C$1.60 cents, a year earlier, compared with the average analyst estimate of C$1.96 a share.

CIBC said profit excluding one-off items rose to C$3.37 per share from C$2.79 a year earlier, versus the average analyst estimate of C$3.53.

($1 = 1.2817 Canadian dollars)

 

(Reporting by Nichola Saminather; Additional reporting by Sohini Podder and Mehnaz Yasmin; Editing by Shailesh Kuber, Jan Harvey, Emelia Sithole-Matarise and Jane Merriman)

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CIBC Misses Analysts’ Estimates as Expense Gains Accelerate – Yahoo Canada Finance

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(Bloomberg) — Canadian Imperial Bank of Commerce is seeing costs rise as the lender ramps up spending to boost businesses in the U.S. and domestically.

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Non-interest expenses rose 7.4% from the third quarter to C$3.14 billion ($2.5 billion), the Toronto-based bank said Thursday in a statement. That’s an acceleration from the previous 5.9% quarter-over-quarter gain it reported in August. Overall profit trailed analysts’ estimates.

CIBC has been spending to expand its franchise in the U.S. as well as its Canadian personal and business banking unit to sustain the growth in mortgages and client retention it has seen in recent quarters. But those investments haven’t been cheap as labor costs rise and banks battle to retain talent, driving up CIBC’s salary costs 5% from the third quarter and increasing performance-based compensation 20% for the year.

Chief Financial Officer Hratch Panossian said CIBC will keep spending to help drive revenue gains.

“Our strategy is to generate positive operating leverage, but to do so through top-line growth rather than containing expenses or under-investing,” Panossian said on the company’s earnings call.

CIBC slid 4.1% to C$135.44 at 9:40 a.m. in Toronto. The shares have advanced almost 25% this year, compared with a 27% gain for the S&P/TSX Commercial Banks Index.

The lender also raised its quarterly dividend 10% to C$1.61 a share, and announced a plan to buy back 10 million shares, or about 2.2% of outstanding shares. At the current share price, that would cost about C$1.4 billion. Canada’s banks last month were released from restrictions on dividend increases and share buybacks that regulators put in place early in the pandemic to protect the financial system.

Also in the statement:

  • Net income rose 42% to C$1.44 billion, or C$3.07 a share, in the three months through Oct. 31. Excluding some items, profit was C$3.37 a share. Analysts estimated C$3.54, on average.

  • CIBC took C$78 million in provisions for credit losses. Analysts estimated C$125.4 million, on average.

  • Canadian banking profit rose 1.2% from a year earlier to C$597 million.

(Updates with CFO’s comments starting in fourth paragraph.)

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