– OPEC+ will meet this Sunday to discuss its production targets for January 2023, amidst a widening discrepancy between oil market watchers as to what we should be expecting next year.
– As things stand currently, it is only the US Department of Energy’s EIA that sees OPEC+ pumping more oil in H1 2023, others indicate the oil group should either keep targets as they are or cut further.
– With outright prices bouncing back from the lowest levels seen this year and even WTI swinging back above $80 per barrel, the current consensus is that OPEC+ will roll over its targets.
– Confirming that forecasts have become inherently political, the IEA’s global oil demand growth for 2023 stands at a mere 1.7 million b/d whilst OPEC expects 2.55 million b/d.
2. Ukraine War to Shrink Russian Upstream Investment
– After Russian oil companies invested $45 billion into upstream projects across the country last year, this year is poised to see the lowest investment activity in years as companies postpone FIDs.
– Greenfield investments have tumbled 40% year-on-year to $8 billion, and even that is mostly coming from previous commitments such as gas production going into Power of Siberia-1 or Vostok Oil.
– Russia’s two largest energy companies, the oil giant Rosneft and the gas giant Gazprom, have seen marginal declines in capital spending this year, coming in at $12.9 billion…
1. Oil Analysts Diverge Ahead of OPEC Meeting
– OPEC+ will meet this Sunday to discuss its production targets for January 2023, amidst a widening discrepancy between oil market watchers as to what we should be expecting next year.
– As things stand currently, it is only the US Department of Energy’s EIA that sees OPEC+ pumping more oil in H1 2023, others indicate the oil group should either keep targets as they are or cut further.
– With outright prices bouncing back from the lowest levels seen this year and even WTI swinging back above $80 per barrel, the current consensus is that OPEC+ will roll over its targets.
– Confirming that forecasts have become inherently political, the IEA’s global oil demand growth for 2023 stands at a mere 1.7 million b/d whilst OPEC expects 2.55 million b/d.
2. Ukraine War to Shrink Russian Upstream Investment
– After Russian oil companies invested $45 billion into upstream projects across the country last year, this year is poised to see the lowest investment activity in years as companies postpone FIDs.
– Greenfield investments have tumbled 40% year-on-year to $8 billion, and even that is mostly coming from previous commitments such as gas production going into Power of Siberia-1 or Vostok Oil.
– Russia’s two largest energy companies, the oil giant Rosneft and the gas giant Gazprom, have seen marginal declines in capital spending this year, coming in at $12.9 billion and $10.4 billion, respectively.
– At the same time, future LNG projects such as Novatek’s Arctic LNG-2 might be delayed for five to six years longer than previously assumed due to a lack of liquefaction technologies.
3. Europe Confronts First Cold Spell
– Following an unseasonably warm autumn, Europe is now bracing for colder-than-average temperatures in December as a double-blocking pattern in the Arctic will bring weeks of chill.
– Scandinavia, Northern, and Western Europe will be the most impacted regions, marking the first real test of European gas inventories this winter, with stocks still around 94% full.
– Power prices in Scandinavian countries were the first to react, with the Nordic daily rate surging 8% in just one day to almost €375 per MWh, the highest since September.
– European spot gas prices have seen some strengthening earlier this week, although they remain on par with month-ago readings, trending around €140 per MWh.
4. Lack of Dual-Use Units Limits Gas Switching
– As the coming Arctic wave is pushing natural gas prices in Europe up again, the continent’s industry at large has hit the limits of gas-to-oil switching that could allow the generation of power from diesel or fuel oil.
– According to the IEA, gas-to-oil switching in Europe might rise to 450,000 b/d in Q4 2022 and Q1 2023, double of what it used to be a year ago when gas prices were four times cheaper.
– The switching capacity of the European industry is assessed at a mere 2-3% of installed capacity or around 2 GW, with most of it located in Italy, Germany, and Spain.
– Fuel oil used to be a huge source of power generation in the early 2000s with some 1 million b/d of installed capacity, but now those volumes have shrunk sixfold to 150,000 b/d.
5. China’s Decarbonization Is Around the Corner
– According to Rystad Energy, China is developing more renewable energy capacity than any other country in the world to fulfill its pledge of becoming carbon-neutral by 2060.
– China’s power generation is still dominated by coal, accounting for some 58% of all electricity and totaling 1,115 GW in capacity, but non-emitting energies have been making huge inroads.
– Current developments suggest China will ramp up its solar PV and wind capacity to almost 2,000 GW by 2030, tripling it over the course of the upcoming seven years as the LCOE of a solar plant dropped below $50 per MWh.
– China’s share in the manufacturing of solar panels stands around 85%, implying the sourcing of wafers and polysilicon will be domestic, buoying relevant industries as well.
6. Despite Headwinds, Saudi Arabia Is the Real Winner of 2022
– Saudi Arabia is expected to post a budget surplus of $25 billion this year, the first in more than a decade, fuelled by a robust 8% increase in the Middle Eastern kingdom’s real GDP.
– Boosted by higher production from Saudi Aramco and elevated oil prices for most of this year, the ramp-up in fiscal spending now will push the budget breakeven lower next year, to $76 per barrel.
– Despite the bountiful windfall, Riyadh has many unforeseen issues it must settle, such as the country’s sudden bank liquidity issue as the interbank offered rate (Saibor) soared to 6% recently.
– This has prompted the Saudi central bank to intervene, seeking to cool down the aggressive loan expansion amidst the country’s rapid economic growth.
7. Copper Strength Is Back
– Amidst widespread Chinese protests and China’s purchasing managers index (PMI) coming in at the lowest reading since March 2022, copper prices continue their spectacular surge.
– The three-month LME copper contract moved to 8,220 per metric ton this week, setting it on track to soar 10% in November, the first monthly gain in eight months and the biggest since April 2021.
– Most of the positive momentum for copper has been coming from shifting expectations in Chinese growth, with the market seeing the protests as paving the way for further Covid easing.
– China is the largest consumer of copper globally and still relies on imports for 25% of its needs, prompting new calls from Chinese miners to launch new rounds of ore prospecting in the country.
Telus Corp. says it is avoiding offering “unprofitable” discounts as fierce competition in the Canadian telecommunications sector shows no sign of slowing down.
The company said Friday it had fewer net new customers during its third quarter compared with the same time last year, as it copes with increasingly “aggressive marketing and promotional pricing” that is prompting more customers to switch providers.
Telus said it added 347,000 net new customers, down around 14.5 per cent compared with last year. The figure includes 130,000 mobile phone subscribers and 34,000 internet customers, down 30,000 and 3,000, respectively, year-over-year.
The company reported its mobile phone churn rate — a metric measuring subscribers who cancelled their services — was 1.09 per cent in the third quarter, up from 1.03 per cent in the third quarter of 2023. That included a postpaid mobile phone churn rate of 0.90 per cent in its latest quarter.
Telus said its focus is on customer retention through its “industry-leading service and network quality, along with successful promotions and bundled offerings.”
“The customers we have are the most important customers we can get,” said chief financial officer Doug French in an interview.
“We’ve, again, just continued to focus on what matters most to our customers, from a product and customer service perspective, while not loading unprofitable customers.”
Meanwhile, Telus reported its net income attributable to common shares more than doubled during its third quarter.
The telecommunications company said it earned $280 million, up 105.9 per cent from the same three-month period in 2023. Earnings per diluted share for the quarter ended Sept. 30 was 19 cents compared with nine cents a year earlier.
It reported adjusted net income was $413 million, up 10.7 per cent year-over-year from $373 million in the same quarter last year. Operating revenue and other income for the quarter was $5.1 billion, up 1.8 per cent from the previous year.
Mobile phone average revenue per user was $58.85 in the third quarter, a decrease of $2.09 or 3.4 per cent from a year ago. Telus said the drop was attributable to customers signing up for base rate plans with lower prices, along with a decline in overage and roaming revenues.
It said customers are increasingly adopting unlimited data and Canada-U.S. plans which provide higher and more stable ARPU on a monthly basis.
“In a tough operating environment and relative to peers, we view Q3 results that were in line to slightly better than forecast as the best of the bunch,” said RBC analyst Drew McReynolds in a note.
Scotiabank analyst Maher Yaghi added that “the telecom industry in Canada remains very challenging for all players, however, Telus has been able to face these pressures” and still deliver growth.
The Big 3 telecom providers — which also include Rogers Communications Inc. and BCE Inc. — have frequently stressed that the market has grown more competitive in recent years, especially after the closing of Quebecor Inc.’s purchase of Freedom Mobile in April 2023.
Hailed as a fourth national carrier, Quebecor has invested in enhancements to Freedom’s network while offering more affordable plans as part of a set of commitments it was mandated by Ottawa to agree to.
The cost of telephone services in September was down eight per cent compared with a year earlier, according to Statistics Canada’s most recent inflation report last month.
“I think competition has been and continues to be, I’d say, quite intense in Canada, and we’ve obviously had to just manage our business the way we see fit,” said French.
Asked how long that environment could last, he said that’s out of Telus’ hands.
“What I can control, though, is how we go to market and how we lead with our products,” he said.
“I think the conditions within the market will have to adjust accordingly over time. We’ve continued to focus on digitization, continued to bring our cost structure down to compete, irrespective of the price and the current market conditions.”
Still, Canada’s telecom regulator continues to warn providers about customers facing more charges on their cellphone and internet bills.
On Tuesday, CRTC vice-president of consumer, analytics and strategy Scott Hutton called on providers to ensure they clearly inform their customers of charges such as early cancellation fees.
That followed statements from the regulator in recent weeks cautioning against rising international roaming fees and “surprise” price increases being found on their bills.
Hutton said the CRTC plans to launch public consultations in the coming weeks that will focus “on ensuring that information is clear and consistent, making it easier to compare offers and switch services or providers.”
“The CRTC is concerned with recent trends, which suggest that Canadians may not be benefiting from the full protections of our codes,” he said.
“We will continue to monitor developments and will take further action if our codes are not being followed.”
French said any initiative to boost transparency is a step in the right direction.
“I can’t say we are perfect across the board, but what I can say is we are absolutely taking it under consideration and trying to be the best at communicating with our customers,” he said.
“I think everyone looking in the mirror would say there’s room for improvement.”
This report by The Canadian Press was first published Nov. 8, 2024.
CALGARY – TC Energy Corp. has lowered the estimated cost of its Southeast Gateway pipeline project in Mexico.
It says it now expects the project to cost between US$3.9 billion and US$4.1 billion compared with its original estimate of US$4.5 billion.
The change came as the company reported a third-quarter profit attributable to common shareholders of C$1.46 billion or $1.40 per share compared with a loss of C$197 million or 19 cents per share in the same quarter last year.
Revenue for the quarter ended Sept. 30 totalled C$4.08 billion, up from C$3.94 billion in the third quarter of 2023.
TC Energy says its comparable earnings for its latest quarter amounted to C$1.03 per share compared with C$1.00 per share a year earlier.
The average analyst estimate had been for a profit of 95 cents per share, according to LSEG Data & Analytics.
This report by The Canadian Press was first published Nov. 7, 2024.
BCE Inc. reported a loss in its latest quarter as it recorded $2.11 billion in asset impairment charges, mainly related to Bell Media’s TV and radio properties.
The company says its net loss attributable to common shareholders amounted to $1.24 billion or $1.36 per share for the quarter ended Sept. 30 compared with a profit of $640 million or 70 cents per share a year earlier.
On an adjusted basis, BCE says it earned 75 cents per share in its latest quarter compared with an adjusted profit of 81 cents per share in the same quarter last year.
“Bell’s results for the third quarter demonstrate that we are disciplined in our pursuit of profitable growth in an intensely competitive environment,” BCE chief executive Mirko Bibic said in a statement.
“Our focus this quarter, and throughout 2024, has been to attract higher-margin subscribers and reduce costs to help offset short-term revenue impacts from sustained competitive pricing pressures, slow economic growth and a media advertising market that is in transition.”
Operating revenue for the quarter totalled $5.97 billion, down from $6.08 billion in its third quarter of 2023.
BCE also said it now expects its revenue for 2024 to fall about 1.5 per cent compared with earlier guidance for an increase of zero to four per cent.
The company says the change comes as it faces lower-than-anticipated wireless product revenue and sustained pressure on wireless prices.
BCE added 33,111 net postpaid mobile phone subscribers, down 76.8 per cent from the same period last year, which was the company’s second-best performance on the metric since 2010.
It says the drop was driven by higher customer churn — a measure of subscribers who cancelled their service — amid greater competitive activity and promotional offer intensity. BCE’s monthly churn rate for the category was 1.28 per cent, up from 1.1 per cent during its previous third quarter.
The company also saw 11.6 per cent fewer gross subscriber activations “due to more targeted promotional offers and mobile device discounting compared to last year.”
Bell’s wireless mobile phone average revenue per user was $58.26, down 3.4 per cent from $60.28 in the third quarter of the prior year.
This report by The Canadian Press was first published Nov. 7, 2024.
