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Oil Markets Confused and Underwhelmed by OPEC Cuts

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Oil markets were left both confused and underwhelmed by the OPEC+ decision to cut 2.2 million bpd in the first quarter of 2024, with oil prices falling toward a weekly loss.Friday, December 1st, 2023

Oil markets welcomed the new OPEC+ deal that pledged 2.2 million b/d in voluntary cuts for the first quarter of 2024 in a very lukewarm manner, with Brent erasing all its earlier gains and dropping back to $81 per barrel. With even the most seasoned industry watchers starting to lose track of which country will be cutting what amount against which reference level, the production target confusion was aggravated by the fact that markets expected deeper cuts, going over and above what Saudi Arabia or Russia have already curbed from their output. 

OPEC+ Cuts Production Further. Members of the OPEC+ oil group agreed to voluntary production cuts totalling 2.2 million b/d for Q1 2024 as the group’s de facto leader Saudi Arabia rolled over its current voluntary cut of 1 million b/d and Russia widened its pledge to 500,000 b/d.

Brazil to Become Member of OPEC+ Family. South America’s largest oil producer Brazil is set to officially become a member of OPEC+ from January 2024 even though it would not join the oil group’s ongoing round of production cuts, seeing output soar to all-time highs in recent months.

Gold to Hit All-Time Highs Soon. With market sentiment shifting back to a US hard landing in Q1 2024, prices of gold have been moving closer to their record high recorded in August 2020 at $2,063 per metric tonne and rallied more than 11% since October.

LME Reinvigorated by End of Nickel Trading Scandal. The London Metal Exchange won a legal case against hedge funds Elliott Associates and Jane Street Global Trading that demanded $472 million in compensation for canceled nickel trades worth billions of dollars, allowing LME to recoup some reputation.

Oxy Might Be the Next M&A Champion. US oil major Occidental Petroleum (NYSE:OXY) is closing in on a deal with shale Permian company CrownRock with a bid of more than $10 billion, potentially outbidding ConocoPhillips and taking over some 86,000 net acres of shale patches in the Midland.

Activist Investors Go After Phillips 66. Only 2 years after its spat with ExxonMobil, activist investor Elliott Investment took a $1 billion stake in US refiner Phillips 66 (NYSE: PSX) and is now demanding that the downstream firm revamp its board due to weaker performance that kept market share subdued.

Norwegian Major to Quit Nigeria. Norway’s state-owned oil company Equinor (NYSE:EQNR) had agreed to sell its onshore Nigerian business, including the almost condensate-like Agbami field, to a local upstream firm Chappal Energies, ending 30 years of Norwegian presence in the African country.

India Demands Generators to Maximize Coal. India’s government is prompting power generators across the country to add some 17 GW of coal-fuelled capacity to avert electricity outages amidst soaring demand for power,  up 10% year-on-year, also unfreezing 38 idled coal plant projects.

Iran Sets Ambitious 2024-2025 Targets. Iran’s government is set to base its 2024-2025 budget on an oil price of $71 per barrel as well as crude and condensate exports of 1.35 million b/d, a notable downgrade compared to last year’s $85 per barrel breakeven cost.

Referendum Raises the Specter of a Venezuela-Guyana War. Venezuela will carry out a referendum on its territorial dispute with Guyana over the contested oil-rich Essequibo territory on December 3, leading to a notable uptick in military activities in the wider region.

TMX Sorts Out Tolling Issues. Canada’s energy regulator CER approved preliminary interim tolls for the Trans Mountain Pipeline system, clearing the largest obstacle to commissioning now as shippers would need to commit to a $11.46 per barrel toll, to be signed under a 15-year pipeline deal.

Lithium Prices Might Still Fall Lower. Analysts are predicting even further pricing downside to lithium carbonate prices as surging supply has been outpacing the rise in demand, with a Reuters survey indicating the trough might be as low ¥80,000 per metric tonne ($11,300/mt) next year.

European Windfall Taxes Hurt Refiners. Poland’s national oil company PKN Orlen (WSE:PKN) saw its shares plunge some 10% this week after the newly elected government introduced a windfall tax on revenues from natural gas production, expecting a revenue loss of $1.5-1.6 billion.

By Michael Kern for Oilprice.com

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Telus prioritizing ‘most important customers,’ avoiding ‘unprofitable’ offers: CFO

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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.

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TC Energy cuts cost estimate for Southeast Gateway pipeline project in Mexico

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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.

Companies in this story: (TSX:TRP)

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BCE reports Q3 loss on asset impairment charge, cuts revenue guidance

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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.

Companies in this story: (TSX:BCE)

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