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Nick Cunningham

Nick Cunningham is an independent journalist, covering oil and gas, energy and environmental policy, and international politics. He is based in Portland, Oregon. 

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OPEC+ is moving quickly to try to halt the meltdown in oil prices as the demand hit from the coronavirus continues to grow.

The Joint Technical Committee (JTC) meets Tuesday and Wednesday to assess the damage and to recommend a course of action. Press reports suggest OPEC+ is considering deeper cuts on the order of 500,000 bpd to 1 million barrels per day (mb/d). The rumor was enough to halt the slide in oil prices on Tuesday, after WTI briefly dipped below $50 per barrel during intraday trading on Monday.

BP’s CFO Brian Gilvary said that the coronavirus could shave off 300,000 to 500,000 bpd from demand growth this year. “We will see how it plays out, but that will soften (demand). If OPEC roll their cuts through the end of year, that should sweep up any excess of supply and re-balance the market,” he told Reuters.

Oil prices have declined by 20 percent decline over the past month. The oil market was “already slightly oversupplied in January,” before the outbreak of the coronavirus really began to hit, Commerzbank said in a note on Tuesday. Whether OPEC+ can balance the market will “depend chiefly on Saudi Arabia,” the bank said. “After all, the restrictions to crude oil processing that have been announced in China will total nearer to 1 million than 500,000 barrels per day.”

Meanwhile, Goldman Sachs is out with a note that digs a little deeper into the demand side of the equation. The $11-per-barrel decline in oil prices over the past few weeks is “effectively pricing in a large oil demand shock,” Goldman analysts said. “Illustrating this dynamic, the recent move of front-month Brent timespreads into contango – for the first time since last July – would be consistent with the physical market suddenly shifting into a large surplus.” Related: New Tech Could Unlock An Alaskan Oil Boom

Of course, estimating the specific hit to demand is still guesswork – much depends on the duration and severity of the crisis. Still, Goldman Sachs said that its model, which incorporates shifts in the structure of the oil futures curve as well as inventory levels, results in an estimated loss of 500,000 bpd in demand growth.

But then, the bank also factors in a 50 percent chance of a 500,000-bpd cut from OPEC+, and it also assumes the 1 million-barrel-per-day (mb/d) outage in Libya lasts through early March. That brings the demand destruction total up to 750,000 bpd relative to the bank’s original forecast.

The coronavirus also cuts into GDP growth by 0.44 percent. “Such a global GDP hit would be even larger than the worst case scenario that our economists laid out in their latest assessment of a two quarter hit, suggesting that the oil market is already pricing in a significant demand shock relative to other assets,” the bank concluded. Related: Why Europe’s Gas Glut Is Worsening

However, because so much of this is already baked into the price, Goldman analysts say there is “only modest further downside potential.”

In another study, investment bank Standard Chartered said that much depends on Libya, which is garnering surprisingly little press attention given the severity of that country’s crisis. The civil war rages on, and the LNA has effectively blockaded much of the country’s oil exports.

If the 1-mb/d outage in Libya persists, the surplus in the market for the first half of the year because of the coronavirus would be offset by the deficit in the second half of 2020, “even under our most severe demand scenario,” Standard Chartered said in a note to clients. “However, while the Libyan outage might delay or reduce the reaction, pressure on prices is likely to force an additional OPEC cut despite potential H2 tightness.”

There are so many variables that any pricing forecast goes out the window if one factor plays out differently than expected. But OPEC+ is not taking any chances. The Joint Technical Committee (JTC) meets on Tuesday and Wednesday, and a full ministerial meeting is expected late next week.

By Nick Cunningham of 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.

Companies in this story: (TSX:T)

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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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