Wed, April 24, 2024 at 9:35 AM EDT
Business
Oil producers cut spending, production in wake of price collapse – The Globe and Mail
Companies in Canada’s oil patch are slashing capital budgets and warning of job cuts as the spread of the coronavirus and a crude production spat between Saudi Arabia and Russia glut global oil supplies and send prices plunging.
Calgary-based Cenovus Energy Inc. cut its capital budget by 32 per cent Tuesday, putting possible expansions at both Christina Lake and Foster Creek on hold and suspending the majority of its planned capital spending at the company’s Deep Basin and Marten Hills operations.
The Cenovus decisions follow moves by Ovintiv Inc., formerly Encana Corp., to reduce its capital budget and rein in spending. Late Tuesday, MEG Energy Corp. announced it would cut its 2020 capital spending by 20 per cent to $200-million.
Cenovus said in a statement it will continue “modest spending” on engineering and permitting for a potential diluent recovery unit, but it doesn’t intend to sanction any new projects and will look for more operational and capital spending reductions “if necessary.”
Ovintiv’s stock price fell by more than 70 per cent and Cenovus lost half of its share price value Monday as a global oil price war sent crude prices diving to their lowest levels in four years, battering energy stocks and threatening to deepen the economic downturn in Alberta. Both companies’ stock prices recovered slightly Tuesday.
The TSX Composite Index fell by more than 10 per cent on Monday. Western Canadian Select crude prices crept back past $20 Tuesday after a $17.80 low on Monday, reflecting a gentle uptick in share prices for Canadian producers including MEG Energy and Frontera Energy Corp., but the overall picture was far from a general recovery.
That has led Alberta’s Premier and Energy Minister to crisis talks with the energy sector. They met with large and small-scale producers, drillers, pipeline companies and the oil service sector this week to understand the extent of the damage.
Speaking with The Globe and Mail during a brief break between meetings, Energy Minister Sonya Savage said while she didn’t want to paint a grim picture, the industry is cutting capital expenditures, scaling back drilling programs and can expect potential job losses.
“We are in a very, very uncertain time and a very precarious situation,” she said.
“We don’t know where the price is going to go and for how long.”
To deal with languishing prices, Cenovus has suspended its crude-by-rail program. That means the company will no longer take advantage of Alberta’s special production allowance program, implemented by the United Conservative government to try to boost oil activity in the face of mandated production cuts. The scheme allowed companies to exceed their production limits as long as crude was shipped out via rail.
As a result, Cenovus estimates a 6-per-cent drop in its 2020 oil sands production, now hitting between 350,000 and 400,000 barrels a day (b/d).
Ovintiv didn’t provide any detail on what its capital cuts might look like, nor did it return requests for comment.
While companies wrestle with capital plans, they are keeping their eye on an unsteady global energy situation as Saudi Arabia and Russia raise the stakes in a production standoff that has caught Canada in its crossfire. The spat began after OPEC+ countries gathered to address the fall in crude demand because of the coronavirus, but they couldn’t reach a deal.
Saudi Arabia announced Tuesday it will raise its crude supply to a record high in April as it appeared to reject Russian overtures for new talks. The clash of the two oil titans sparked the 25-per-cent slump in crude prices on Monday, triggering panic selling and heavy losses on Wall Street’s main stock indexes, already hit badly by the coronavirus outbreak.
Amin Nasser, chief executive of Saudi Aramco, said the oil giant would increase supply to 12.3 million b/d next month for customers inside the kingdom and abroad. That’s 300,000 b/d above its maximum production capacity, indicating Aramco may also free up crude from storage.
“It is frustrating, because we have done so much in Alberta to turn the economy around, to get our sector healthy, to get Albertans back to work, and these are events completely out of our control,” Ms. Savage said.
With a report from Reuters
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Business
Oil Firms Doubtful Trans Mountain Pipeline Will Start Full Service by May 1st
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Oil companies planning to ship crude on the expanded Trans Mountain pipeline in Canada are concerned that the project may not begin full service on May 1 but they would be nevertheless obligated to pay tolls from that date.
In a letter to the Canada Energy Regulator (CER), Suncor Energy and other shippers including BP and Marathon Petroleum have expressed doubts that Trans Mountain will start full service on May 1, as previously communicated, Reuters reports.
Trans Mountain Corporation, the government-owned entity that completed the pipeline construction, told Reuters in an email that line fill on the expanded pipeline would be completed in early May.
After a series of delays, cost overruns, and legal challenges, the expanded Trans Mountain oil pipeline will open for business on May 1, the company said early this month.
“The Commencement Date for commercial operation of the expanded system will be May 1, 2024. Trans Mountain anticipates providing service for all contracted volumes in the month of May,” Trans Mountain Corporation said in early April.
The expanded pipeline will triple the capacity of the original pipeline to 890,000 barrels per day (bpd) from 300,000 bpd to carry crude from Alberta’s oil sands to British Columbia on the Pacific Coast.
The Federal Government of Canada bought the Trans Mountain Pipeline Expansion (TMX) from Kinder Morgan back in 2018, together with related pipeline and terminal assets. That cost the federal government $3.3 billion (C$4.5 billion) at the time. Since then, the costs for the expansion of the pipeline have quadrupled to nearly $23 billion (C$30.9 billion).
The expansion project has faced continuous delays over the years. In one of the latest roadblocks in December, the Canadian regulator denied a variance request from the project developer to move a small section of the pipeline due to challenging drilling conditions.
The company asked the regulator to reconsider its decision, and received on January 12 a conditional approval, avoiding what could have been another two-year delay to start-up.
Business
Tesla profits cut in half as demand falls
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Tesla profits slump by more than a half
Tesla has announced its profits fell sharply in the first three months of the year to $1.13bn (£910m), compared with $2.51bn in 2023.
It caps a difficult period for the electric vehicle (EV) maker, which – faced with falling sales – has announced thousands of job cuts.
Boss Elon Musk remains bullish about its prospects, telling investors the launch of new models would be brought forward.
Its share price has risen but analysts say it continues to face significant challenges, including from lower-cost rivals.
The company has suffered from falling demand and competition from cheaper Chinese imports which has led its stock price to collapse by 43% over 2024.
Figures for the first quarter of 2024 revealed revenues of $21.3bn, down on analysts’ predictions of just over $22bn.
But the decision by Tesla to bring forward the launch of new models from the second half of 2025 boosted its shares by nearly 12.5% in after-hours trading.
It did not reveal pricing details for the new vehicles.
However Mr Musk made clear he also grander ambitions, touting Tesla’s AI credentials and plans for self-driving vehicles – even going as far as to say considering it to be just a car company was the “wrong framework.”
“If somebody doesn’t believe Tesla is going to solve autonomy I think they should not be an investor,” he said.
Such sentiments have been questioned by analysts though, with Deutsche Bank saying driverless cars face “technological, regulatory and operational challenges.”
Some investors have called for the company to instead focus on releasing a lower price, mass-market EV.
However, Tesla has already been on a charm offensive, trying to win over new customers by dropping its prices in a series of markets in the face of falling sales.
It also said its situation was not unique.
“Global EV sales continue to be under pressure as many carmakers prioritize hybrids over EVs,” it said.
Despite plans to bring forward new models originally planned for next year the firm is cutting its workforce.
Tesla said it would lose 3,332 jobs in California and 2,688 positions in Texas, starting mid-June.
The cuts in Texas represent 12% of Tesla’s total workforce of almost 23,000 in the area where its gigafactory and headquarters are located.
However, Mr Musk sought to downplay the move.
“Tesla has now created over 30,000 manufacturing jobs in California!” he said in a post on his social media platform X, formerly Twitter, on Tuesday.
Another 285 jobs will be lost in New York.
Tesla’s total workforce stood at more than 140,000 late last year, up from around 100,000 at the end of 2021, according to the company’s filings with US regulators.
Musk’s salary
The car firm is also facing other issues, with a struggle over Mr Musk’s compensation still raging on.
On Wednesday, Tesla asked shareholders to vote for a proposal to accept Mr Musk’s compensation package – once valued at $56bn – which had been rejected by a Delaware judge.
The judge found Tesla’s directors had breached their fiduciary duty to the firm by awarding Mr Musk the pay-out.
Due to the fall in Tesla’s stock value, the compensation package is now estimated to be around $10bn less – but still greater than the GDP of many countries.
In addition, Tesla wants its shareholders to agree to the firm being moved from Delaware to Texas – which Mr Musk called for after the judge rejected his payday.
Business
Stock market today: Nasdaq futures pop, Tesla surges after earnings with more heavyweights on deck
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Tech stocks rose on Wednesday, outstripping the broader market as investors welcomed Tesla’s (TSLA) cheaper car pledge and waited for the next rush of corporate earnings.
The Nasdaq Composite (^IXIC) rose roughly 0.6%, coming off a sharp closing gain. The S&P 500 (^GSPC) was up 0.2%, continuing a rebound from its longest losing streak of 2024, while the Dow Jones Industrial Average (^DJI) fell 0.1%.
Tesla shares jumped nearly 12% after the EV maker’s vow to speed up the launch of more affordable models eclipsed its quarterly earnings and revenue miss. That cheered up investors worried about growth amid a strategy shift to robotaxis and the planned cancellation of a cheaper model.
The results from the first “Magnificent Seven” to report have intensified the already high hopes for Big Tech earnings, that the megacaps can revive the rally in stocks they powered. The spotlight is now on Meta’s (META) report due after the market close, as the Facebook owner’s shares rose after the Senate voted for a potential ban on rival TikTok. Microsoft (MSFT) and Alphabet (GOOG) next up on Thursday.
Meanwhile, Boeing (BA) reported better than expected first quarter results before the opening bell with a loss per share of $1.13, narrower than the $1.72 estimated by Wall Street. Shares rose about 2% in morning trade.
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