WINNIPEG, Manitoba (Reuters) – After moving record-large Canadian oil volumes by rail just five months ago, shippers have hit the brakes, idling thousands of cars and tens of millions of dollars’ worth of infrastructure.
FILE PHOTO: A tanker with an inscription which reads, “empty and inspected”, is pictured on the rail track in Lac-Megantic, November 21, 2013. REUTERS/Mathieu Belanger/File Photo
Rail was Canada’s oil lifeline in recent years when cheaper pipelines ran full and crude had no other exit from landlocked Alberta. But oil production cuts this year opened pipeline space and eliminated demand for trains, leaving producers like Cenovus Energy Inc (CVE.TO) with high fixed expenses and monthly payments still owing to railways.
Cenovus said last week it was spending as much as C$20 million ($14.97 million) per month for its suspended rail program, one-quarter of the costs when it is fully active, but now generating no revenue to offset expenses.
Prospects of a longer-term rail recovery also look dim as long-planned pipeline expansions enter service in each of the next two years.
Canadian crude by rail volumes in May fell to 58,048 barrels per day (bpd), the lowest in four years, the Canada Energy Regulator said. In February, they had peaked at nearly 412,000 bpd.
Cenovus has idled several thousand tank cars, said Chief Executive Alex Pourbaix. He said they will stay parked pending several shifts – rebounding Canadian oil production, pipelines filling again, and a wider gap between Canadian and U.S. crude prices to justify rail shipments’ higher cost than pipelines.
It looks doubtful that will happen soon.
“I wouldn’t be surprised to see (price) differentials widen. (But) I don’t know if they’re going to widen enough in the second half to incent rail,” Pourbaix said in an interview.
Canadian heavy crude in Alberta traded this week for around $10 per barrel below the U.S. benchmark CLc1 for September delivery, according to NE2 Group, well below the $15-$20 industry estimate for economic rail shipments. Trades for later delivery show the differential widening to just $13 in the fourth quarter.
Even so, Pourbaix expects Canadian oil production to grow to fill expanded pipelines in coming years, reviving the need for rail.
Greater availability of pipeline space has helped keep differentials narrow.
Demand exceeded supply by 7% on two Enbridge Inc (ENB.TO) heavy oil lines in August, a fraction of the 53% rationing in February that prompted shippers to move a record-large number of barrels by rail.
Investment bank Tudor Pickering Holt & Co forecasts “next to no rail requirements” in Canada into 2021, said analyst Matt Murphy, adding that oil production looks slow to return.
All of that could change suddenly, depending on how quickly pandemic restrictions lift and fuel demand returns, or if there is a significant pipeline outage.
Some are more optimistic.
Suncor Energy Inc (SU.TO) Chief Executive Mark Little said last week he expects several operators to ramp up rail shipments this year.
Consultancy Wood Mackenzie also sees rail volumes rising in the second half as production returns.
But large western terminals, owned by Cenovus as well as partnerships between Imperial Oil (IMO.TO) and Pembina Pipeline Corp (PPL.TO), and USD Group and Gibson Energy (GEI.TO), have mostly or completely idled, said John Zahary, chief executive of Altex Energy, which loads crude at four Western Canada terminals.
Altex has slowed loadings but not shut any terminals as its shipments remain economic for shippers because they do not require blending with costly lighter oil, he said.
Imperial and Gibson, which report quarterly results soon, declined to comment. Pembina did not respond.
FILE PHOTO: Irving Oil workers inspect rail cars carrying crude oil at the Irving Oil rail yard terminal in Saint John, New Brunswick, March 9, 2014. Picture taken March 9, 2014. REUTERS/Devaan Ingraham/File Photo
Railways and independent terminals are better insulated from economic damage than oil shippers, as some continue collecting payments, whether they have crude to move or not.
Such payments contracts allow USD to maintain operating capability as markets fluctuate, said Jim Albertson, senior vice president for USD’s Canadian unit.
Canadian National Railway (CNR.TO) also continues to collect payments, Chief Executive Jean-Jacques Ruest said on a July call.
Reporting by Rod Nickel in Winnipeg, Manitoba; Editing by Marguerita Choy
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.
TORONTO – Canada Goose Holdings Inc. trimmed its financial guidance as it reported its second-quarter revenue fell compared with a year ago.
The luxury clothing company says revenue for the quarter ended Sept. 29 totalled $267.8 million, down from $281.1 million in the same quarter last year.
Net income attributable to shareholders amounted to $5.4 million or six cents per diluted share, up from $3.9 million or four cents per diluted share a year earlier.
On an adjusted basis, Canada Goose says it earned five cents per diluted share in its latest quarter compared with an adjusted profit of 16 cents per diluted share a year earlier.
In its outlook, Canada Goose says it now expects total revenue for its full financial year to show a low-single-digit percentage decrease to low-single-digit percentage increase compared with earlier guidance for a low-single-digit increase.
It also says it now expects its adjusted net income per diluted share to show a mid-single-digit percentage increase compared with earlier guidance for a percentage increase in the mid-teens.
This report by The Canadian Press was first published Nov. 7, 2024.
