Enbridge cites economic uncertainty, a challenging regulatory environment, higher interest rates and fierce competition for growth
Citing persistent economic headwinds, Calgary-based pipeline giant Enbridge signalled it’s going to cut its workforce by 650 people next month, while the midstream sector faces a changing landscape.
The energy infrastructure firm, which has a large presence in both Canada and the United States, sent a memo Tuesday informing its staff of planned cuts across the company, which will begin in February and be completed by March 1.
“While we delivered strong financial performance in 2023, cost-reduction measures are necessary to maintain our financial strength, be more cost competitive and enable us to grow.”
In the memo, Enbridge pointed to ongoing economic uncertainty, a challenging regulatory environment, higher interest rates, fierce competition for growth, and the reverberations from geopolitical developments for contributing to “increasingly difficult business conditions.”
According to its website, the company has more than 12,000 employees, mainly based in Canada and the United States. The cuts represent slightly less than six per cent of its total workforce.
Enbridge said it will look to reduce vacancies and contract positions, as well as redeploy staff.
“Reducing our operating costs and strengthening our competitiveness will enable us to weather near-term challenges,” the statement said.
Analyst Stephen Ellis with Morningstar noted pipeline companies in the North American industry aren’t benefiting as much from service rates that are tied to inflationary increases as they have in recent years, while rising interest rates have heightened their need to focus on cost-cutting.
During the third quarter of 2023, Enbridge reported adjusted earnings of $1.27 billion, down from $1.37 billion during the same period in 2022.
Enbridge is the largest pipeline company in Canada and the sector has been facing a shifting landscape during the energy transition.
Last September, Enbridge bought three U.S. natural gas utilities — East Ohio Gas Co., Public Service Company of North Carolina (PSNC) and Questar Gas Co. — from Richmond-based Dominion Energy for $19 billion.
The acquired companies have more than 3,000 employees. The deal was the largest acquisition for Enbridge since 2016, when it bought Houston-based Spectra Energy for $37 billion.
In December, Enbridge sold off its interest in the Alliance natural gas pipeline and the Aux Sable joint ventures for $3.1 billion.
Enbridge, which operates Canada’s Mainline crude pipeline network, will soon see increased competition from the Trans Mountain expansion project, Ellis noted.
Calgary-based TC Energy, which has aggressively sold assets in the past year, is also planning to spin off its oil pipeline network — including the Keystone system — into a new publicly traded company named South Bow. The move is expected to occur in the second half of this year.
Laura Lau, chief investment officer with Brompton Group, which has previously owned stock in Enbridge, said Tuesday the midstream sector is facing increased pressure due to the effect of high interest rates and the difficulty to build major infrastructure projects in Canada and the United States.
She pointed to Friday’s decision by the Biden administration to put a temporary pause on approving new LNG export projects as another example of government policy that could impede the industry.
“It used to be, in the good old days, you could do these big projects. It’s harder to find growth now and it’s harder to make numbers work with higher interest rates,” Lau said.
“The operating environment is getting tougher and tougher for permitting.”
There have been some layoffs in the Canadian oilpatch in the past year, with Suncor Energy announcing last summer it was cutting 1,500 positions.
The Canadian economy has largely stalled since the middle of 2023. It’s expected to remain weak in the first quarter before growth gradually resumes, with an annual GDP expansion of just under one per cent forecast by the Bank of Canada’s latest monetary policy report.
Meanwhile, energy prices have dipped in recent months and it could mean less cash flow for the country’s oil and gas industry in 2024.
Based on the current pricing outlook for oil and natural gas, industry revenues in Canada are projected to drop by 12 per cent to $162 billion from last year’s levels, said Jackie Forrest, executive director of ARC Energy Research Institute.
“The lower commodity prices are putting a bit more fiscal pressure (on). I’m not sure that will result in layoffs but, for sure, you’re going to see the slowdown in spending,” Forrest said.
“Add to that the massive policy that we’re getting here — the layering of policy on top, potential for legal challenges, political uncertainty. I think that’s another factor that’s going to slow down investment over the next year.”
Chris Varcoe is a Calgary Herald columnist.
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)
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)
The Canadian Press. All rights reserved.
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)
The Canadian Press. All rights reserved.
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