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COVID-19 causes industry-wide labour disruption

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These are challenging times and to a large extent, previous models and economic expectations will have to be revised as our society muscles through this public health crisis. COVID-19 created a shock wave through our economy and is effects on the labour marketing are still being felt and understood.

Currently, Canada has furloughed close to 2.5 million workers with Toronto alone seeing more than a quarter-million people sent home from jobs to stay safe. Will the economy quickly reabsorb these workers once the all-clear has sounded? Indications are that over the short term there will be pent up demand in the market and this could be good news for retail and service sectors. Government economic initiatives will also help spur the economy. However, COVID-19 has created lasting damage to the trade environment and this will be felt over the long term following back to work.

Here are some figures we have been able to source about the impact of COVID-19 on employment in Canada. Restaurants Canada tells OCTANE that there are now more than 800,000 foodservice workers on lay off with 10% of Canada’s restaurants closing permanently. The ING group has reported the economy shrunk by 20% in March with some three million laid off across the country. The Edmonton Chamber of Commerce states that 3% of businesses in the city have closed permanently and 47% see this a strong likelihood in the coming period. There, 86.3% of companies have seen drops in revenue and 60% have had to lay off staff. About 40% of Edmonton businesses have shut down their offices.

Even though gas station and car wash facilities were deemed essential services (most provinces), there is still considerable pain with-in this sector across the country. Customer volumes are down dramatically with people isolating and operators are working hard to keep staff safe. For example, at Valet Car Wash, an eight location full-service chain in Ontario, they had to stopped interior detailing, a key point of revenue, and focus on automated exterior service. The company typically employs just under 200 workers, but the vast majority of Valet’s crews were laid off waiting to see what the future will bring. According to Karen Smith, Valet’s compliance and training manager, “We choose to close interiors for the safety of our employees. We are keeping exteriors open due to the fact it is a zero contact service.”

Valet’s experience is similar to what other operators across the country are finding. As we move forward the labour challenge will be competition from a wide range of businesses for the laid-off employees as the country gets back to work in the months ahead. Already businesses such as c-store, car wash and gas bar were being hit by high rates of turnover and difficulty in recruitment.

Before March, operators across the country had been finding it harder and harder to recruit the staff they needed and to keep the ones they already had in place. Indeed, the number of jobs unfilled in Canada’s private sector had grown. At the end of 2019, the Canadian Federation of Business (CFIB) found almost 435,000 unfilled positions in Canada, a value that is up by nearly 10,000 over last year.

Behind this was a declining labour force where gains in new workers have almost flatlined with an expansion of just 0.2% (BDC). Low wages and limited benefits packages also impacted businesses such as c-store, gas bar and car wash where their capacity to bring in new staff has been negatively impacted by competitive pressures from large operators such as Amazon and Walmart (Walmart is currently advertising job openings for 10,000 workers).

Among the most difficult spots to fill were in the services sector where businesses such as car wash found a 5.1% vacancy rate, a number well above the national average of 3.2%. The retail sector is also where 54% of respondents to a BDC study reported hiring was very difficult. Regionally, the Atlantic (50%) was tops in reporting trouble sourcing new hires. BC was next up at 45% with 40% of Ontario respondents telling BDC they had Human Resource (HR) challenges. Hardest hit were small businesses with between 5 and 49 employees. The study found 49% of businesses in the 5-9 worker set had real difficulty finding new staff with 55% of 10-19 worker enterprises reporting major challenges and 58% in the 20-49 worker group finding HR grief.

The Convenience Industry Council of Canada (CCIC) is a national body dedicated to convenience sector advocacy, research and education. Recently they took an in-depth look at British Columbia’s labour market. Findings mirrored other studies and showed specifically that the c-gas channel was being hammered by hiring and retention challenges. Industry participants to a round table discussion told moderators that:

  • Employees of any kind were difficult to find but especially difficult to find suitable ones.
  • They found very low response rates from ads.
  • They were interested in the Temporary Foreign Worker Program and found they could rely on that program to help fill positions but with recent program changes such as application fee increases and more paperwork, the process became more onerous and stressful.
  • Present staff is mostly students and mostly part-time. These workers tend to be very hard to retain and they quit easily often without notice.
  • Retention cost for employers is about $4,000 (e.g., it costs about $4,000 to recruit and provide each new employee with approximately 50 hours of initial training). After all that training, however, employers can’t pay wages high enough to recruit and retain high-quality people.

Help at hand

At Valet Car Wash, Smith reports they recruit using organizations such as Second Chance in Guelph, the YMCA and use federal government programs to assist with training. They also turn to Indeed, Facebook and through word of mouth. “Friends tell friends if the employment environment is good,” she says adding that they seek employees who are a good fit with Valet’s core values. “When the fit is there, retention is high. During our interview, I tell applicants about our values and ask them to give two examples of core values they possess,” she says mentioning that road signs can also be effective.

“We also use the local universities and colleges online career pages to post job openings and have had some success with the local high-schools co-op program, resulting in hiring after the co-op term finished, this includes students with disabilities, who have developed into valuable employees.

“Give some thought to the questions you want to ask in the interview, you want to make sure the applicant is qualified and understands the adverse conditions they will be working in; weather, noise, physical, fast-paced.  Not only do you want to hire qualified staff that can do the job, but employers also have to consider if they have the right personality to fit into the culture of your business.”

Smith tells OCTANE that at Valet they don’t do exit interviews with general labour, but do so for managers and supervisors who leave. She comments that this final talk with an exiting staffer can offer tremendous insight into working challenges every business faces. “The goal is continuous improvement in everything we do.”

Are temporary foreign workers still a viable option given the current state of affairs? The short answer is yes, especially once the dust settles from COVID-19 labour challenges and the economy corrects. Foreign temporary worker numbers have been climbing as Canada faces labour market shortages. By 2017 Canada had over 214,000 foreign temporary workers. This is a number that is up by 50% from 2015 and reveals a strong trend across the country.

“Restaurants, c-stores and gas stations can be challenging environments for hiring,” suggests Parvinder Burn, director with Canadian Immigration Centre, a consultancy specializing in student visa, business immigration and skilled foreign workers. He has seen Tim Horton’s locations with 110% turnover, gas and c-stores that are finding it tough to compete with wage and benefits from other businesses, and sites where temporary workers fill entire staffing cohorts. “Having skilled workers come in from other countries can be a good solution to these challenges. However, we see that businesses are both confused and intimidated by the government paperwork and regulations.”

Originally published in the May/June issue of OCTANE.


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N.L. warns of exodus of oil and gas industry without more federal help

Newfoundland and Labrador’s government is looking for a rapid answer from Ottawa on its request for aid for the offshore oil sector in light of a quickening exodus of exploration rigs from the province.

Premier Dwight Ball, Natural Resouces Minister Siobhan Coady and industry leaders held a news conference May 26 to repeat earlier warnings that hydrocarbon projects could be permanently lost to the province without a commitment from Ottawa.

Ball and Coady repeatedly warned that as each week passes, companies are closing and jobs are being lost.

The global COVID-19 pandemic and plummeting world oil prices have been causing problems for the East Coast industry.

In mid-March, Equinor and Husky Energy announced the decision to defer the Bay du Nord offshore development project due to falling oil prices and the economic downturn as countries respond to the novel coronavirus.

In addition, Hibernia has recently suspended its drilling program, the Terra Nova refit for May has been suspended and the West White Rose project has been deferred.

“Time may not be our friend,” the premier during the event.

imagesThe Newfoundland and Labrador Oil and Gas Industries Association, or NOIA, has said in order to remain competitive with Norway, the United Kingdom and Australia, the federal government needs to provide a renewed program of “incentives for offshore exploration.”

The province is backing many of the industry proposals, noting the offshore industry accounts for close to one third of the province’s GDP, 13% of wages and 10 per cent of all jobs.

Coady noted in an April 20 letter to federal Natural Resources Minister Seamus O’Regan that the province appreciated a $75 million allocation to help its industry reduce greenhouse gas emissions, but it needs further assistance.

Coady wrote that the province needs a program similar to Norway’s system of stimulating exploration through “direct tax payments.”

Her letter also called for a renewal of a regional tax credit program, and the introduction of 100% deductibility of capital costs to encourage companies to continue with their exploration plans.

Charlene Johnson, the chief executive of NOIA, said during Tuesday’s news conference that there are three drilling rigs in the province and the industry is hoping they will remain there, rather than being shifted to other jurisdictions.

“It’s a real toss-up because the minute Norway approves (incentives), it’s going to be very hard to entice them to stay in our waters,” she said.

“These decisions are being made now. We’ve had over a dozen companies end their membership in NOIA because they’re closing up shop here.”

O’Regan, who is also the MP for St. John’s South, said in a tweet that he’d been in discussion with Johnson regarding the growing anxiety in the offshore sector.

“We all have friends and family who are worried about their jobs. Oil and gas is in a state of upheaval out West, and around the world. But I am a champion of our offshore. Together we will get through this.”

Ottawa has been offering programs to help companies with liquidity problems during the pandemic.

Federal agencies last month announced commercial loans, ranging in size from $15 million to $60 million each, to fund cash flow needs for a year for companies that had shown themselves to be financially viable prior to the pandemic.

A spokesman for O’Regan’s office said these kinds of programs have helped provide liquidity to the small and medium-sized players in the industry.

In addition, the Canada Emergency Wage Subsidy program covers up to 75% of an employee’s wages for an employer, and can be applied to oil and gas firms, O’Regan office noted.

 


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‘What do we do now?’ Labour dispute at Regina refinery nears 6 months

Screen Shot 2019-12-10 at 11.08.12 AMFor Dean Funke, getting hired at Regina’s Co-op oil refinery felt like winning the lottery.

“For a blue-collar worker, you can’t get better than the refinery. And it’s always been that way,” he told The Canadian Press.

Born and raised in Saskatchewan’s capital, Funke had worked in Alberta’s oilpatch but the refinery job allowed him to stay home and put down roots.

Nearly a decade later, the process-operator-turned-picket-captain wonders what he might do next as a dragging labour dispute between the refinery and his union nears the six-month mark.

“They’re hard conversations. What do we do now? Go get another skill, I guess, is my option, so go back to school?” he said.

“Maybe this isn’t where we’re going to finish our careers. Hopefully it is, but you never know.”

About 700 unionized workers were locked out by refinery owner, Federated Co-operatives Ltd., on Dec. 5 after they took a strike vote.

One of the most contentious issues were proposed changes to employee pensions because of costs to the company.

“Negotiators from FCL have indicated they are prepared for prolonged job action,” reads a briefing note prepared for Saskatchewan’s deputy minister of labour relations earlier this year. It was released to The Canadian Press under freedom-of-information legislation.

Over the winter, Unifor members blocked access to the refinery, which led to fines, court hearings and police arrests. Mischief charges were laid against 14 people, including the union’s national president, Jerry Dias.

“Co-op won’t return to the table unless Unifor removes the barricades, i.e stops breaking the law. Unifor won’t remove the barricades unless the Co-op removes all replacement workers. I think they call that a Mexican standoff,” a labour relations official wrote in an email at the time.

Premier Scott Moe appointed veteran labour mediator Vince Ready, who made recommendations that were accepted by workers, but not the company.

In turn, the refinery owner put forward its final offer, which members rejected.

About 200 replacement workers and 350 managers are keeping the plant running, said the company.

“This is labour relations at its most brutal,” said Scott Walsworth, a business professor at the University of Saskatchewan.

“This is kind of the threat that holds labour relations together _ that you’d better work things out and keep a good relationship with the other side or else you’ll end up like the refinery.”

Walsworth, who’s also an arbitrator, believes the COVID-19 pandemic and economic shutdown has swung the pendulum of public support towards the company.

“It’s hard to manufacture sympathy in this kind of a climate, when so many people are out of work.”

The refinery has cut oil production because of low prices and a drop in demand. Walsworth said it makes it a convenient time not to be paying employees.

The crisis has also created expectations for employers to be sympathetic and not to put profits before people, he added.

“I don’t think Co-op wants to get on the wrong side of that momentum.”

In a statement, Co-op spokesman Brad DeLorey said the company hopes Unifor reconsiders the final offer, which he said exceeds compensation at other Canadian refineries.

Co-op has criticized Unifor for trying to disrupt the fuel supply of farmers busy with spring seeding by picketing cardlocks.

Unifor Local 594 president Kevin Bittman said the pandemic makes it tough for the union to get its message out when members can’t meet in person or rally in large groups.

He also said the company’s demands have been met and there’s nothing left to bargain.

The Opposition NDP has joined the union in calling on the Saskatchewan Party government to intervene and legislate binding arbitration. Premier Scott Moe, calling the dispute a fight between a private company and a union, has rejected the idea.

Walsworth said under provincial labour laws, the government can’t force a private employer into binding arbitration unless the case can be made that society is in danger.

If the refinery owner says its equipment and those living around the plant are safe – and without evidence to prove otherwise – “it’s a pretty tough case to make that the government should step in.”

Without both sides consenting to binding arbitration or the appointment of another mediator, which the government isn’t considering, the waiting continues.

“How do you break this stalemate?” asked Walsworth.


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Irving buys Come By Chance refinery

Move enhances company’s market edge

UnknownIrving Oil has announced the completion of its acquisition of North Atlantic Refining Corp. from U.S.-based investment firm Silverpeak. The deal, with undisclosed financial terms, includes a 135,000-barrels-per-day (bpd) refinery located at Come By Chance, NL, as well as a network of retail sites and other marketing assets.

Unknown-1The retail locations include nearly 100 company-owned and dealer sites and cardlocks, including the Orangestore chain of 24 convenience stores. North Atlantic Refining Corp has been a well-known major player in the province’s stove oil, gasoline, and propane trade since 1950.

The Newfoundland refinery is one that comes with a storied past of bankruptcies and business losses. Bought and sold a number of times since it went into service in the early 1970s, the facility was built to refine light crude and takes about 70% of its inputs from sources in the U.S. Silverpeak had recently invested $400 million to bring capacity up from about 100,000 bpd to 135,000bpd. Proposed is a further upgrade that would increase output to more than 165,000bbd and add a new coker that would allow a heavier grade of crude to be refined.

This initiative that is now in Irving’s court would bode well for the company given that they just arranged to ‘import’ Albertan heavy bitumen via tankers through the Panama Canal route. As well, Newfoundland and Labrador offshore wells also produce heavier crude and with an upgrade, the Come By Chance facility could finally refine the locally sourced heavy oil.

The Come By Chance refinery and the North Atlantic Refining Corp. convenience retail and fuel network in Newfoundland and Labrador is a strategic fit for Irving. With the closing of the Silverpoint deal, Irving will now operate the only two refineries in the Atlantic region. The other is Canada’s largest refinery at 320,000bbd and is located at St. John, NB. These facilities are married to another refinery in Cork, Ireland (71,000bbd). Together this recent agreement gives Irving a solid footing in fuel refining in the North Atlantic basin as well as an uptick in retail locations that create a greater market presence for this Halifax-based family business.

Kgray@ensembleiq.com


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COVID-19 cleaning strategies: A Q&A with Dr. Andrew Landa  

Screen Shot 2020-05-25 at 12.35.06 PMCanada’s car washes know a thing or two about making vehicles shine and look their best. With the COVID-19 challenge, this expertise may be called upon to not only remove grit and grime but get cars and trucks clean on a microbial level as well. Recently we had an opportunity to discuss these needs with ZEP Vehicle Care’s Director of R&D, Dr. Andrew Landa a medical microbiologist who spearheads the science behind the clean.

OCTANE: How are you seeing car wash operators step up to help with COVID-19?

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Dr. LandaWe are seeing that operators are taking the safety of their staff very seriously. It can be a huge challenge to have people sanitizing car interiors. However, this must be done for police, first responders, taxis and other essential services as well as rental cars. UBER has reached out to us for advice and assistance with products such as hand sanitizers and other disinfectants.

At the gas station and car wash, bathrooms must be kept spotless and monitored well beyond what is done on a usual basis. Pay Stations and other touchpoints must be cleaned after each use and care should be taken to clean and sanitize those touchpoints while not possibly damaging the electronic components.

There is fear among businesses and staff. Organizations such as ours can help with knowledge about techniques and products. We can discuss the type of cleaning necessary, how to sanitize and show the steps. For example, just using a sanitizing spray on a dirty surface is not effective. A surface must first be cleaned of surface grime and then disinfected to achieve the desired results.

OCTANE: Do you have advice on best practises for car wash sites in this current crisis?

Dr. LandaAutomatic wash sites offer a no interaction service and are the safest option for exterior cleaning. Express exterior wash sites may be a bit more interactive with customers often having to choose their wash options. Here sites could offer clean styluses (a small pen-shaped instrument where the tip can be detected on a touchscreen. It is used to draw, or make selections by tapping, on devices such as mobile phones, ATMs, and car wash selectors) to customers to use on the pushbuttons. These devices can be placed in a small container of disinfectant for customers who can use them in place of fingers to push selections. The best case is for customers to utilize digital apps on mobile devices that allow choice and take payments. Interior detailing services are very quiet right now, but with the right protective equipment and proper knowledge, operators can offer their special skills to clean vehicles belonging to essential services.  

OCTANE: What are the products that are useful in the fight against COVID-19?

Dr. LandaWe have a wide range of products such as Spirit II, a hospital-grade germicidal detergent and Whirl Away aerosol germicidal surface cleaner that are useful in this challenge. However, we ask people to look to organizations such as the CDC and EPA in the US and Health Canada in Canada for guidelines. It is important to read and follow all label instructions and guidelines for these products to be fully effective. Most products need to be applied and then allowed to rest on surfaces for several minutes to do the job. First, clean for debris and general grime and then apply a germicide. It is the same for hands. However, hands can have other challenges caused by frequent washing and for this reason, we advise health care professionals as well at the general public to utilize lotions to keep the skin smooth and in better shape to hold off germs and viruses.

OCTANE: What other advice do you have for operators?

Dr. LandaFirst and foremost would be to wash your hands. As well, post guidelines where not just staff can see them, but let customers see you are taking this challenge very seriously and let customers know you are cleaning and sanitizing all touchpoints constantly. Monitor your staffs health and be prepared to take action immediately if a team member shows signs of illness. And, lastly, work with your chemical suppliers to get the right products to do the job.


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‘Immense amount of pain’ predicted for Canadian oilfield services sector

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Canada’s oilfield services sector is in for “an immense amount of pain” over at least the next year thanks to low North American oil and gas exploration activity amid a worldwide glut of cheap crude, according to a report from CIBC.

Drilling and well completion companies stand to suffer the most as producers will be reluctant to reverse cuts in spending and production linked to the COVID-19 pandemic and its affect on fuel demand, the analysts warn.

“There is no way to sugarcoat it. The oilfield services sector is in for an immense amount of pain over the balance of 2020 and into 2021,” the report says.

“This will be felt across the sector and while some sub-segments will be more impacted than others (i.e. drilling/completion services lines), no one will be immune, especially with the broad-based shut-ins of existing production.”

On Thursday, Calgary-based STEP Energy Services Ltd. was the latest oilfield service provider to report a series of measures to deal with sharply lower demand that began in mid-March.

The measures include job cuts, wage rollbacks, parked equipment and reduced capital spending in its hydraulic fracturing and coiled tubing well service operations in Canada and the U.S.

It is also seeking relief from its lenders because it could potentially breach its debt-to-adjusted-earnings covenants within the next two quarters, triggering a possible demand for immediate repayment of all amounts due.

“Volatile market conditions have created uncertainty for our clients and they have responded by announcing material reductions in capital expenditures and cancelled work programs,” said STEP in a statement.

“Natural gas prices have strengthened of late which could support additional work later in the year; however, this is not expected to offset the decline in demand for services from oil-directed work.”

In a note, analyst Ian Gillies of Stifle FirstEnergy said STEP’s results were in line with expectations, but the bank covenant warning is worrying for investors.

“The outlook for North American hydraulic fracturing remains extremely challenging due to the material uncertainty surrounding the global economy and crude prices,” he said.

The authors of the CIBC report said the services sector downturn is made worse by expectations of “a prolonged trough” in activity as demand for new oil and gas production is delayed by the need to draw down crude storage and as idled wells are reactivated.

It said shares in the services companies it covers are down between 15 and 70% since early March, some of which is justified by the cost of challenges to come, but some due to “indiscriminate selling” by spooked investors.

Ongoing equipment retirements are expected to allow the North American services sector to eventually match capacity with demand, it said.

At STEP, adjusted earnings before interest, taxes, depreciation and amortization fell by 12% to $22.8 million in the three months ended March 31, despite a 10% increase in consolidated revenue to $194 million.

It attributed the decrease to a $2.5 million provision for bad debt and $1.9 million in severance for unspecified workforce reductions in Canada and the United States.

Despite a recent rise in U.S. benchmark oil prices to above US$30 per barrel, STEP says it has further reduced its 2020 capital program to $15.5 million, down from $24 million previously and its initial plan of $47 million.

It reported a first-quarter net loss of $52.2 million, compared with a net loss of $600,000 for the same period in 2019, mainly due to $58.8 million in non-cash impairment charges against its Canadian well-fracturing assets.

Earlier this month, the PetroLMI Division of Energy Safety Canada reported more than 7,700 oil and gas sector jobs were lost in April compared with March, with 6,500 of the lost jobs from the oilfield services sector.

 


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Canal route brings Alberta crude to Eastern Canada

UnknownCanada is the world’s fourth-largest exporter of oil and the third-largest repository of proven reserves of which 96% come from Alberta’s oil sands. This month Alberta got a new export customer for its heavy crude: Plans are to ship product to this customer via the Panama Canal in medium-sized Aframax ocean tankers. Surprising to learn that the customer is Halifax-based Irving Oil, a Canadian major that had hoped to get Alberta crude via an east-west pipeline that has been in discussion since 2013. The ‘Energy East’ pipe faced an uphill battle with Quebec and First Nations groups voicing concerns. The project was scrapped in 2017 leaving Irving without easy access to the massive Alberta oil store.

Last week the company announced the Federal Government had agreed to its April 13 request for an urgent need for more crude oil for its refineries. The government granted Irving a one year permit to bring Alberta heavy oil sands crude from Pacific tidewater to its facility in New Brunswick.

Reports quote Irving Oil chief refining and supply officer Kevin Scott saying, “It is critical to our customers, to our business, and to energy security throughout Atlantic Canada that we are able to use foreign crude oil tankers to access Western Canadian crude oil on an urgent basis and going forward for one year to allow for effective and flexible supply chain planning and to strengthen the link between Canadian oil producers and our refinery in this challenging and uncertain time.”

Irving will ship its Western Canadian oil 11,771 kilometres from British Columbia through the Panama Canal to its Canaport facility in Saint John, NB. Irving will also source Canadian oil delivered through ports in Texas and Louisiana. Altogether the route is more than twice the length of the once proposed Energy East pipeline that would have run 4,600 kilometres.

Irving Oil operates Canada’s largest refinery in Saint John and has a network of more than 900 fuelling locations and 20 Big Stop convenience centres. The company provides heating oil, diesel, gasoline as well as lubricants and a range of other products to markets in Canada, the U.S. and Ireland.


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Imperial Oil reports $188M loss as COVID-19 hits workers, slows work schedule

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CEO Brad Corson

Imperial Oil Ltd. is slowing or deferring maintenance work throughout its operations as it tries to ensure employee safety in the wake of a COVID-19 outbreak that has infected 83 workers at its Kearl oilsands mine in northern Alberta.

The Calgary-based company said Friday it will start a planned one-month maintenance shutdown of one of its two production trains at Kearl in a few days and extend it by an extra month to late June or early July to allow more distancing between workers.

The extension means production at Kearl will fall from the record average of 226,000 barrels per day in the first quarter – and 238,000 bpd in March – to about 150,000 bpd in the second quarter, CEO Brad Corson told a conference call on Friday.

“This allows us to progress at a more measured pace and greatly reduce the number of people we have working at site at any given time and without affecting the overall scope,” he said.

“It also allows us to complete the work at a time of likely low prices so we can have the asset fully up and running as and when prices recover.”

He said the company has also reduced the scope of maintenance at its Sarnia, Ont., refinery, will defer planned work at its Sarnia chemical plant and is postponing planned maintenance at its Nanicoke, Ont., and Strathcona (Edmonton) refineries until after this year.

Twenty-two of the Kearl workers stricken with the coronavirus have recovered and the others are being monitored or treated as necessary, Corson said.

Work at the project is continuing with enhanced physical distancing, cleaning and health screening, along with supplying face masks and moving fewer workers on transport airplanes and buses.

Kearl is owned by Imperial at 71% and its parent company, ExxonMobil, with 29%.

The record output at Kearl thanks to the introduction of supplemental ore crushers drove overall Imperial production to about 419,000 barrels of oil equivalent per day in the first three months of 2020, up from 388,000 boe/d in the same period last year.

Record throughput at its Strathcona refinery helped take its overall processing total to 383,000 barrels per day, the same as a year ago.

Corson said demand for jet fuel and gasoline fell significantly in March, while diesel demand dropped by a more moderate amount, due to measures taken to limit the pandemic. However, there are signs demand may be slowly recovering, he added.

Imperial reported a net loss of $188 million in the first quarter due to lower commodity prices and non-cash charges of $301 million, with $281 million of that due to a reduction in the value of its inventory as crude oil prices plunged in March and $20 million from a goodwill impairment.

It had a net profit of $293 million in the same quarter last year.

Fellow oilsands producers Husky Energy Inc. and Cenovus Energy Inc. both reported writedowns and losses earlier this week.

Imperial’s revenue and other income totalled $6.69 billion in the quarter, down from $7.98 billion in the first quarter of 2019.

Imperial’s average realized bitumen price averaged $18.08 per barrel in the first quarter of 2020, compared to $48.85 per barrel in the first quarter of 2019.

Crude-by-rail shipments averaged 97,000 bpd from its co-owned Edmonton rail terminal in the first quarter of 2020, up from 53,000 bpd in the fourth quarter of 2019.

Shipments by rail fell to about 10,000 bpd in April and are being phased out as pipeline space is freed up amid industry-wide production cutbacks due to current low oil prices, said Corson.

Analysts said Imperial beat their expectations on production and on cash flow, the latter thanks to higher profits from its refining and marketing sector.

Imperial cut its 2020 capital spending plan at the end of March by $500 million to between $1.1 billion and $1.2 billion and targeted a reduction in expenses by $500 million compared with 2019 levels in an effort to deal with impact of the pandemic.

 


Incoming Suncor president and CEO Mark Little addresses shareholders. Photo: Jeff McIntosh Canadian Press

Suncor CEO predicts slow recovery for sector from pandemic demand crunch

Incoming Suncor president and CEO Mark Little addresses shareholders. Photo: Jeff McIntosh Canadian Press

Suncor president and CEO Mark Little. File photo: Jeff McIntosh Canadian Press

CALGARY – Consumer demand for fuel is growing slightly after a sudden decline due to measures to deal with the COVID-19 pandemic but the CEO of Suncor Energy Inc. says he doesn’t expect a full recovery for his company or the Canadian energy sector until at least 2022.

The Calgary-based oilsands and refining giant surprised analysts by cutting its quarterly dividend by 55% to 21 cents per share as it reported a first-quarter net loss of $3.525 billion on Tuesday.

It had 18 years of consecutive annual dividend increases, with the latest announced in February.

The cut was necessary as the company resets its target of breaking even at a West Texas Intermediate price of US$35 per barrel, down from the previous mark of US$45, said CEO Mark Little on a conference call on Wednesday.

“Although we expect the crude market to substantially recover by 2022, the risk of an extended period of economic uncertainty, translated into weaker commodity prices and higher volatility, remains possible,” he said.

“In the second quarter, we know our industry is being challenged by … a significant supply and demand imbalance which has resulted in the largest collapse in crude prices ever. These market conditions require decisive leadership and action.”

The company, which sells fuel across Canada through its Petro-Canada network, has seen a reduction in demand of 50% for gasoline, 70% for jet fuel and 20% for diesel, Little said.

As North American oil storage fills to near capacity, any rebound in upstream oil production must be led by recovery in the downstream and that means it depends on when governments reopen the economy and consumers feel confident about travelling again, Little said.

There will be further delays as the high level of crude inventories is drawn down, he added.

Chief financial officer Alister Cowan said on the call he expects that Suncor’s gross debt of about $20 billion will grow by $2 billion or $3 billion this year, but the company will break even on a cash flow basis in 2021.

In a report, analyst Michael Dunn of Stifel FirstEnergy estimated the dividend cut will save Suncor about $1.56 billion per year.

“While not altogether surprising, the cut was not a sure thing given Suncor’s liquidity and track record of dividend increases. We agree with the move,” he said.

Suncor’s capital spending plan for 2020 is being cut to $3.8 billion, a further reduction of $400 million compared with its recent guidance and down $1.9 billion or about one-third compared with its original 2020 plan.

It added it intends to cut operating costs by $1 billion or 10% this year compared with 2019 levels.

Suncor registered an impairment charge of $1.38 billion on its 54.1% share of the Fort Hills oilsands mine it operates and $422 million against its share of the East Coast offshore White Rose and Terra Nova assets.

Suncor also recorded a $397-million after-tax inventory writedown, as well as a $1-billion unrealized after-tax foreign exchange loss on U.S. dollar denominated debt.

Due to lower demand for refined products, Suncor is reducing its outlook for refinery throughput to between 390,000 and 420,000 barrels per day from the previous goal of between 440,000 and 460,000 bpd.

 

 


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Parkland Fuel sees $79 million loss in first quarter on higher revenues

The Calgary-based company says that equalled a loss of 53 cents per diluted share, compared with a profit of 52 cents per share or $77 million a year earlier.

Revenues for the three months ended March 31 increased 3.4% to $4.36 billion from $4.2 billion in the prior year.

Fuel and petroleum product volume increased 12% to six billion litres.

Analysts expected Parkland to lose one cent per share on $4.37 billion of revenues, according to financial markets data firm Refinitiv.

The company says it removed more than $300 million of capital expenditures from its plans this year.