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Parkland Fuel drains$300M from budget to deal with COVID-19 demand impact

UnknownParkland Fuel Corp. is cutting its 2020 capital spending budget by 52% and trimming executive salaries in response to the uncertain economic impact of the novel coronavirus.

The Calgary-based company, which sells fuel through more than 2,600 service stations throughout Canada and in the United States and Caribbean, says it plans to spend $275 million this year, down from its earlier guidance of $575 million.

Parkland says it has already spent about $130 million of the budget in the first quarter, which ends Tuesday.

It says starting that Wednesday, president and CEO Bob Espey will take a 35% salary reduction, while other members of the leadership team will take a 25% cut and directors will accept a 25% reduction in cash retainer fees.

The company withdrew its 2020 earnings guidance, while noting it remains focused on providing fuel and convenience store services to customers via its brands including Ultramar, FasGas, Chevron and Esso.

Parkland says its Burnaby, B.C., refinery, which is shut down for maintenance, is to be restarted in early April and utilization rates will be determined based on the demand outlook at the time.

“We are responding quickly and prudently to the ongoing COVID-19 pandemic,” said Espey in a statement.

“We will maintain the operational flexibility to resume our growth initiatives when conditions improve.”


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How low will gas go?

Screen Shot 2020-03-24 at 12.28.39 PM“Oil markets are poised to get worse before they get better, ushering in a new era for petroleum,” U.S.-based Citi Bank said in a recent note to its clients. Already, oil is being produced below the cost of production, with prices falling for Western Canadian Select Crude to under (US) $10 (actually hit (US) $7.36) a barrel for the first time.

Simply, the petroleum market got hammered with a one-two blow, where demand has fallen off sharply and supply has increased dramatically. The result is dispenser prices that few of us have seen in recent years.

The COVID-19 concern has Canadians staying at home and working in place. This means less fuel usage for things like commuting and air travel. Less demand drives prices downward. Add to this the recent dust-up between Russia and the Saudis over OPEC production targets, whereby both parties are pumping oil like there is no tomorrow. Russia is selling at a loss as a way to build European market share and the Saudis (and UAE) are battling back with excess production to bring pressure onto Russia in a bid to get them to ratchet back well flows. The upshot is a glut of petroleum products at a time when world demand is at an all-time low.

The Russians have said they have enough reserve capital to keep up this fight well into next year. The Saudis have cash to burn, as well as low production costs, and have said they will keep up pressure till the sides get back to the bargaining table.

Here in Canada Syncrude and Suncor have scaled back maintenance work on upgraders due to COVID-19 and the companies’ inability to obtain workers for the task. The result here is that synthetic crude continues to flow at a time when levels were set to be throttled back. The result is even more capacity in the system.

The outcome is that gasoline prices have fallen and could drop even more. Some analysts predict an additional 10% to 15% decline under canopy as we move into April. A look at prices this week sees Vancouver around the $1.00 mark for a litre of gas. This is a drop from the high of $1.70 we saw last year. British Columbia is around 0.75 cents a litre. Ontario is reporting sales of 0.59 cents and Calgary motorists discovered pumps offering prices of 0.55 cents Tuesday morning. Nova Scotia is selling as low as 0.66 cents.

The bottom line is that Canadians can expect gas prices to decline further over the short term with prices in Ontario possibly coming in around the 0.60 cent mark later next month. Until Russia and OPEC makeup and play nice expect the barrel price to continue to stay low for the foreseeable future.


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Project deferral, oil prices troubling for N.L. economy during pandemic

Unknown-2The global COVID-19 pandemic is spelling trouble for Newfoundland and Labrador’s oil and gas industry, adding to existing economic challenges in the cash-strapped province.

Premier Dwight Ball acknowledged last week the province is experiencing “tough times,” referencing deferred investment on projects and historic lows in oil prices.

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

A statement from Equinor Canada says planning on the project will continue with adjusted timelines.

The project in the Flemish Pass Basin, about 500 kilometres east of St. John’s, was announced in 2018 but not yet officially sanctioned. Equinor had set a target of 2020 to decide.

The Bay du Nord project was expected to deliver first oil by 2025. It was a key part of the province’s plan to rapidly increase offshore oil and gasdevelopment, including a goal to double production to more than 650,000 barrels a day by 2030.

Natural Resources Minister Siobhan Coady said the news is disappointing, but she said it’s a positive sign that the project is deferred rather than cancelled during such a tumultuous time.

“These are difficult times, there’s no doubt, and it was difficult to hear that they’re deferring their decision,” Coady said by phone. “I remain kind of optimistic that things will move into a better place as we move forward.”

She said she remains encouraged by exploration ongoing in the province’s offshore.

Ball urged the federal government to take quick action on financial support for provinces on Wednesday but said Ottawa should not respond with a one-size-fits-all approach.

“My message to the federal government is, it’s urgent to get this money moving,” Ball said on Wednesday.

Larry Short, a chartered professional accountant who owns an investment firm in St. John’s, said the situation adds up to a “body blow” for the province’s finances.

“All the bad parts of the Bible have been delivered upon the province, and all the same time,” Short said by phone Thursday.

Short pointed to the immediacy of the COVID-19 crisis, the billions over-budget Muskrat Falls hydro project that accounts for a third of the province’s debt and the oil price collapse as serious challenges to the province’s budget that can’t be ignored much longer.

“We’ve got three major problems here that have suddenly come home to roost, and the province is going to have to really struggle to get through them over the next period of time,” he said.

He said the effects may not be seen until the government tables its budget, likely in the summer after a Liberal Party election set for May that will determine the new party leader and premier.

But with the federal government experiencing financial difficulties of its own, including major blows to Alberta’s oil-reliant economy, Short said Ottawa won’t be in a position to assist Newfoundland and Labrador financially as it normally would.

While prices are being hit hard right now by barrels of cheap oil from Russia and Saudi Arabia, he said Newfoundland and Labrador’s offshore might be left standing as a profitable and desirable drilling site once prices rise again, as the industry is less susceptible to disruptions like pipeline project delays.


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COVID-19: 5 ways to safeguard workers and customers

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Cleanliness is next to godliness, especially in the face of this COVID-19 pandemic. C-stores, gas stations and car washes can do their part to help keep the population healthy with a few simple steps.

1 – Talk to staff about the seriousness of the situation and the need to take special efforts to safeguard both workers and customers. Health authorities indicate the virus can live on surfaces for a few hours and up to several days.

2 – Have cleaning solutions and tools ready. According to Public Health Ontario (www.publichealthontario.ca) many commonly used cleaners and disinfectants are effective against COVID-19. Use only disinfectants that have a Drug Identification Number (DIN) and follow manufacturers’ instructions.

3 – Establish a cleaning routine and follow it. Clean and disinfect frequently touched surfaces at least twice per day. These include dispenser nozzles, payment buttons, squeegee handles, fuel selector switches and trash receptacles. Pay attention to door handles and light switches to the c-store and wipe all counters and cooler doors with a disinfectant. Bathrooms need to be a constant focus and all surfaces need to be disinfected repeatedly throughout the day. Wipe and clean all vending systems as well.

4 – Staff safety is important. Make sure crews have disposable latex gloves if they are detailing cars and discuss the importance of keeping hands away from faces. Gloves should be discarded into a lined receptacle after each vehicle is cleaned. If reusable gloves are used make sure they are only used for a specific task.

5 – Know your cleaning products.

Cleaners: These break down grease and remove organic material from the surface. Cleaners can be used separately before using disinfectants and can be purchased with cleaner and disinfectant combined in a single product.

Disinfectants: These have chemicals that kill most germs and are typically used after surfaces have been cleaned. These have a Drug Identification Number (DIN).

Disinfectant wipes: These have combined cleaners and disinfectants in one solution. Disinfectant wipes may become dry due to fast-drying properties and should be discarded if they become dry and are not recommended for heavily soiled surfaces.

Bleach solution: 5 tablespoons (1/3rd cup) bleach per five litres of water or 4 teaspoons bleach per litre of water.

RELATED READ: Prevention training video for operators and staff


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Oil price crash: What it means for Canada’s fuel prices?

esso_bearspaw_thumbWorld oil prices are in free fall after Saudi Arabia slashed its crude sale price Sunday, signalling the start of a price war after OPEC talks with Russia broke down without an agreement on production cuts. The threat of increased crude supply, on top of prices already weakened over fears the global outbreak of a novel coronavirus would lead to lower fuel consumption, triggered the crash. The turmoil is already affecting Canadian companies and consumers.

What does it mean for fuel prices?

Lower oil prices usually mean lower prices at the pump for drivers, although consumers should expect a lag before they see cheaper gas. Refineries work their way through inventories purchased at higher prices before the price drop. Despite the advent of carbon taxes, the price of oil is still the largest component in the price per litre of gasoline, diesel and other fuels, so drivers will eventually notice the drop.

How does it affect Canadian oil prices?

Crude oil is traded on a global market so when oil prices fall in New York or London, they also fall in Edmonton. Heavy-oil benchmark Western Canadian Select is a blend of made of oilsands bitumen and light oil that allows for better pipeline flow. Unlike other commodities, WCS futures are based on the price difference with U.S. benchmarks and therefore reflect changes in those prices. On the other hand, world oil trade is conducted in U.S. dollars, so the plunging loonie will help mitigate the effect of lower oil prices in Canada.

How does this affect Canadian oil and gas companies?

Lower commodity price forecasts are already causing producers to cut spending and payouts to their shareholders. On Friday, Vermilion Energy Inc. halved its dividend. The day before, Canadian Natural Resources Ltd. trimmed $100 million from its 2020 capital spending budget and said it could cut another $300 million to $400 million if market turmoil continues. Lower oil price forecasts were partly blamed for the recent shelving of the $20.6-billion Frontier oilsands mining project by developer Teck Resources Ltd.

How does this affect investors in the stock market?

Energy companies were among the hardest hit Monday on the Toronto Stock Exchange, with Cenovus Energy Inc. and MEG Energy Corp. each down more than 40 per cent in early afternoon trading. Heavily weighted Enbridge Inc. dropped 13.1%. The TSX energy subindex, which tracks the market value of Canada’s largest oil and gas companies, dropped sharply, trading as low as 29.6% below its Friday close. Energy has the second highest weighting of any sector on the TSX, at 15.9%, so a drop in energy stock prices drags down the index.

How will lower crude prices affect the Canadian economy?

Globally, Canada is the fourth-largest producer and fourth-largest exporter of oil and the energy sector accounts for more than 11 per cent of its gross domestic product. That means lower prices are a “huge negative” for the country, says Sherry Cooper, chief economist for Dominion Lending Centres. The scale of the economic hit will depend on how long lower prices persist, she says.

 


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Parkland acquires ConoMart Super Stores in the U.S.

Parkland Fuel Corporation, through its wholly owned U.S. subsidiaries, has entered into an asset agreement to acquire seven retail sites located in and around Billings, Montana. All seven retail sites feature a strong convenience store offering and a Conoco-branded forecourt.

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“This acquisition expands our Montana business and scales our existing Northern Tier Regional Operating Centre,” Doug Haugh, president of Parkland USA, said in a release. “ConoMart Super Stores is a well-run, customer-focused business and we look forward to welcoming the team to Parkland.”

Calgary-based Parkland is an independent supplier and marketer of fuel and petroleum products and a leading convenience store operator across Canada, the United States, the Caribbean region and the Americas.


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A look at carbon prices in all provinces and territories

Screen Shot 2019-12-17 at 10.45.10 AMAs of Jan. 1, every Canadian and all Canadian businesses are paying a price on carbon.

The federal Greenhouse Gas Pollution Pricing Act means provinces that do not have their own price on pollution that meets Ottawa’s standard get the federal carbon tax applied to them.

The federal tax is currently $20 a tonne and will rise $10 a year every April until it hits $50 a tonne in 2022.

For individuals and businesses with relatively small emissions, that carbon levy is applied to liquid and gaseous fuels at the point of purchase. Households receive rebates on income taxes to offset the cost. The amount varies by province to account for different uses of fossil fuels.

There is separate carbon pricing for big industrial emitters, which are charged the tax on a portion of their emissions, rather than on the fuels they purchase. This is known as the “output-based pricing system,” and the carbon price is charged on between five and 20 per cent of emissions, depending on the industry.

Some provinces have both federal systems in place, while others use one or the other. On Thursday, Manitoba decided to enact its own small-emissions tax starting July 1.

Here’s a quick look at how the national price on pollution works in every province and territory:

British Columbia

B.C. charges a provincewide carbon tax of $40 per tonne on fossil fuels, including gasoline, natural gas and diesel. The province intends to raise the tax to $45 on April 1 and to $50 on April 1, 2021.

B.C. uses revenues to invest in clean technology and environment policies, as well as to provide direct rebates to individual households with an income-based tax credit. The credit is worth up to $154.50 per adult (or for the first child in a single-parent home) and $45.50 per child. The credit is phased out as income rises. It’s eliminated completely for any family with a net income over $62,964.

Alberta

Albertans began paying the federal carbon levy Jan. 1. In February, the provincial government won a challenge of the tax when the Appeal Court found the legislation unconstitutional. The broader national fight is bound for the Supreme Court.

As it stands, the carbon rebate in Alberta will amount to $888 for a family of four in 2020. The amount represents a rebate for carbon tax paid over 15 months _ from Jan. 1, 2020, to March 31, 2021 _ because Albertans were not included in the rebate program last year.

Ottawa approved Alberta’s charge of $30 a tonne on industry emissions of more than 100,000 tonnes a year. Emitters have been asked to reduce their levels by 10 per cent in the first year, and one per cent a year after that. If they don’t hit those reductions, they pay the carbon tax on whatever they emit over their cap, or must buy credits from firms that do better than their targeted reductions.

Saskatchewan

Saskatchewan families and small businesses pay the federal carbon levy. A Saskatchewan family of four received $609 in a rebate in 2019 are to get $809 in 2020.

Saskatchewan has a large industrial carbon price that partially meets Ottawa’s requirements. The federal government charges its output-based carbon price on electricity generators and pipelines that are not subject to the provincial system.

Saskatchewan lost its court challenge of the tax. The Supreme Court is to hear the appeal in March.

Manitoba

Manitoba plans to enact a $25-per-tonne tax starting July 1.

It originally planned a $25-per-tonne levy in 2017, but withdrew it when the federal government said it was not high enough. The federal government then imposed its own tax. A family of four received $339 from the Climate Action Incentive in 2019 and is to receive $486 in 2020.

It’s not immediately clear whether the federal government will agree to Manitoba’s plan.

Manitoba is also fighting the federal levy in court, although a date for a hearing has not been set.

The province is also subject to the output-based system on any facility emitting more than 50,000 tonnes of greenhouse gases each year.

Ontario

Ontario families and small businesses pay the federal carbon levy. Ontario challenged Ottawa’s authority to impose the carbon levy in court and lost. It is also appealing to the Supreme Court.

An Ontario family of four received $307 in 2019 from the climate rebate and is to receive $448 in 2020.

The province is also subject to the output-based system on any facility emitting more than 50,000 tonnes of greenhouse gases each year.

Quebec

Quebec has had a cap-and-trade system since 2013. It sets caps on emissions by industry. Companies that cannot reduce their emissions below the cap must buy credits from a carbon market shared with California. Each jurisdiction sets a minimum price per tonne for credits, which in Quebec last year was the equivalent of $20.82 per tonne of emissions.

Individuals pay the carbon cost embedded in the price of goods.

New Brunswick

New Brunswick is subject to the federal carbon levy, but on April 1 will switch to a provincial tax that will involve introducing a price per tonne on carbon, then reducing the province’s gas tax by a similar amount to make the cost to individuals mostly neutral.

New Brunswick industry is subject to the federal output-based system, but has proposed its own version that would require big emitters to cut pollution by 10 per cent over the next decade.

Nova Scotia

Nova Scotia introduced a cap-and-trade system in January 2019 that meets federal standards. It sets limits on emissions in specific industries, and companies that emit more than their limit must buy credits from companies that emit less than their limit.

Prince Edward Island

P.E.I. has a provincial carbon levy of $20 a tonne on most liquid and gaseous fuels with the exception of furnace oil and propane.

The province opted to use Ottawa’s output-based system for big emitters.

Newfoundland and Labrador

Newfoundland and Labrador introduced a carbon price of $20 per tonne on Jan. 1, 2019. At the same time, it reduced its provincial gas tax by about the same amount.

The province has an output-based system for big industry that sets targets for cutting emissions.

Yukon

Yukon opted to use the federal carbon levy but was allowed to collect the revenues itself. It is providing rebates of about $172 per family of four in 2019 and 2020.

The territory is paying $20 per tonne on fuels. It is exempt from paying the tax on aviation gasoline and aviation turbo fuel.

It is also using the federal output-based system for big emitters.

Northwest Territories

The N.W.T. implemented a territorial carbon tax of $20 per tonne last fall, with various rebates and offsets to aid residents, including a 100 per cent point-of-purchase rebate on home heating fuel tax, and a cost-of-living benefit of $260 per adult and $300 per child.

Nunavut

Nunavut opted to use the federal carbon levy. It is reducing the cost to individuals by covering half the levy. So instead of the cost of five gallons of gasoline going up 90 cents, it went up 45 cents. The levy applies to all fuels except aviation gasoline and aviation turbo fuel.

Nunavut is also using the federal output-based system for industrial emitters.


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New government program funds alternative fuel infrastructure

Funding available for service stations, convenience stores and car washes

EV promoThe Government of Canada is putting more buzz into the country’s zero-emission infrastructure with a new program (launched February 2020) that puts cash in the hands of facility site developers.

Run by Natural Resources Canada (NRCan), the Electric Vehicle and Alternative Fuel Infrastructure Initiative is a $182.5 million program designed to support the establishment of a coast-to-coast charging network for electric vehicles, natural gas stations along key freight corridors and stations for hydrogen fuel cell electric vehicles in metropolitan centres.

The program will also support the demonstration of next-generation charging technologies as well as host the development of binational (Canada and the United States) codes and standards for low-carbon vehicles and infrastructure.

The program is available to individuals and legal entities that are incorporated or registered in Canada and include both not-for-profit and for-profit organizations. These include a range of groups such as utilities, indigenous and community groups, provincial and municipal departments and agencies as well as private businesses such as service stations, convenience stores and car washes.

Eligible projects include permanent installations serving on-road vehicles that increase current capacity. Sites must be open to the public at all times for EV (Electric Vehicle) fast-chargers and as appropriate for natural gas and hydrogen refuelling stations and offer at least one payment option free of any network membership requirement.

Sites must be completed 18 months after the receipt of the Letter of Conditional Approval for EV fast chargers and two years after the receipt of the Letter of Conditional Approval for natural gas and hydrogen refuelling stations. Applicants must demonstrate at least 50% of secured funding of their share of the project costs; demonstrate that they engaged with the energy supplier where the project will be built and own the land, have access to the land for at least ten years or demonstrate that they can obtain the access to the site for at least ten years where the project will be built.

What’s available under the program? NRCan’s repayable contribution through this program will be limited to a maximum of $5 million per project. For EV fast chargers, the program will pay up to 50% of the total project costs to a maximum of $50,000 per charging unit. For natural gas and hydrogen refuelling stations, the program will pay up to 50% of the total project costs to a maximum of $1 million per refuelling station.

EV fast charger projects located in British Columbia and selected for funding under NRCan’s initiative are automatically eligible for non-repayable provincial funding. The B.C. Clean Energy Vehicle Public Fast Charging Program is funding 25% of the total project costs up to a maximum of $25,000 per EV fast chargers.

 For more information visit www.nrcan.gc.ca


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Carwash for a Cure seeks campaign supporters

Industry initiative is raising money for the Canadian Spinal Research Organization

Screen Shot 2020-03-09 at 11.53.39 AMDuring The Convenience U CARWACS Show in Toronto last week, attendees on the car wash side gathered to hear Karen Smith, compliance and training manager at Valet Car Wash, discuss Safety Inspections and how operators can prepare to keep their site safe for customers and employees – it was a fitting segue to discuss the industry-wide fundraising initiative. 

Smith took close to 100 attendees through a full slate presentation (Compliance in the Workplace; Are you ready for an inspection) that covered all the bases. She offered insights from information posting to Ontario Health and Safety requirements, to action plans and program excellence.

Key takeaways were that its never too soon to implement a safety plan and the payoffs help keep your operation running smoothly. “If you see an issue, act on it,” she told participants. “Don’t wait for inspectors to discover a problem. Be proactive.”

Following Smith’s discussion, the stage was opened to Barry Munro who was promoting Carwash for a Cure, an offshoot from Paving the Way for a Cure, a fundraising program that has raised more than $250,000 for the Canadian Spinal Research Organization (CSRO), a group that assists those challenged with spinal cord impairment.

Munro is himself a survivor of a serious spinal cord injury. The injury has not slowed him in his efforts to bring this condition to the forefront of public awareness and his speaking date at the Canadian Carwash Associations’ morning seminar session was a good case in point. With Car Wash for a Cure, Munro invites members of the industry to help raise funds for a study of neuromodulation, one of the most promising therapies in spinal cord injury research today. 

To get involved in this industry-wide fundraising initiative, contact Karen Smith.

 

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Husky Energy reports $2.3B Q4 loss on writedowns

UnknownShares in Husky Energy Inc. fell by as much as 11.7% in Toronto last week after it reported fourth-quarter results that matched analyst expectations on production but missed by a wide margin on funds from operations.

The Calgary-based company blamed lower U.S.refinery margins, an extended shutdown at its refinery in Lima, Ohio, and $74 million related to employee severance for posting funds from operations of $469 million, compared to $583 million in the year-earlier period and analyst expectations of $712 million, according to the financial markets data firm Refinitiv.

The company posted a net loss of $2.34 billion in the last three months of 2019 as it took asset impairment and other charges related to its long-term price assumptions and reductions in its long-term capital spending plans.

The loss amounted to $2.34 per share for the quarter ended Dec. 31 compared with a profit of $216 million or 21 cents per share in the same quarter a year earlier.

Revenue, net of royalties, totalled $4.79 billion compared with $4.99 billion in the fourth quarter of 2018.

Husky says non-cash asset impairments and other charges totalled $2.3 billion after tax in its most recent quarter primarily related to its upstream assets in North America, including its Sunrise project.

Other charges also included exploration-related write downs and asset de-recognition at its Lima Refinery following the completion of a crude oil flexibility project.

The writedowns echo a $3.3-billion charge taken by oilsands rival Suncor Energy Inc. earlier this month, with $2.8 billion of that related to lower forecast prices for heavy oil from its Fort Hills oilsands mine in northern Alberta. Partner Teck Resources Ltd. took a charge of $910 million for the same reason for its 21.3 per cent stake in the Fort Hills mine.