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Parkland posts lower Q2 net income of $32 million as fuel sales fall by 14%

UnknownService station operator Parkland Corp. is reporting higher-than-expected second quarter earnings despite pandemic-related hits to its sales volumes.

The Calgary-based company says net income in the three months ended June 30 was $32 million on revenue of $2.7 billion, down from $105 million on revenue of $4.85 billion in the same period a year ago.

Its net earnings per diluted share were 21 cents, compared with 70 cents last year. Analysts had expected a loss of 38 cents, according to financial data firm Refinitiv.

Parkland, which purchased the Caribbean fuel retailer Sol early last year, says volumes in its international segment are trending about 20% lower in July compared with last year because some markets have temporarily increased restrictions due to rising COVID-19 cases.

It says overall fuel and petroleum product volumes decreased by 14% in the second quarter compared with the year-earlier period but strong fuel margins and convenience store traffic, along with cost cutting, drove an over 30% increase in adjusted earnings in Canada.

Parkland, which sells fuel through more than 2,600 service stations in Canada, the United States and Caribbean, cut its budget to $275 million in March, down from its earlier guidance of $575 million. It says it will restore $50 million to account for stronger cash flow than expected and higher maintenance spending.

“We delivered solid margins, won new business and successfully managed our cash flow by reducing costs and controlling capital expenditures,” said CEO Bob Espey in a statement.

“Our financial and operating performance through the second quarter demonstrates the flexibility and resilience of our diversified business model. While we remain nimble in light of ongoing COVID-19 uncertainty, we are confident in our ability to advance our growth agenda.”


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Forecourt Performance Report 2020

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Choice is now a greater option for both Canadas motoring public and retail fuel operators with more independent petroleum brands and fewer refinery controlled sites coast to coast to coast. This was a key finding in this years National Petroleum Site Census, a watershed study that is done each year by The Kent Group Ltd.

 Based in London, Ontario, The Kent Group Ltd. is a data-driven consultancy that is a leading authority on fuel sector marketing, economics, performance measurement and benchmarking, as well as price/margin reporting/analysis, regulation, and industry economic research and analysis. Since 2004 The Kent Group Ltd. has been the go-to organization for the latest and most complete set of data that describes Canadas retail fueling sector.

Download the full report here

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Parkland teams up with Amazon Web Services to ramp up digital transformation

UnknownParkland Corporation is collaborating with Amazon Web Services to use analytics in order to improve its logistics and enable frictionless commerce.

“We are excited to be teaming up with AWS to advance our strategic priorities and support our ambitious organic growth targets,” Ian White, SVP strategic marketing and Innovation at Parkland, said in a release. “AWS is a renowned global technology leader who is laser-focused on customer experience and innovation.”

The goal, adds White, is to uncover valuable insights into “customers’ needs and preferences to provide enhanced services, products and personalized offers.”

The company says it has been building its internal capabilities to leverage digital technology trends for some time and has identified several technologies and customer-centric opportunities that support organic growth. These include:

  • Loyalty program data optimization (including the Canadian JOURNIE rewards loyalty program) and personalized customer offers;
  • Real-time price optimization using enhanced data feeds and machine learning;
  • Progressing a vision for the convenience store of the future.

Next steps include “monitoring fuel inventories in real-time and optimizing routing and distribution, harnessing digital to help scale the business without adding significant cost and complexity, and improving the speed and efficiency of M&A integration.”

White says that by embracing digital to focus on the customer experience, Parland aims to drive organic revenue growth and margin expansion. “Digital services are changing constantly and teaming up with AWS helps us channel those developments to elevate our customer focus and enhance our core competencies of retailing, customer loyalty, pricing, supply and distribution.”


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BG Fuels to trade as Greenergy following merger

Fuel supplier Greenergy continues to make news. The company entered the Canadian market in 2013 as a price and service-based supplier that offered a unique approach to distribution. This year (February) Greenergy merged with gas and retail operator BG Fuels as they sought to expand in the national market. Now, the company has announced that together they will trade as Greenergy.  

Christian Flach

Christian Flach

“Over recent months our priority has been to support our customers through the challenges associated with COVID-19, while also moving swiftly to integrate our combined Canadian operations into one team,” says Christian Flach, CEO of Greenergy.  “As a fully integrated downstream fuels business, we are now best-placed to extend our presence across Canada and deliver on our ambitious growth strategy in the years ahead.” 

Altogether, Greenergy’s combined Canadian business now has significant capability and expertise spanning the whole supply chain, from fuel origination, infrastructure, and supply to gas and convenience retailing. The retail brand portfolio includes both company-owned and independent retailer sites, operating under the Mobil, Mr. Gas, Waypoint, Breakaway, and Inver brands.

 


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Alimentation Couche Tard Q4 profits nearly doubles despite lower revenues

couche-tard2-780x520Alimentation Couche-Tard Inc. beat expectations as it capped its fiscal year with profits nearly doubling in the fourth quarter despite a revenue decrease mainly due lower fuel demand because of COVID-19.

The Laval, Que.,-based convenience store operator reported after markets closed that it earned US$576.3 million or 52 cents per share for the period ended April 26. That compared with US$293.1 million or 26 cents per share a year earlier.

“This year, Couche-Tard became a better, and stronger company,” said CEO Brian Hannasch. “Our agile, decentralized model and advancements in operational excellence allowed us to face the unprecedented challenges of the COVID-19 crisis and fare far better than many other businesses.”

Reporting in U.S. dollars, Couche-Tard results were affected by a pre-tax gain of $41 million on the sale of its U.S. wholesale fuel business, a $22.8 million foreign exchange gain and $4.6 million adjustment on deferred taxes.

Excluding one-time items, adjusted profits were $521 million or 47 cents per diluted share, up from $289 million or 26 cents per share a year earlier.

Revenues decreased 26.1% to $9.69 billion from $13.11 billion, largely due to 34% decrease in fuel volumes.

“We also had a strong fourth quarter with positive traffic trends to begin with before we endured significant decline in traffic and fuel volumes with the pandemic stay-at-home orders implemented across our global footprint,” Hannasch added.

He said customers changed their shopping behaviours by purchasing more at each visit, including more impulse and emergency items.

Implementation of physical distancing measures decreased traffic across its entire network, starting mid-March in Europe and slightly later in North America.

Merchandise product demand shifted during the pandemic, which hurt margins.

Merchandise and service revenues decreased 2.6% to $3.2 billion with same-store revenues falling 0.5% in the U.S., 6.5% in Europe and increased 4.7% in Canada.

Merchandise gross margin decreased 0.9% in the U.S. to 33%, by 1.2% in Europe to 40.6%, and 1.2% in Canada to 31.8%.

Fuel sales declined rapidly during the first weeks after stay-at-home orders, but margins remained healthy.

Same-store road transportation fuel volume decreased 18.3% in the U.S., 13.4% in Europe, and 23.5% in Canada.

The retailer was expected to earn an adjusted profit of 43 cents per share on $9.36 billion of revenues, according to financial markets data firm Refinitiv

For the full-year, it earned $2.35 billion or $2.09 per share on $54.1 billion of revenues, up from $1.83 billion or $1.62 per share on $59.12 billion of revenues in 2019.

The results demonstrated Couche-Tard’s resiliency with better-than-expected same-store sales, said Derek Dley of Canaccord Genuity.

He said the 0.5% decrease in U.S. same-store merchandise sales was much better than his estimate for an eight% decrease.

Fuel margins rose to a record 46.9 cents US in the United States and were high in Europe and Canada as well, Dley added in a research note.

“With consolidation likely to accelerate over the next six to 18 months, in our view, we believe Couche-Tard is in an advantageous position to take advantage of what is likely to become a ‘buyers’ market,” he said.


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Suncor takes flight with AvGas venture

Screen Shot 2020-06-08 at 2.09.56 PMSuncor has teamed with Japanese partners to fund an innovative new project called LanzaJet that will develop sustainable aviation fuel (SAF) and other products.

Suncor Energy Inc., alongside Japan-based trading and investment company, Mitsui & Co., Ltd., will invest (US)$25 million to establish the LanzaJet demonstration plant at Soperton, Georgia.

The facility will be operated as an integrated bio-refinery by LanzaTech using sustainable ethanol sources to produce almost 38 million litres per year of SAF as well as renewable diesel. Hopes are the plant will start production in early 2022. The initial investment is coupled with participation from All Nippon Airways (ANA) and will complement an existing (US)$14 million grant from the US Department of Energy.

Suncor reports it has contracted to take a significant portion of the SAF and renewable diesel produced at the facility to provide its jet fuel and distillate customers. “These products are very complementary to our existing product mix and we see growth potential in both North American and international markets,” says Mark Little, President and CEO of Suncor. “Suncor is committed to both a low carbon future for our own business and to helping our customers, including in the space of commercial aviation, realize their vision of a sustainable future.”

Heading LanzaJet as CEO is Jimmy Samartzis, an aviation industry veteran who was pulled from his role as a Director with the Fermi National Accelerator Laboratory.

 

The LanzaJet process can use any source of sustainable ethanol for jet fuel production, including, but not limited to, ethanol made from recycled pollution, the core application of LanzaTech’s carbon recycling platform. Commercialization of this process, called Alcohol-to-Jet (AtJ) has been years in the making, starting with the partnership between LanzaTech and the US Energy Department’s Pacific Northwest National Laboratory (PNNL). PNNL developed a unique catalytic process to upgrade ethanol to alcohol-to-jet synthetic paraffinic kerosene (ATJ-SPK) which LanzaTech took from the laboratory to this pilot project.

Contact OCTANE editor Kelly Gray at Kgray@ensembleiq.com


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

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Shutterstock

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.