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Parkland ramps up growth the latest U.S. acquisition

Screen Shot 2020-11-16 at 1.10.47 PMParkland Corporation has announced it will acquire the assets of Richfield, Utah-based Sevier Valley Oil Company (SVO).

Based in Richfield, Utah, SVO is a well-established retail and commercial fuel business with annual fuel and petroleum product volume of approximately 350 million litres. SVO’s primary operations are in Southwestern Utah, along with a presence in Northern Utah and Colorado. The acquisition of SVO adds seven retail locations and over 20 retail dealers in addition to robust diesel and lubricant distribution capabilities.

“We continue to expand our US footprint and execute on our growth strategy,” says Doug Haugh, president of Parkland USA. “This acquisition meaningfully expands our retail presence in rapidly growing Southern Utah and presents a fantastic opportunity to leverage our North American On the Run convenience store brand, enhance our customer proposition and drive incremental value.”

“The acquisition strongly complements our existing Rockies Regional Operating Center and positions us for further organic and acquisition growth in neighbouring Nevada and Arizona,” added Haugh. “We are delighted to welcome Garrett Ekker and the SVO team to Parkland and look forward to the continued growth of our USA business.”

This acquisition is consistent in value with Parkland’s previous U.S. transactions. Funding for the deal will come from existing credit facility capacity. The transaction is expected to close in the fourth quarter of 2020. 


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New deal set for Atlantic refinery

Prospects looking brighter following Irving departure 

UnknownWorkers at North Atlantic Refining Ltd. site at Come By Chance, N.L. may see their luck change. The refinery had been set to sell to Irving Oil when the deal collapsed this October. Now U.S.-based Origin International, a Maryland company involved in oil recycling, has made a formal offer to purchase the assets of the company that include the refinery.
The deal, between Silverpeak, owner of North Atlantic Refining, and Origin International, was announced last week. Terms are still undefined as the two sides hammer out details. Expectations are that once the ink dries, Origin International will ramp refinery production back to full capacity with a full complement of workers.
As little as two weeks ago, Origin International CEO Nicholas Myerson asked that the facility be kept on ‘warm idle’ to make the transition to new ownership an easier task. “Origin is finalizing a plan that would have all employees back to work immediately after a transaction, with a restart for the plant in the second quarter of next year,” the company said at the time.
The North Atlantic Refining facility at Come By Chance employs 500 workers. The plant refines 135,000 bbl. per day of crude and contributes as much as 5% of the GDP of Newfoundland and Labrador.
OCTANE editor Kelly Gray can be reached a Kgray@ensembleiq.com

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‘Bleak’ drilling forecast calls for even fewer Canadian oil and gas wells in 2021

The Petroleum Services Association of Canada says it expects another “bleak” year for Canadian oil and gas drilling in 2021.

It says it expects a total of 2,600 wells will be drilled in Canada next year, down from its expected total of 2,850 wells in the current year. Both numbers represent more than 50-year lows for activity.

PSAC cut its 2020 Canadian drilling forecast three times over the past 10 months as oil prices fell early in the year due to global overproduction and then fell again as the COVID-19 pandemic eroded demand for fuel.

The forecast for 2021 is 47% lower than the 4,900 wells drilled in 2019.

It calls for fewer wells to be drilled in Alberta and Saskatchewan but more in British Columbia and about the same number in Manitoba and in Eastern Canada.

PSAC interim CEO Elizabeth Aquin says the slump in drilling is entering its sixth year and has been “devastating” for oilfield services companies and employees.

“These are the companies and people with the skills and expertise for responsible resource development, that innovate and create new technology to continue to reduce environmental footprint and contribute to the transition to a low-carbon future,” she said.

“Without work and income, however, their capacity to do so is thwarted.”


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Irving backs away from refinery deal

Workers to find out this week about jobs at Come By Chance

UnknownLast May (2020), Irving Oil announced they would purchase the Come By Chance oil refinery owned by the New York-based investment group Silverpeak. At that time Irving had big plans that would see the company tap into Newfoundland and Labrador offshore oil resources.

 This October, sources were telling media that Irving had backed out of the agreement to purchase the Placentia Bay, N.L. refinery. Workers received notice from plant operator North Atlantic Refining on October 5.

North Atlantic Refining Ltd. has stated that the closure of the facility is not yet a done deal. There are reports of another party interested in the facility. Origin International Inc.,a Maryland-based US company that specializes in recycling used oil, has released a statement indicating its interest.Management also plans to work to reduce costs further in a last-ditch attempt before turning off the lights and letting the 500 employees and contract workers go. The plant refines 135,000 bbl per day of crude and contributes as much as 5% of the province’s GDP.

The Come By Chance facility has a storied past. It began operation in 1973 but was bankrupt by 1976 with owner Shaheen Resources leaving creditors with $500 million in debt, a figure that was among the largest credit failures in Canadian history to that time.

In 1980, Petro-Canada picked up the site for a mere $10 million. However, rather than reactive the plant, Petro-Canada decided to sell it to Bermuda-based Newfoundland Energy Limited in 1986 for the sum of $1. The group reopened the refinery following upgrades the next year.

The deal with Petro-Canada stipulated that the plant could not supply the Canadian market (except for Nfld & Labrador) and product was largely sold into the US. Newfoundland Energy operated the plant at a profit until 2006 when it sold the facility to Calgary’s Harvest Energy Trust for $1.6 billion. North Atlantic Refinery Limited

OCTANE editor Kelly Gray can be reached at kgray@ensembleiq.com


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Suncor announces staff reductions

Pandemic and markets force 0il company’s hand

UnknownCalgary-based Suncor Energy Inc. told employees last week that it will reduce its workforce by 10% to 15% over the next 18 months. It is expected that this reduction could involve as many as 2,000 positions across the country and will impact both salaried and contract positions.

According to Suncor CEO Mark Little, workers would see an initial 5% staff reduction over the next six months. Currently, Suncor employs 12,889 persons at its facilities that include exploration and petroleum extraction, refining, and retail distribution. 

The company reports that behind the reduction is a series of initiatives at cost-cutting, cash flow, and competitive market position. Internally the plan was called Suncor 4.0. Expectations were that the program would result in a smaller, more market-tuned workforce. Speaking to media, Suncor stated that the unprecedented drop in oil prices, the impact of the global pandemic and economic slowdown, as well as market volatility, had them accelerate the plan.

The company says much of the workforce reduction could come through early retirements or voluntary severance packages. Workers could also be redeployed in other areas of the business.

Suncor is the third major oil co., behind Shell and Marathon, to announce staff reductions this September. Already this year, the Canadian Association of Petroleum Producers reports 28,000 direct job losses in oil & gas with another 107,000 indirect positions lost.


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Energy sector looking for aid and regulation delays as throne speech looms

Canada’s fossil-fuel sector is looking to this month’s throne speech for signs the federal government is not throwing in the towel on oil and gas.

At the same time Canadian climate strikers are threatening mass protests if the same speech doesn’t show a plan to eliminate all greenhouse-gas emissions produced by human activities in less than a decade.

Screen Shot 2020-06-08 at 5.12.34 PMTim McMillan, president of the Canadian Association of Petroleum Producers, says Prime Minister Justin Trudeau can use the throne speech Sept. 23 to send a signal to international investors that Canada’s oil and gas industry is a solid opportunity for investment.

He says the planned clean-fuel standard meant to force oil and gas companies to emit less greenhouse gas is out of whack with Canada’s main competitors for that investment and if the new standard isn’t postponed, many companies will simply not be able to comply.

Earlier this year Ottawa scaled back the requirements of the standard over the first few years to give companies more time to recover from the economic crisis caused by COVID-19, but McMillan says that is not enough.

Trudeau is also, however, facing pressure from thousands of Canadian youth in the Climate Strike Canada movement who say the throne speech is Trudeau’s “last chance” to convince them he really is a climate-change leader.


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2020’s crude price crash offers a bright spot for natural gas producers

InvestorRelations-NewsReleasesVeteran oilman Mike Rose says he doesn’t want to “jinx it,” but he admits it’s not so bad heading the company that last year became the biggest producer of natural gas in Canada.

While many oil companies have curtailed production and chopped capital budgets to deal with a massive drop in demand for crude this year, Tourmaline Oil Corp. has been buying assets, running a fleet of 10 drilling rigs and reporting production at the high end of guidance.

“On the oil side, that’s where the crisis was in March and April, and there was hue and cry from all governments and industry,” said Rose, who has been CEO of Tourmaline since its founding in 2008.

“But the reality is we’ve had horrible gas prices for five years and it didn’t seem to be as big a crisis. The gas producers that survived have figured out how to survive very low prices for extended periods of time. So that’s partly why we’re a little healthier.”

Natural gas has been considered by many as little more than an unprofitable byproduct for more than a decade, as the North American shale gas boom launched billions of cubic feet of the heating fuel on markets, driving down prices.

Gas economics got worse five years later when the technology was adapted to extract crude oil from tight underground shale formations in Canada and the United States, a technique that also freed more billions of cubic feet of associated natural gas.

When the twin crises of the Russia-Saudi price war and COVID-19 outbreak hit earlier this year, oil producers stopped drilling and shut down producing wells to avoid selling at a loss.

In turn, the sudden withdrawal of gas byproducts created a shortage, sending prices higher.

Futures contracts at the Alberta marketing hub for gas to be delivered next year have recently surged to a nearly four-year high of about $2.75 per thousand cubic feet -for comparison, Tourmaline’s break-even price is about $1.75.

“In many ways, for the gas producers, what’s bad for oil is good for gas,” said Jordan McNiven, an analyst for Tudor Pickering Holt & Co.

A seasonal increase in gas demand this winter, combined with an expected recovery in global liquefied natural gas demand as economies recover from the pandemic, is expected to spur North American gas prices even higher, analysts say.

“We’re constructive on the gas quote. We could see reasons why it could flex higher,” said Robert Fitzmartyn, head of energy institutional research at Stifel FirstEnergy.

The rise of natural gas has been noticed at Canadian Natural Resources Ltd., the Calgary-based oilsands giant that was Canada’s top gas producer before being dethroned last year.

In May, Canadian Natural announced it would reboot drilling on its long-ignored natural gas fields to add about 60 million cf/d to its long-standing output of around 1.4 billion cf/d.

Earlier this month, it doubled down on that interest by announcing a $461-million deal to buy Calgary rival Painted Pony Energy Ltd., which produces 270 million cf/d of natural gas in northeastern B.C.

“When we went into this year we thought prices would be a little more depressed,” said Canadian Natural president Tim McKay in an interview after its second-quarter results were released last week.

“They’ve been quite strong and that gives us the opportunity to ramp up some volumes.”

The oil price crash is reflected in share prices. As of Tuesday, the only positive stock year-to-date of the 16 oil and gas producers on the S&P/TSX Capped Energy Index is Tourmaline, up 6.77% since Jan. 1.

The remainder have dropped between 20 and 70%, with ARC Resources Ltd., primarily a natural gas producer, down by the least amount with a 19.3% loss.

Last week, Tourmaline reported second-quarter production of more than 299,000 barrels of oil equivalent per day, up seven% over the same period last year, composed of 61,800 bpd of oil and liquids and 1.425 billion cubic feet of natural gas.

It reported its average gas price was up 16% but its average oil and liquids price fell by 41%.

Second-quarter cash flow -arrived at by subtracting operating and maintenance costs from revenue -came to $225 million, in line with $226 million in the same quarter of 2019. It expects $1.05 billion in cash flow this year on an $800-million capital budget.

The company aims to reach more than 322,000 boe/d by year-end after drilling 42 new wells in the third quarter and bringing on 57 more in the fourth. It estimates its 2020 average gas production will be 1.5 billion cf/d.

In April, Tourmaline completed the acquisition of Chinook Energy Inc. for $24.5 million and it bought several assets in northwestern Alberta for a total of $38.3 million.

Asked if there are more acquisitions to come, CEO Rose said, “Oh yeah. Potentially.”

He said Tourmaline’s success hinges on strict control over costs, careful marketing to extract every possible penny from every cubic foot of gas and never getting too deep in debt.

On the latter front, he predicts the company will pay down enough debt to achieve an enviable debt-to-cash-flow ratio of 1:1 or lower sometime this year, if prices hold up.

“Fortunately, finally, we’re looking at a pretty strong gas price recovery for 2021 and hopefully that extends into 2022,” he said.

“It’s looking a lot more positive on the natural gas side than it has for a while. But I don’t want to jinx it.”


File photo: Jeff McIntosh Canadian Press

Suncor CEO signals caution about restarting oil output as economy recovers

The CEO of Suncor Energy Inc. says the company won’t quickly ramp up oil production despite recent higher crude prices as the North American economy begins to reopen following the easing of lockdowns from the COVID-19 pandemic.

Mark Little says he won’t “bet the financial health” of the company on the nascent recovery, listing a host of risks including the possibility of a second wave of virus outbreaks.

On a conference call to discuss second-quarter results, Little reiterated his contention that the energy sector recovery will be led by consumers of its refined products, with higher demand for fuel translating into more demand for oil.

Little says Suncor’s refinery utilization rate of 76% in the three months ended June 30 (allowing crude throughput of 350,400 barrels per day), was well ahead of industry averages, and credited that to its ability to assess customer needs through its wholesale and retail networks, including its Petro-Canada service stations.

Suncor’s total production was 655,500 barrels of oil equivalent per day during the second quarter, 18.5% less than the 803,900 boe/d in the prior year quarter, as it took measures including shutting down one of the two production trains at its 194,000-bpd Fort Hills oilsands mine in northern Alberta.

Little said putting the second train back in service depends on oil prices, the ongoing Alberta oil output curtailment program which has prevented full production at Fort Hills and Suncor’s ability to control costs.

“During the second half of 2020 we see continued strengthening of downstream (refining) demand in gasoline and diesel to more seasonal levels by the end of the year,” said Little.

“Given the high level of global crude inventories and the return of production which was shut in during the second quarter, we expect (oil) pricing and crude spread volatility to remain through 2020, although obviously not as extreme as we saw in the second quarter.”

It reported a second-quarter net loss of $614 million or 40 cents per share, down from net earnings of $2.73 billion or $1.74 per share in the same period of 2019, but ahead of analyst expectations of a net loss of $1.28 billion, according to Refinitiv.


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PrairieSky Royalty reports lower second quarter crude oil production

Oil production is beginning to recover after it was curtailed by an average of 30% in the second quarter due to low crude prices, PrairieSky Royalty Ltd. said Tuesday.

The Calgary-based company, which earns revenue by sharing in production from lands for which it holds the petroleum mineral rights, said it produced 18,670 barrels of oil equivalent per day in the three months ended June 30, down 16% from the first quarter.

No new wells were started on its properties in the three months ended June 30 but there are signs that activity will pick up later this year as oil pricesstrengthen, said CEO Andrew Phillips on a conference call.

“We do expect greater activity than we would have two months ago… I don’t know that will show an effect for us in the back half of this year, but it certainly will improve in 2021,” he said.

PrairieSky’s production shortfalls are expected to be a common theme as larger oilpatch players including Suncor Energy Inc. and Cenovus Energy Corp. roll out second quarter results later this week.

Producers in Western Canada are estimated to have shut down wells producing more than 800,000 barrels per day of oil at times in the second quarter due to plunging prices amid the economic downturn associated with the COVID-19 lockdowns.

Crude oil production at PrairieSky fell by 30% to 6,035 barrels per day over the quarter from 8,740 bpd in the year-earlier period as its average realized price fell to C$24.31 per barrel from C$65.48.

PrairieSky says as much as 40% of its oil output was curtailed in May.

Natural gas output was down 7.5% from the second quarter of 2019 despite the average price rising from 74 cents per thousand cubic feet to $1.39.

The company’s second quarter production revenue was $25.1 million, off by 39% compared with the first quarter of 2020 and 60% from the second quarter of 2019.

PrairieSky reported a net loss of $400,000 or zero cents per share in the quarter, compared with a net profit of $44 million or 19 cents in the year-earlier period, largely matching analyst expectations.

Its stock rose by as much as seven% to $8.90 on the Toronto Stock Exchange on Tuesday.

The company reported completing $6 million in royalty interest acquisitions in northeastern B.C. during the quarter and added it is continuing to look for expansion opportunities.


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Western oil heads east

UnknownThe first shipment of Alberta crude from British Columbia tidewater is on its way to the Irving Oil refining facility in Saint John. The route will take the Panama-flagged tanker, Cabo de Hornos, 11,900 kilometres from Burnaby, B.C. via the Panama Canal to New Brunswick.

The petroleum, sourced through Alberta energy company Cenovus, comes just two months after Irving announced it would seek greater Western Canadian resources for its East Coast facilities following the demise of the Energy East Pipeline project. The (CAN) $12 billion Energy East Pipeline was proposed by TransCanada (TC) Pipelines in 2013 and would have travelled 4,600 kilometres to points in Quebec and New Brunswick. If completed the line would have been among the world’s longest and would have carried 1 million barrels of Alberta and Saskatchewan crude per day. Following the election of the Trudeau government, the project was scrapped in 2017, leaving Eastern Canadian-based operators, such as Irving, to continue to source both refined and raw petroleum from the U.S. and other markets.

Now, using the Panama Canal route Irving will see the 229-metre Cabo de Hornos vessel arrive July 14 at refinery receiving docks in Saint John. After the Energy East Project was shelved, Irving approached the Canadian Transportation Agency (CTA) this spring (April) to ask for permission to use foreign tankers in an effort to increase the amount of domestic crude Irving gets from offshore Newfoundland and Western Canada. Approval was granted in May and Irving got busy making arrangements.

Irving has reported that it was importing the vast majority of its refinery inputs from sites in the U.S. and was using about 20% Canadian petroleum in its operations. In its application to the CTA Irving Oil stated that they sought to lessen their reliance on foreign petroleum at their Saint John facility, which is Canada’s largest refinery with a daily processing capacity of 320,000 barrels per day.

“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,” said Irving Oil chief refining and supply officer Kevin Scott.

OCTANE editor Kelly Gray can be reached at Kgray@ensembleiq.com.