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Canada’s oil price woes reaching an ’emergency situation,’ Cenovus CEO says

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The head of one of the country’s largest oilsands producers says Canada’s oil price woes are reaching an « emergency situation, » and on Wednesday saw his company’s call for production cuts echoed by a competitor. 

Oil « is a provincial resource and… we’re giving it away for free, » Cenovus Energy CEO Alex Pourbaix said on CBC Calgary’s morning show, The Eyeopener.

« Nobody is making money at this price and this is rapidly becoming an emergency situation in the economy. »

Pourbaix made the comments following his company’s calls for the Alberta government to mandate temporary production cuts to help deal with an oil glut and pipeline bottlenecks that are weighing heavily on many producers.

The value of Western Canadian Select is tracking roughly $40 per barrel less than the U.S. benchmark. On Wednesday it was at $15.75 US a barrel, compared to $56.18 US for West Texas Intermediate.

Calgary-based Cenovus is blaming political setbacks for the failure to build pipelines, urging the province to take action.

That sentiment was echoed Wednesday by Canadian Natural Resources executive vice chairman Steve Laut, said his company is « fully supportive of curtailments » by all Alberta producers.

« It’s something that has worked in the past, » Laut told CBC News. 

Laut noted that then-premier Peter Lougheed cut output in 1980, a point also raised by Cenovus. 

« It just makes total sense. It’s the simplest, cleanest and most effective way to ensure Albertans get value for resources and end the subsidies to U.S. buyers, » Laut said. 

Analysts have said that while many Canadian oil companies can’t seem to catch a break on prices, some American refineries are enjoying a « heyday » because of the price differential. 

If the whole sector reined in production, Laut believes there probably would be a market response almost immediately from the psychological effect of the news. 

« But I think, depending on what size of curtailment they used, it could be within 30 to 50 days, » for the strategy to correct the supply-demand problem, Laut said.

Canadian Natural Resources executive vice chairman Steve Laut told CBC News that the company is ‘fully supportive of curtailments’ by all Alberta producers. (Larry MacDougal/Canadian Press)

CNR said recently it has already cut production by up to 15,000 barrels per day and could increase that figure to as much as 55,000 this month and in December.

Canadian prices crashed in September because of a backlog of oil in Alberta.

The Fort McMurray region has increased production throughout this year, but export pipelines are full and several refineries in the U.S. which process heavy oil from Alberta, have shut down for maintenance.

Some industry experts now expect low prices for Canadian heavy crude could persist into 2020, though more export pipeline space is expected once Enbridge’s Line 3 replacement project is complete in about 12 months.

The situation has stung many Alberta producers, with one estimate pegging the cost to the sector at $100 million a day.

But some observers have noted that not all companies are affected the same way and it would be difficult to get everyone to agree on output cuts.

Large integrated companies would not be affected like companies without refineries or other options for their oil productions, said Warren Mabee, an expert on energy policy at Queen’s University.

Suncor president and CEO Steve Williams told analysts this month that the market is working. (Jeff McIntosh/Canadian Press)

Indeed, Suncor’s CEO said this month his company has full pipeline access to market for all of its production.

« That was a strategic decision we made, » Steve Williams said in a financial call with analysts.

« I have a great deal of sympathy for where the market is, and I understand the pressure that others are under. We invested for this circumstance to make sure it had — it’s not a zero impact but minimal impact on us.

« So what’s happening is, the market is working. The higher cost producers are having to pull back because they’re not making any margin on their last barrel. We are not in that circumstance. »

The provincial government has so far said little about the call for mandated production cuts.

On Wednesday, it reiterated its position that Premier Rachel Notley is fighting to build new pipelines and pushing Ottawa to step up and help fix the backlog in rail shipments.

However, spokesman Mike McKinnon said in an email that « we’re not ruling out any options. »

In Calgary on Wednesday, the federal natural resources minister said he shares Albertan’s « frustration » at billions of dollars being lost to the Canadian economy due to oil price discounts linked to export pipeline capacity constraints.

Federal Natural Resources Minister Amarjeet Sohi said Ottawa is focused on finding long-term solutions for the oil sector. (CBC/Scott Neufeld)

But Amarjeet Sohi said Ottawa is focused on finding long-term solutions by getting approval for new export pipelines such as the Trans Mountain pipeline expansion project it bought in August.

Asked about an Alberta request in October for the federal government to support crude-by-rail shipments, Sohi said the Alberta request is being examined by his department but he hasn’t actually seen it.

« My department is engaging with provinces, we are engaging with other federal departments, to see what can can be done in the short term, » Sohi told reporters. 

« But as you know, more than 200,000 barrels of oil is shipped through rail now and that is going up. What we need to do, we need long-term solutions. »

With files from The Canadian Press

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‘Business as usual’ for Dorel Industries after terminating go-private deal

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MONTREAL — Dorel Industries Inc. says it will continue to pursue its business strategy going forward after terminating an agreement to go private after discussions with shareholders.

« Moving ahead. Business as usual, » a spokesman for the company said in an email on Monday.

A group led by Cerberus Capital Management had previously agreed to buy outstanding shares of Dorel for $16 apiece, except for shares owned by the family that controls the company’s multiple-voting shares.

But Dorel chief executive Martin Schwartz said the Montreal-based maker of car seats, strollers, bicycles and home furniture pulled the plug on a deal on the eve of Tuesday’s special meeting after reviewing votes from shareholders.

“Independent shareholders have clearly expressed their confidence in Dorel’s future and the greater potential for Dorel as a public entity, » he said in a news release.

Dorel’s board of directors, with Martin Schwartz, Alan Schwartz, Jeffrey Schwartz and Jeff Segel recused, unanimously approved the deal’s termination upon the recommendation of a special committee.

The transaction required approval by two-thirds of the votes cast, and more than 50 per cent of the votes cast by non-family shareholders.

Schwartz said enhancing shareholder value remains a top priority while it stays focused on growing its brands, which include Schwinn and Mongoose bikes, Safety 1st-brand car seats and DHP Furniture.

Dorel said the move to end the go-private deal was mutual, despite the funds’ increased purchase price offer earlier this year.

It said there is no break fee applicable in this case.

Montreal-based investment firm Letko, Brosseau & Associates Inc. and San Diego’s Brandes Investment Partners LP, which together control more than 19 per cent of Dorel’s outstanding class B subordinate shares voiced their opposition to the amended offer, which was increased from the initial Nov. 2 offer of $14.50 per share.

« We believe that several minority shareholders shared our opinion, » said Letko vice-president Stephane Lebrun, during a phone interview.

« We are confident of the long-term potential of the company and we have confidence in the managers in place.”

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Pandemic funds helping Montreal businesses build for a better tomorrow

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Many entrepreneurs have had to tap into government loans during the pandemic, at first just to survive, but now some are using the money to better prepare their businesses for the post-COVID future.

One of those businesses is Del Friscos, a popular family restaurant in Dollard-des-Ormeaux that, like many Montreal-area restaurants, has had to adapt from a sit-down establishment to one that takes orders online for takeout or delivery.

“It was hard going from totally in-house seating,” said Del Friscos co-owner Terry Konstas. “We didn’t have an in-house delivery system, which we quickly added. There were so many of our employees that were laid off that wanted to work so we adapted to a delivery system and added platforms like Uber and DoorDash.”

Helping them through the transition were emergency grants and low-interest loans from the federal and provincial governments, some of which are directly administered by PME MTL, a non-profit business-development organization established to assist the island’s small and medium-sized businesses.

Konstas said he had never even heard of PME MTL until a customer told him about them and when he got in touch, he discovered there were many government programs available to help his business get through the downturn and build for the future. “They’ve been very helpful right from day one,” said Konstas.

“We used some of the funds to catch up on our suppliers and our rents, the part that wasn’t covered from the federal side, and we used some of it for our new virtual concepts,” he said, referring to a virtual kitchen model which the restaurant has since adopted.

The virtual kitchen lets them create completely different menu items from the casual American Italian dishes that Del Friscos is known for and market them under different restaurant brand names. Under the Prasinó Soup & Salad banner, they sell healthy Greek options and their Stallone’s Sub Shop brand offers hearty sandwiches, yet the food from both is created in the same Del Friscos kitchen.

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Downtown Montreal office, retail vacancies continue to rise

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Some of downtown Montreal’s key economic indicators are heading in the wrong direction.

Office and retail vacancies in the city’s central core continued to climb in the fourth quarter of 2020, according to a quarterly report released Thursday by the Urban Development Institute of Quebec and the Montréal Centre-Ville merchants association. The report, whose first edition was published in October, aims to paint a socio-economic picture of the downtown area.

The survey also found office space available for sublet had increased during the fourth quarter, which may foreshadow even more vacancies when leases expire. On the residential front, condo sales fell as new listings soared — a sign that the downtown area may be losing some of its appeal to homeowners.

“It’s impossible not to be preoccupied by the rapid increase in office vacancies,” Jean-Marc Fournier, the former Quebec politician who now heads the UDI, said Thursday in an interview.

Still, with COVID-19 vaccinations set to accelerate in the coming months, “the economic picture is bound to improve,” he said. “People will start returning downtown. It’s much too early to say the office market is going to disappear.”

Public health measures implemented since the start of the pandemic almost a year ago — such as caps on office capacity — have deprived downtown Montreal of more than 500,000 workers and students. A mere 4,163 university and CEGEP students attended in-person classes in the second quarter, the most recent period for which figures are available. Border closures and travel restrictions have also brought tourism to a standstill, hurting hotels and thousands of local businesses.

Seventy per cent of downtown workers carried out their professional activities at home more than three days a week during the fourth quarter, the report said, citing an online survey of 1,000 Montreal-area residents conducted last month.

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