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Oil price crash expected to hit oilsands production

Price crash hitting oil patch

Record low prices for oilsands crude could result in up to 20 per cent of Canada's thermal bitumen production being shut down over the next few months, according to analyst Matt Murphy of Tudor Pickering Holt & Co.

That would equate to about 340,000 barrels per day of the 1.7 million bpd produced by projects that use steam to loosen the heavy, sticky oil and allow it to be pumped from wells in northern Alberta, he said.

"It's certainly a tough time for Western Canada producers right now," said Murphy.

Western Canadian Select oil, bitumen blended with lighter oils to allow it to flow in a pipeline, fell to a record low of US$4.58 per barrel on Friday morning as New York-traded West Texas Intermediate dropped to US$21.55.

After removing the cost of blending, Murphy estimates the price that flows through to the producer is about 83 cents per barrel, a level at which no producer can be profitable.

The steep decline over the past few weeks is due to weakness in U.S. Gulf Coast demand for WCS, he said, as higher production from Saudi Arabia floods the market and refineries buy less crude in anticipation of lower demand because of the COVID-19 pandemic.

Companies are also expected to announce cuts in conventional heavy oil production as they prepare to release first-quarter financial results starting next month, he said.

Canada's oilsands are among the most vulnerable to shut-ins because of their high operating costs, said Fraser McKay, vice president, upstream, for Wood Mackenzie, in a report Friday.

"The oilsands require an unenviable US$45 per barrel Brent, on average, to cover the cost of production before capex," he wrote. (Brent was trading at just less than US$25 on Friday.)

"If Brent averages US$35 per barrel for 2020, we expect corporate cash flow from the sector to be US$17 billion in the red."

He said that would cost the Alberta government almost US$2 billion in royalties.

Because cutting back production in the oilsands is technically difficult, he added, the sector will do everything it can to trim costs first.

Earlier this week, oilsands giant Suncor Energy Inc. announced it would cut $1.5 billion from its 2020 capital program.

In view of low bitumen prices, it plans to go from two production trains to one at its 194,000-bpd Fort Hills oilsands mine, essentially halving output, and will delay returning its MacKay River thermal oilsands project to service until at least May after it was shut down in December due to an operational problem.

Last week, Baytex Energy Corp. announced it would stop producing about 3,500 bpd of low- or negative-margin conventional heavy oil, while reducing its 2020 production forecast by 8,000 barrels of oil equivalent per day.

Cenovus Energy Inc. has announced a 32 per cent cut in spending that would result in a six per cent reduction in planned production from its thermal oilsands operations.

More barrels are expected to be placed in storage if prices remain low, Murphy said, a situation that, in part, led to Alberta's imposition of production curtailments last year as a glut of oil in Western Canada prompted steep price discounts.

Western Canadian Select prices averaged US$27.28 a barrel in February, almost 40 per cent lower than the average in February 2019.



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Pandemic sees many postponing funerals, delaying grief

Grief waits, funerals delayed

B.C. families needing support when a loved one passes away will continue to receive services from funeral homes, crematoriums and cemeteries during the COVID-19 pandemic.

Thursday, the province declared these services essential, which means they will be encouraged to keep operating even if the pandemic requires more business shutdowns and personal isolation.

But how funeral services will be held — and even if they will be held — continues to challenge service providers as they stick to physical distancing rules required by the provincial health authority to reduce the spread of the novel coronavirus.

Many people are choosing to hold virtual services, where they webcast a graveside funeral service with no more than 10 people attending or record it for distribution later, while some are simply postponing services.

According to Jason Everden, president of the BC Funeral Association, the vast majority of people are postponing their funeral services during the pandemic. He gave no numbers but said many online obituaries are stating funerals are being delayed.

“A lot of people are postponing funeral services, which is not great — that just postpones grief,” Everden said.

Whether online or in the paper, many obituaries are stating flatly that due to COVID-19 there will be no funeral, some say family members only or a service will be held in the future "when safe."



Rental support leaves landlords in precarious position: advocate

Landlords left in the lurch

A B.C. emergency-response rental package that could balloon above $1 billion over the next 90 days will leave landlords exposed to huge losses, according to agents and LandlordBC.

Tenant advocates are openly wondering if it even makes sense to pay rent.

In a response to the COVID-19 crisis, the March 25 announcement by the provincial government will end virtually all rental evictions – including those currently in process – freeze rental increases, and pay $500 direct to landlords to help tenants battling job and income losses over the next three months.

Despite the good intentions, many say the unprecedented program is wide open to abuse.

The new rental supplement is in addition to federal and provincial programs announced to offer financial aid to those who lose income due to the health crisis.

Mark Goodman, a multi-family real estate specialist with Goodman Commercial Inc. Vancouver, estimates B.C.'s rental aid package could add up to more than $1 billion over the next three months, but argued it is landlords who could end up paying the most. The $500 paid directly to the landlord will not compensate for losses from the rental increase freeze, Goodman said.

This is particularly evident in Metro Vancouver, he said, where the average rent is now more than $2,300. 

While the $500 payment direct to landlords is welcome, David Hutniak, CEO of LandlordBC, said that, with no potential for evictions, landlords have little protection if a tenant refuses to pay the balance.

“This is wide open to potential abuse,” Hutniak said. He hopes common decency will keep abuses in check.

“Two-thirds of landlords in Metro Vancouver are mom-and-pop situations,” Hutniak said, which includes people renting out a basement suite or a condominium to help cover the highest mortgage costs in the country. These owners are also struggling during the current crisis, Hutniak said.

“We have heard advocates speak about landlords getting mortgage deferrals so they can 'pass those savings on to renters.' But a mortgage deferral by a bank does not constitute any savings to the landlord. It has to be paid back with compound interest on the deferred amount.  In other words, interest upon interest," Hutniak explained. Any deferred amount is added to the mortgage principal, whereas a landlord doesn’t have any security for deferred rent from a tenant, he noted.

"It is the government’s expectation that all renters, including those renters impacted by the COVID-19 crisis, who have the capacity to pay rent do the responsible thing and pay their rent,” Hutniak added.



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Pipeline builder cuts workforce for spring thaw with eye on virus

GasLink reduces workforce

Coastal GasLink says it has reduced its workforce in Northern B.C. by two thirds over the last month, and that its ramp-down will continue next week.

There were 1,200 working on the pipeline project in February, which had been reduced to 400 by the end of last week, the company said Thursday. The ramp-down will continue next week ahead of the spring thaw and as winter construction is completed, the company said.

"To ensure our construction footprint is safe and secure during the spring thaw, we will continue to employ residents and local contractors to perform critical activities, including environmental monitoring, pipe delivery and stockpile," the company said in a statement.

"Local contractors will undertake some off right-of-way site preparation and maintenance as the spring thaw does not impact it."

In Northeast B.C., just under 70% of the 670-kilometre Coastal GasLink route had been cleared as of March 19, according to the company website.

Progress west of Prince George varied from 0% on section seven from south of Houston to north of Morice Lake, to 38 per cent on section six from south of Burns Lake to south of Houston, to 66% on section eight from north of Morice Lake to Kitimat to 83% on section five from north of Vanderhoof to south of Burns Lake to 98% on section four from north of Prince George to north of Vanderhoof.

With spring breakup around the corner, the company expects a significantly lower workforce to be on site before resuming clearing and beginning pipe installation this summer.

Smaller crews will be at work along the route and ensuring that workers and nearby communities are safe through its COVID-19 protection measures, said Coastal GasLink.

This includes having workers who are considered non-essential to working along the route at this time work from home instead. It also is continuing to work with provincial and local authorities on COVID-19 management.

With the rapid developments around the COVID-19 situation, the company said it would continue to monitor the situation and take appropriate actions to maintain a safe work environment, minimize the risks of virus spread and ensure the safe operation of the pipeline and safe construction of the expansion project.



Reitmans lays off most its retail workers, some head office staff

Reitmans lays off most staff

Reitmans (Canada) Ltd. is laying off 90 per cent of its Canadian retail store workers and 30 per cent of its Montreal head office employees after closing stores amid the spread of COVID-19.

The company, which employs about 7,000 people, says that nearly all of its Canadian retail store workers at its five chains will be out of work effective Sunday. The head office layoffs take effect Monday.

Reitmans, which closed its 587 stores March 17, says it's asking remaining employees to contribute to on-going cost-saving initiatives.

In addition to its namesake Reitmans stores, the company's other banners include Penningtons, Addition Elle, RW&CO. and Thyme Maternity.

CEO Stephen Reitman says in a statement that the company has "never had to turn to such drastic measures" in its more than 90-year history.

Reitmans says its e-commerce business and Montreal distribution centre continue to operate.



Boston Pizza International laying off half its corporate staff

Layoffs at Boston Pizza

Boston Pizza International Inc. is temporarily laying off approximately half of its 192 corporate staff across its three offices in Canada.

The company says the cuts are due to a significant decline in business caused by the COVID-19 pandemic.

Boston Pizza closed all of its dining rooms and sports bars across Canada last week, including those in areas where such closures were not yet been mandated, in an effort to slow the spread of the novel coronavirus.

The company says virtually all of its nearly 400 independently and locally owned restaurants have had to make similar decisions to layoff staff as they adjust to take out and delivery only.

It says franchisees in some locations have chosen to temporarily close altogether.

Boston Pizza Royalties Income Fund temporarily suspended its monthly distributions earlier this week.



Stocks open lower on Wall Street following three-day rally

Markets give back gains

Stocks are opening lower on Wall Street as the market gives back some of the gains it piled up over the past three days.

Major indexes are down about 3% in early trading Friday.

The S&P 500 had shot up 17% over the previous three days as traders became hopeful that Congress would pass a $2 trillion coronavirus relief package.

The bill has made it through the Senate and is expected to pass the House soon.

Even after the rally this week the market is down 25% from the peak it reached a month ago. European markets also fell.

The Dow Jones industrial average was down 948.83 points at 21,603.34. The S&P 500 index was down 102.69 points at 2,527.38, while the Nasdaq composite was down 295.66 points at 7,501.88.

Canada's main stock index also fell at the start of trading after rallying this week.

The S&P/TSX composite index was down 542.18 points at 12,828.99.

The Canadian dollar traded for 70.80 cents US compared with an average of 71.04 cents US on Thursday.

Germany's DAX fell 3.2% to 9,687 while the CAC 40 in Paris gave up 4% to 4,363. Britain's FTSE 100 sank 4.6% to 5,551 81.51 after Prime Minister Boris Johnson was diagnosed positive for the COVID-19 virus.

“Rallies don't last forever and clearly investors are happy to call time on this one as we head into another uncertain weekend," Craig Erlam of Oanda said in a report.

“We may have had a good run this week but the weekend can feel like a long time at moments like this and the numbers we're getting from the U.S., which now has more cases than China or Italy, are getting uglier by the day," he said.

Still, Asian markets mostly rose as governments tightened controls on businesses and travel, seeking to contain the pandemic.

Japan's Nikkei 225 index surged 3.9% to 19,389.43, while South Korea's Kospi jumped 1.9% to 1,717.73. The Hang Seng in Hong Kong advanced 0.6% to 23,484.28, while the Shanghai Composite index edged 0.3% higher to 2,772.20. Shares fell in Taiwan but rose in Southeast Asia.

India's Sensex rebounded, gaining 0.7% to 30,148.36 after the central bank slashed its key lending rate to a decade-low 4.4% from 5.15% to help the economy weather a lockdown aimed at beating the outbreak in the world's second most populous country. Sydney's S&P/ASX 200 slipped to 4,842.40.



Bank of Canada cuts key interest rate to 0.25 per cent

Bank rate to just 0.25%

The Bank of Canada is cutting its key interest target by half a percentage point to 0.25 per cent in an unscheduled rate announcement.

In a statement on its website, the central bank says its decision to lower rates is aimed at cushioning the economic shocks from COVID-19 and a sharp drop in oil prices by easing the cost of borrowing.

It adds that providing credit in the economy for businesses that need it should help lay the foundation for the economy’s return to normalcy.

The interest rate cut takes the key rate to what the central bank referred to as "its effective lower bound" or the lowest level that rates can be set.

Bank governor Stephen Poloz is scheduled to discuss the rate cut during a teleconference with reporters this morning.

The central bank is also launching two new programs. One will aim to alleviate strains in short-term funding markets, while the other will see the central bank begin acquiring federal government securities in the secondary market with a minimum of $5 billion per week.



SNC withdraws financial guidance, moves to reduce spending

SNC moves to cut costs

SNC-Lavalin Group Inc. is withdrawing its financial guidance for 2020 as it works to cut costs and manage its cash flow due the COVID-19 pandemic and its impact of the company's operations around the world.

The company says it has been able to continue work with clients from non-office-based locations, and to move work among different jurisdictions as required.

However, it says where it's not possible for employees to carry on productive client work, due to temporary shutdowns or the nature of the client service, actions are being taken, including reduced hours and employee furloughs.

SNC also says all of its executive leadership will be taking a 20 per cent reduction in salary and board members will take a 20 per cent reduction in cash compensation for the second quarter.

In its outlook for 2020, SNC said on Feb. 28 that it expected gross revenue from SNCL Engineering Services, excluding Capital, to grow by a low single digit percentage. Segment earnings before interest, taxed, depreciation and amortization as a percentage of gross revenue, from SNCL Engineering Services, excluding Capital, were expected to be between 10 and 12 per cent.

The company expects to provide an update on its situation when it releases its first-quarter results.



Lumber producer Canfor cuts production and capital spending

Canfor cuts production

Canfor Corp. is cutting production and reducing capital spending as it deals with the COVID-19 outbreak.

The Vancouver-based lumber producer says it has reduced its planned capital spending by $20 million for Canadian and U.S. operations.

Combined with an already lower capital budget for 2020, the company says the move means its capital spending this year will be down about $100 million across lumber operations compared with 2019.

Canfor also says that effective March 30 its Canadian lumber production will be curtailed by about 40 per cent of about 70 million board feet over a three-week period. The cuts will be implemented across several B.C. sawmills through a combination of temporary plant curtailments and reduced operating hours.

In the U.S., Canfor Southern Pine operating capacity will be reduced by about 40 per cent over or about 50 million board feet a four-week period through the implementation of variable shift schedules and reduced operating hours.

And in Europe, Swedish lumber production will be curtailed starting next week at two sawmills by 50 per cent or about 17 million board feet over a four-week period.

"Our principal focus is ensuring the safety and well-being of our people through these unprecedented times, while taking the necessary actions to protect the long-term sustainability of our business," Canfor chief executive Don Kayne said in a statement.



Netflix reduces video quality in Canada to lower internet bandwidth

Netflix bandwidth soars

Netflix is lowering video quality for its subscribers in Canada as it attempts to reduce soaring demands on internet bandwidth.

The streaming giant says it will introduce changes today that are designed to slash its data traffic by 25 per cent as internet service providers deal with a surge in user activity in the midst of the COVID-19 pandemic.

The lower bandwidth streams of Netflix programs should still deliver the usual quality of each plan, the company said, whether it's ultra-high definition 4K, high-definition or standard definition.

In a blog post last week, the company's vice president of content delivery explained that Netflix has many different levels of streaming quality for each title within each resolution tier. With the changes, Ken Florance said Netflix is simply removing the highest bandwidth streams from the platter of options.

The move comes as telecom companies see a rise in data usage while Canadians self-isolate at home and use streaming services more frequently than usual.

Netflix has already introduced bandwidth measures in other parts of the world over the past two weeks. Similar reductions in video quality were made in Europe, India, Australia, New Zealand and some Latin American countries.

The company says it plans to maintain the lower bandwidth measures in Canada for 30 days.



Cruise lines offering perks to lure travellers back

Cruise lines eye restart

The cruise ship industry wants travellers to know it expects to soon be back in business, with some scheduling cruises as soon as April.

To soothe any concerns guests might have regarding the coronavirus pandemic, many are offering guarantees that include either full cancellation refunds or adding extra perks if they rebook.

On March 13, Transport Canada issued a formal health advisory, recommending that Canadians avoid going on cruise ships at this time due to COVID-19 and the health risk it poses, particularly in such close quarters.

The federal government also deferred the start of the cruise ship season in Canada, from April 2 to July 1, at the earliest, for ships capable of carrying more than 500 passengers and crew.

But now the cruise ship industry wants to rebuild. Here’s a quick look last what some of the cruise lines are offering.

American Cruise Line: river cruises

Voluntarily suspended operations until April 30

The new plan includes assurance from American that it will protect Travel Advisor (agents) commissions for bookings impacted by COVID-19. Earlier this month, American proactively rolled out flexible new options for guests and has now bundled them into one simple Travel Advisor Assurance Plan for agents.

This new option offers flexibility to guests for all new and existing bookings on cruises departing through Aug. 31, 2020. Guests opting for this offer have the ability to cancel for any reason up to 24-hours prior to the start of their cruise package and to receive cruise vouchers equal to 100 per cent of the amounts paid.

Guests booked on any cruises that have been suspended by American have the option to receive a full money-back refund or cruise vouchers equal to 125 per cent of all amounts paid for their package.

Globus: Globus, Cosmos, Monograms and Avalon Waterways

Voluntarily suspended operations until April 30

Its new plan provides travellers booked to depart from now through April 30, 2020 the freedom to reschedule their vacation in 2020, 2021 or 2022 to any destination, with any of the Globus family of brands, without incurring cancellation fees.

The plan also offers travellers an additional credit of $50 to $200 CDN per person (depending on which brand they originally booked with) when they reschedule their plans.

Norwegian Cruise Line

Voluntarily suspended operations until April 11

Guests who were booked on suspended cruises with embarkation dates from March 13 through April 11 will automatically receive a 125 per cent or 150 per cent refund (depending on the original cruise date) of their cruise fare in the form of a future cruise credit, which can be applied towards any Norwegian Cruise Line voyage through Dec. 31, 2022. Future cruise credits will be applied to their account by April 1, 2020.

For all cruises through Sept. 30, guests can cancel up to 48 hours prior to their vacation start date and receive a future cruise credit for sailings through December 2022.

For all cruises Oct. 1 and beyond, guests can cancel for a full refund up to 120 days before their cruise.

Other changes include: rigorous pre-embarkation screenings, no-touch temperature checks for all guests and crew, disinfection and sanitization protocols on all ships

Royal Caribbean

Voluntarily suspended operations until May 12

Royal Caribbean will now let guests cancel any cruise that sets sail from now through July 31, 2020. Whether it’s a booking you already have or one you make right now, you’re covered.

As long as guests cancel at least 48 hours before they set sail, they’ll receive a future cruise credit, which can be used toward any cruise that sets sail through Dec. 31, 2021.

Carnival Cruises

Voluntarily suspended operations until April 10

Carnival is also offering full refunds on certain cruises and extra credits up to $600 for guests who reschedule their cruise. 

Staring this year, Carnival will be denying boarding to guests 70 years of age or older unless they have a letter from their physician confirming they are fit to sail. Additionally, all guests will be asked if they have been hospitalized in the past two months or if they have a history of chronic or severe medical conditions.

Chronic conditions are defined as an illness persisting for a long time or constantly recurring, such as diabetes, heart, kidney or lung disease. Additional severe medical conditions include: suppressed immunity (active cancer, taking steroids) or if the person requires oxygen for any reason. Guests with chronic or severe medical conditions will not be allowed to sail.

Holland America

Voluntarily suspended operations until April 15

For cruises departing on or before July 31, 2020, guests can cancel their cruise no less than 48 hours before departure and a future cruise credit will be automatically applied to their mariner number in approximately two weeks — no further action is required.

For bookings made between March 1 and April 30, 2020 on cruises departing Aug. 1 to Oct. 15, 2020, guests must complete a form to receive a future cruise credit.

Canadians who are planning to travel abroad are reminded to consult the Government of Canada’s Travel Advice and Advisories and register with the Registration of Canadians Abroad service.



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