U.S. judge orders review of TransCanada's Keystone XL pipeline route

WASHINGTON (Reuters) - A federal judge in Montana has ordered the U.S. State Department to do a full environmental review of a revised route for the Keystone XL oil pipeline, possibly delaying its construction and dealing another setback to TransCanada Corp (TRP.TO).

For more than a decade, environmentalists, tribal groups, and ranchers have fought the $8-billion, 1,180-mile (1,900-km) pipeline that will carry heavy crude to Steele City, Nebraska, from Canada’s oilsands in Alberta.

U.S. District Court Judge Brian Morris ruled late on Wednesday for the Indigenous Environmental Network and other plaintiffs, ordering the review of a revised pipeline route through Nebraska to supplement one the State Department did on the original path in 2014.

The State Department was obligated to “analyze new information relevant to the environmental impacts of its decision” to issue a permit for the pipeline last year, Morris said in his ruling.

Supporting the project are Canadian oil producers, who face price discounts over transport bottlenecks, and U.S. refineries and pipeline builders.

TransCanada is reviewing the decision, company spokesman Matthew John said. It hopes to start preliminary work in Montana in the coming months and to begin construction in the second quarter of 2019.

The company said this month it expects to make a final investment decision late this year or in early 2019.

The ruling is negative for TransCanada, since it adds uncertainty to timing, said RBC analyst Robert Kwan, and it was important that the pipeline be constructed during the current U.S. presidential cycle.

President Donald Trump is keen to see the building of the pipeline, which was axed by former President Barack Obama in 2015 on environmental concerns relating to emissions that cause climate change.

The White House did not respond to a request for comment. The State Department is reviewing the court’s order, a spokesman said.

The ruling was “a rejection of the Trump administration’s attempt to ... force Keystone XL on the American people,” said Jackie Prange, a lawyer for the Natural Resources Defense Council, an environmental group.

Trump pushed to approve the pipeline soon after he took office, and a State Department official signed a so-called presidential permit in 2017 allowing it to move forward.

However, Morris declined the plaintiff’s request to void that permit, which was based on the 2014 review.

Last year, Nebraska regulators approved an alternative route for the pipeline, which will cost TransCanada millions of dollars more than the original path.

In a draft environmental assessment last month, the State Department said Keystone XL would not harm water supplies or wildlife. That review is less wide-ranging than the full environmental impact statement Morris ordered.

Reporting by Timothy Gardner; additional reporting by Rod Nickel in Winnipeg, Manitoba; Editing by Bernadette Baum and Paul Simao

SOURCE: REUTERS CANADA

Canadian dollar weakens as oil prices and stocks slide

TORONTO (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Wednesday as oil prices fell and a 13-month high for the greenback pressured emerging markets and global stocks.

Stocks have been volatile in recent days due to the prospect of an economic crisis in Turkey spreading to other emerging market countries, particularly those that borrow in U.S. dollars.

The greenback .DXY rose against a basket of major currencies as data showed U.S. retail sales grew more than forecast in July.

Canada exports many commodities and runs a current account deficit so its economy could be hurt if the flow of trade or capital slows.

The price of oil, one of Canada’s major exports, was pressured by a weakening global economic growth outlook and data showing rising U.S. crude inventories. 

U.S. crude oil futures CLc1 were down 1.1 percent at $66.31 a barrel.

At 9:21 a.m. EDT (1321 GMT), the Canadian dollar CAD=D4 was trading 0.4 percent lower at C$1.3117 to the greenback, or 76.24 U.S. cents. The currency, which touched a near 3-week low of C$1.3179 on Monday, traded in a range of C$1.3051 to C$1.3121.

Resales of Canadian homes rose 1.9 percent in July from June, notching the third straight monthly rise but remaining below the highs seen in recent years, the Canadian Real Estate Association said.

Canada’s manufacturing sales data for June is due on Thursday and the July inflation report on Friday.

Canadian government bond prices were higher across a flatter yield curve in sympathy with U.S. Treasuries as government bonds benefited from safe-haven demand.

The 10-year CA10YT=RR rose 29 Canadian cents to yield 2.286 percent. Its yield touched its lowest since July 27 at 2.279 percent.

Energy Deals Decline in Canada as Oil Rally Heals Slump's Scars

  • Companies facing reduced appetite for equity-fueled takeovers
  • Enbridge accounts for almost half of this year’s buying

Investors have been pushing Canadian energy companies to merge so they can cut costs and combine resources. That isn’t going so well this year. The value of deals involving Canadian oil, natural gas and pipeline companies slumped 29 percent to $45.5 billion in the first seven months of the year, according to data compiled by Bloomberg. Exclude $22.3 billion in Enbridge Inc. outlays to absorb subsidiaries, and this year’s decline widens to 64 percent. Driving the drought is an oil rally that’s emboldened management teams to stay the course, as well as a lack of appetite for dilutive share issuances to fund takeovers. The trend is hampering consolidation that observers say is necessary to allow Canadian entities to compete with lower-cost shale drillers in the U.S.

Deals Drought

Rising oil prices have Canadian energy companies holding off on takeovers

“The ability to attack inefficiencies is much greater when there’s one group of people working on an asset rather than two,” said Rafi Tahmazian, who helps manage about C$900 million ($690 million) in energy investments at Canoe Financial in Calgary. “That’s just a better way to go in this world today, where we’re not focused on just growing production, we’re focused on the rate of return.” Tahmazian lays much of the blame for the decline on Canadian government policies, such as carbon taxes, that he says make the nation’s energy sector less competitive with rivals in other countries. A shortage of pipeline capacity in western Canada has also hurt domestic producers because it means they have to sell their crude and gas at discounted prices.

Desperation Eased

In contrast to the Canadian decline, U.S. deals increased 12 percent to $174.8 billion this year through July. Western Canada Select crude climbed 16 percent during the first seven months of 2018, outpacing West Texas Intermediate, the American benchmark. Although prices are still shy of the $100-a-barrel level of 2014, the worst of the slump that saw them dip below $30 is long gone. That’s eased the desperation that drove many Canadian wildcatters to sell when the outlook was dire, said Martin Pelletier, a portfolio manager at TriVest Wealth Counsel in Calgary. "When oil prices move higher, the incentive to sell, or the fear that things are going to get worse, goes away,” Pelletier said. “So management teams start to think, ‘Maybe I don’t need to sell. I can stay in business and compete." Yet bankers are still hesitant to buy new equity in energy producers, depriving them of the capital they need to take over rivals. That’s forced companies to rely heavily on their own stock to pay for transactions. For example, Vermilion Energy Inc. and Baytex Energy Corp. have both arranged all-stock buyouts. Across the Canadian energy landscape, all-stock transactions made up 39 percent of deals this year, compared with just 2.5 percent last year. “Three to five years from now, we’re going to go through another downturn, and a lot of these companies cannot survive,” Canoe’s Tahmazian said. “That could end up making them have to sell in a forced situation at a much lower valuation. It’s important that potential sellers recognize that is a risk for them.”

SOURCE: BLOOMBERG

TSX futures up as oil prices rise

July 30 (Reuters) - Canada's main stock index was on track to open higher on Monday, as energy shares were helped by a steady rise in oil prices. Oil has been rallying almost uninterruptedly for the past two weeks on rising trade tensions between the United States and China and slowing supply from Iran due to looming sanctions. First Quantum Minerals is scheduled to release second-quarter results after the close of markets. September futures on the S&P/TSX index were up 0.25 percent at 7:15 a.m. ET. The Toronto Stock Exchange's S&P/TSX fell 61.78 points, or 0.38 percent, to 16,393.95 on Friday. Dow Jones Industrial Average e-mini futures were up 0.1 percent at 7:15 a.m. ET, while S&P 500 e-mini futures were down 0.02 percent and Nasdaq 100 e-mini futures were down 0.2 percent. TOP STORIES Australia's Jervois Mining has bought almost 5 percent of shares in Ecobalt Solutions Inc , which is developing a high grade cobalt mine in the United States, days after two of its biggest shareholders called for management overhaul. ANALYST RESEARCH HIGHLIGHTS Agnico Eagle Mines Ltd . RBC raises target price to $55 from $49 Barrick Gold Corp . RBC cuts rating to sector perform from outperform Morneau Shepell Inc . CIBC raises price target to C$29 from C$27.25 COMMODITIES AT 7:15 a.m. ET Gold futures : $1221.4; -0.13 percent US crude : $69.94; +1.82 percent Brent crude : $74.88; +0.79 percent LME 3-month copper : $6213; -1.33 percent U.S. ECONOMIC DATA DUE ON MONDAY 1000 Pending Homes Index for Jun: Prior 105.9 1000 Pending sales change mm for Jun: Expected 0.1 pct ; Prior -0.5 pct 1030 Dallas fed manufacturing business Index for Jul: Prior 36.5 FOR CANADIAN MARKETS NEWS, CLICK ON CODES: TSX market report Canadian dollar and bonds report Reuters global stocks poll for Canada Canadian markets directory ($1 = C$1.30) (Reporting by Nayyar Rasheed in Bengaluru; Editing by Anil D'Silva)

Canada to Miss Deadline for Quickly Reselling Trans Mountain Pipeline

By Josh Wingrove, Scott Deveau, and Kevin Orland

July 20, 2018, 10:19 AM CST Updated on July 20, 2018, 11:31 AM CST

About a dozen parties are interested in the Trans Mountain oil pipeline, but the Canadian government won’t reach a deal to flip it before a marketing deadline with Kinder Morgan Inc. closes Sunday, according to people familiar with the situation.

The government’s C$4.5 billion ($3.4 billion) purchase of the pipeline and expansion project gave it to July 22 to co-market the pipeline with an eye to selling it to a third party. A quick sale would have effectively allowed the government to substitute in another buyer for the current deal to be finalized.
 
That deadline Sunday is set to pass. The deal will be finalized with the government as the new owner, and it will seek a new buyer without Kinder Morgan’s help, amid fears of legal and political delays. About a dozen parties have signed non-disclosure agreements as part of the process for a potential resale, and the project is seen likely to end up being bought by a Canadian-led consortium, as opposed to a single buyer, the people said.
 
 

The Trans Mountain sale is scheduled to close in either the late third quarter or early fourth quarter, as the project faces continued opposition from the British Columbia premier and awaits a key court ruling. Kinder Morgan’s Canadian unit declined to comment beyond previous statements that it is working with the government to find a buyer, and it referred questions on the status of those efforts to the government. A spokesman for Finance Minister Bill Morneau declined to directly say if there’d be a sale to a third party by July 22, but said the government won’t hold the pipeline forever.

No ‘Rush’

“We have no interest in being a long-term owner of a pipeline, but we will be the temporary caretaker,” spokesman Daniel Lauzon said by phone, when asked about a sale. “We won’t rush that.”

Finding a third-party purchaser by the Sunday deadline would be difficult because the obstacles that Kinder Morgan cited in its threat to abandon the project still exist, said Kevin McSweeney, a fund manager at CI Investments in Toronto. British Columbia has given no indication it will drop efforts to impose additional regulations on the pipeline, and a court case over the project is still under way, he said. Third-party purchasers are likely to be attracted to the pipeline once those issues are resolved, he said.

“A buyer would be reluctant to take it on for the same reasons that Kinder decided not to go forward,” said McSweeney, who helps manage C$13 billion. “Perhaps someone would be willing to purchase the project at a big discount, but I doubt the government would want to lock in a loss given the political acrimony this file has generated.”

High-Stakes Negotiations

Canada’s purchase of Trans Mountain deal was announced on May 29, and the government has already been marketing the pipeline. A regulatory document filed by Kinder Morgan this month has offered a glimpse of the high-stakes negotiations that led to the pipeline essentially being nationalized as Kinder balked at the political landscape.

On March 6 -- a month before it suspended work -- the company asked for clarity from the government and for a financial backstop arrangement. Talks carried on that month, with the company proposing the government “take specific legislative and executive actions” and agree to a backstop to “indemnify” the company for all expansion costs if it ever abandoned the project. In exchange, the government would have received an option to buy a 5 percent stake in the pipeline for a “nominal consideration.” The government expressed willingness to provide a backstop “subject to numerous conditions,” while the company “emphasized the urgency of the matter.”

The company suspended all non-essential work and spending on April 8. Two days later, government representatives “raised the possibility” of buying a 51 percent stake in the pipeline.

Kinder Morgan then floated the idea of a 100 percent sale, and on April 30, the company proposed a price of C$6.5 billion for the assets, including the existing pipeline and the expansion project.

The government responded on May 8 by presenting two alternative proposals. The first, which the government preferred, was for the company to proceed with construction relying on a government backstop. The second was to bundle the assets -- with the government guarantee -- and try to find a buyer. Under that proposal, if a sale couldn’t be arranged, the government would buy it for C$2.3 billion plus an unspecified share of C$1.1 billion in capital spending so far.

The next day, the board unanimously rejected the proposal, and the day after that, on May 10, Kinder Morgan CEO Steven Kean told Morneau by phone the proposed backstop “was unacceptable to the company because it did not provide certainty with respect to the ability to construct through B.C.” Talks continued. On May 22, the government offered C$3.85 billion, a figure based on an analysis by its financial advisers, Greenhill & Co., and suggested the deal close in December. The company thought that’d be too long.

On May 23, the company countered at C$4.5 billion, which after capital gains taxes would be C$4.2 billion. After a break of several hours, the government agreed on certain conditions, including the 6-week marketing window that elapses on July 22.

Vertex Makes Another Acquisition

An $8.9 million purchase of an Alida based company by Vertex Resource Group. It was announced last week Vertex had purchased Three Star Trucking, an environmental service company that provides fluid hauling, pressure trucks, hot oilers and combo vac services in Western Canada.

Deon Walsh is Vertex’s Vice-President of Environmental Services. He explained the purchase was a good fit.

“We felt it would a be a great geographical and strategic move for us to acquire Three Star Trucking to add into our current geographical footprint and service offering.”

The management team in place at Three Star is expected to stay on, and Walsh stated he is not anticipating any layoffs as a result.

“For us, we truly believe you need to keep the employees and management teams to have success when you do acquisitions,” Walsh added.

This is the fifth acquisition in Western Canada by Vertex this year. The total purchase consists of 2.6 million common shares being issued at $1.00 per share, $4.4 million in cash and $1.9 million in non-interest bearing promissory notes over two years. Vertex also assumed $10.2 million in long-term debt offset by a positive working capital of $6.3 million.

Sale of Canadian refinery falls through as owners clash over price: sources

(Reuters) - The sale of a remote Canadian refinery has been scuttled as two former oil traders running the company locked horns over the value of the plant, according to three people familiar with the discussions.

The partners, former traders Neal Shear and Kaushik Amin, sought to sell the 130,000 barrel-per-day refinery in Come By Chance, Newfoundland last year to privately held Canadian refiner Irving Oil, which was seen as the leading bidder.

The deal fell apart in recent months and is unlikely to be rekindled because Shear and Amin are at odds over the sale price, according to three people familiar with the firm, who spoke on condition of anonymity as the events were private.

Shear was ready to sell to Irving for an undisclosed value that two of the people said was about C$250 million ($191 million). Amin, however, was pushing for a C$400 million price tag, according to the people. Shear’s name has since been removed from the firm’s website, and talks with Irving have been put on hold. There are no longer any immediate plans to try to sell the plant, the people said.

Gloria Warren-Slade, communications manager for the Come By Chance refinery, did not respond to a request for comment.

Irving Oil did not respond to requests for comment.

The refinery’s value has fluctuated widely over the last 12 years. It was sold for C$1.6 billion ($1.2 billion) in 2006 and re-sold for C$930 million three years later, but the two bought it in 2014 for just C$97 million due to a slump in world oil prices.

Having paid less than any other buyer of the plant, Amin and Shear wanted to use Come By Chance as a linchpin for later purchases of other fuel shipping infrastructure globally, or to sell quickly at a profit.

 

Come By Chance’s value for suitors is hampered by its isolated locale, reducing its access to cheap domestic crude that has boosted margins for Gulf Coast or Midwest refiners, and because it lacks the processing scale of larger refineries.

The refinery’s relative proximity to Europe and shorter shipping time to eastern ports in Latin America is an advantage, but it has still been hurt by slimmer margins than other North American refiners.

 

SOURCE:REUTERS

Canadian dollar hovers near three-week high as oil prices rise

TORONTO (Reuters) - The Canadian dollar steadied against its U.S. counterpart on Wednesday while holding near its strongest level in nearly three weeks, as oil prices rose and investors braced for a potential interest rate hike next week from the Bank of Canada.At 3 p.m. EDT (1900 GMT), the Canadian dollar CAD=D4 was trading nearly unchanged at C$1.3142 to the greenback, or 76.09 U.S. cents.

The price of oil, one of Canada’s major exports, was driven higher by a threat to supply from an Iranian commander and a drop in U.S. crude inventories for a second week in a row.

U.S. crude oil futures CLc1 rose 0.3 percent to $74.33 a barrel.

 “Right now we have many problems on the oil supply side ... and we may see high prices for a few more months,” said Hendrix Vachon, senior economist at Desjardins.

The higher price of oil and an expectation in the market that the Bank of Canada will raise interest rates next week have boosted the loonie, Vachon said.

Money markets see about a 70 percent chance of a rate increase at the July 11 announcement.

Expectations have been raised by hawkish comments last week by Bank of Canada Governor Stephen Poloz and recent domestic data that showed business optimism and stronger-than-expected growth in Canada’s economy.

Independence Day celebrations in the United States discouraged traders on Wednesday from taking big positions in major currencies, not least until there is some clarity about where the escalating U.S.-China trade tensions are heading. Washington is due to impose tariffs on Chinese imports at the end of the week.

Also, reduced Canadian oil supplies after a production problem at the Syncrude oil sands facility in Alberta could hurt the country’s economic growth in the third quarter.

Canadian government bond prices were lower across the yield curve, with the two-year CA2YT=RR down 2.5 Canadian cents to yield 1.909 percent and the 10-year CA10YT=RR falling 17 Canadian cents to yield 2.158 percent.

On Tuesday, the 10-year yield touched its highest intraday level in more than two weeks, at 2.204 percent.

Canada’s employment report for June and trade data for May are due out on Friday.

 
Reporting by Fergal Smith; Editing by Frances Kerry and Leslie Adler
 
SOURCE: REUTERS

CAD rebounds from 1-year low; oil surge counters domestic data

(Recasts with effect of oil prices; adds comment; updates prices) * Canadian dollar at C$1.3276, or 75.32 U.S. cents * Loonie touches its weakest level in a year at C$1.3384 * Price of U.S. oil rises 4.6 percent * Bond prices higher across a steeper yield curve By Fergal Smith TORONTO, June 22 (Reuters) - The Canadian dollar gained against the greenback on Friday, recovering from an earlier one-year low, as a jump in oil prices offset domestic inflation and retail sales data that crimped expectations for a Bank of Canada interest rate hike next month. At 4 p.m. EDT (2000 GMT), the Canadian dollar was trading 0.3 percent higher, at C$1.3276 to the greenback, or 75.32 U.S. cents. After the data, the currency touched its weakest intraday level since June 12, 2017, at C$1.3384. "It has been quite a ride for the Canadian dollar," said Shaun Osborne, chief currency strategist at Scotiabank. "I think most of that is due to the fact that oil prices have ground higher after the OPEC agreement." The price of oil, one of Canada's major exports, soared after the Organization of the Petroleum Exporting Countries and other top crude producers agreed to just modest crude output increases. U.S. crude oil futures settled 4.6 percent higher at $68.58 a barrel. Canadian retail sales fell 1.2 percent in April, the largest drop in more than two years, and inflation remained at 2.2 percent. While the inflation rate was above the central bank's 2.0 percent target, markets had expected an uptick to 2.5 percent. Chances of a Bank of Canada interest rate hike at the July 11 announcement fell to less than 50 percent from 69 percent before the data, the overnight index swaps market indicated. The market may now be underestimating the likelihood of a hike because the data was impacted by poor weather and the Bank of Canada is forward looking, Osborne said. "Other indicators generally suggest the economy is doing OK and price pressures are likely to pick up, particularly looking at wages and the general tightness in the labor market," he said. For the week, the loonie fell 0.7 percent after being pressured by an uncertain outlook for trade. Still, speculators have cut bearish bets on the Canadian dollar for a second straight week, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed. As of June 19, net short positions dipped to 14,014 contracts from 14,988 a week earlier. Canadian government bond prices were higher across a steeper yield curve, with the two-year up 5 Canadian cents to yield 1.799 percent. The 2-year yield fell 3.2 basis points further below its U.S. equivalent to a spread of -74.6 basis points, its widest gap since March 2007. (Reporting by Fergal Smith Editing by Phil Berlowitz and Leslie Adler)

SOURCE: REUTERS

Canada's Baytex to buy oil producer Raging River for C$2.8 billion

(Reuters) - Baytex Energy Corp will buy rival Raging River Exploration Inc for C$2.8 billion ($2.13 billion), the Canadian oil and gas producer said on Monday, becoming the latest company to bet big on Canada’s vast shale reserves.

Oil producers have made a beeline for the Duvernay and Montney formations, known for their light oil which is easier to refine and cheaper to produce than northern Alberta’s oil sands crude.

Seven Generations and Encana Corp are already among the leading Canadian producers operating in the two regions, while Chevron Corp announced its first Canadian shale development in the Duvernay in November.

The oil sands boom dates back two decades, when improved technology, rising crude prices and fears of global oil shortages sparked a rush to develop the world’s third-largest reserves.

However, in the last five years, much of that investment has migrated south as U.S. shale firms pioneered new drilling techniques and flooded global oil markets with cheaper-to-produce crude.

Earlier this year, the Canadian heavy oil discount widened significantly against the West Texas Intermediate (WTI) as growing oil stockpiles couldn’t be moved out of the resource-rich province of Alberta due to transport bottlenecks.

After the announcement of Monday’s deal, shares of both companies fell and analysts pointed to investor skepticism about the all-stock deal and a low premium for Raging River shareholders.

The Baytex deal, the second all-stock acquisition in the Canadian oil industry this year after Vermilion Energy’s buyout of Spartan Energy, sends investors the message that capital is not available for large-scale cash transactions, said Lyndon Dunkley, an analyst at Beacon Securities.

Baytex’s offer — 1.36 Baytex shares for each Raging River share — represents a 10 percent premium to Raging River’s Friday closing price, according to Reuters calculations.

The premium was much lower than investors’ expectations, Dunkley said. “It’s just not what we believe the market was expecting as an outcome for the strategic repositioning process (Raging River) announced in March,” Dunkley added.

Raging River has since March explored strategic options for its business, including selling certain assets.

The combination of Baytex and Raging River will be led by Baytex Chief Executive Officer Edward LaFehr once the deal closes in August, Baytex said.

 

The companies expect to produce a combined 100,000 to 105,000 barrels of oil equivalent per day in 2019 and expect capital expenditure of between C$750 million and C$850 million.

Reporting by Parikshit Mishra and John Benny in Bengaluru; Editing by Sriraj Kalluvila and Shounak Dasgupta

SOURCE: REUTERS

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