Husky Energy weighs sale of some offshore assets in Eastern Canada, which could fetch billions, sources say

TORONTO/CALGARY — Canadian oil and gas producer Husky Energy Inc is weighing paring down its stakes in some of its Eastern Canadian offshore assets, in a move that could fetch as much as several billion dollars, people familiar with the talks told Reuters.

The company, which is controlled by Hong Kong billionaire Li Ka-shing, finds the assets less attractive in a low oil price environment, making it challenging to generate profits, the people said. Husky could invest the sale proceeds in South America, Africa or Asia, the people added.

The sources cautioned that the talks are at an early stage and Husky may decide not to proceed with the divestitures if it does not get attractive offers.

When asked about the potential sale on the company’s earnings call, Chief Executive Rob Peabody said Husky’s Atlantic operations were an important part of its portfolio and declined to comment on what he said was speculation.

Husky’s offshore assets include White Rose, seen as its crown jewel in the region, as well Flemish Pass and Terra Nova. Husky could potentially sell down stakes in Terra Nova, where it has a 13 per cent working interest, and Flemish Pass, but is also considering paring down ownership in White Rose, the people added.

Offshore projects started to fall out of favour with some producers during the energy downturn as they often require a greater investment, making it harder for companies to make the financial dynamics work.

Husky began producing oil from the Atlantic region in 2005. Production averaged 34,300 barrels per day in the fourth quarter.

© Thomson Reuters 2017

Ottawa is now $14 billion in the red, compared with a $3.2 billion surplus last year

OTTAWA — The federal government ran a budgetary shortfall of $14 billion over the first nine months of the fiscal year, compared with a $3.2-billion surplus over the same period a year earlier.

The Finance Department’s monthly fiscal monitor says federal program expenses between April and December rose $16.7 billion, or 8.8 per cent, compared with the same stretch a year ago.

A closer look at the numbers shows that major government transfers to individuals, including seniors benefits, were up $5.7 billion, or 9.3 per cent, while direct-program spending rose $8.9 billion, or 11.3 per cent.

Government revenues, such as those pulled in from income taxes, were down $1.9 billion or 0.9 per cent compared with 2015-16.

The Trudeau government is projecting a $25.1-billion deficit for 2016-17 as part of its plan to run several double-digit shortfalls over the coming years in an effort to lift the economy through infrastructure investments and larger child benefits.

The Finance Department also says Ottawa posted a $1.3-billion deficit in December alone — compared to a $2.2-billion surplus in December 2015.

Canada’s inflation rate spikes to two-year high as gas prices soar 20%, the biggest hike in six years

OTTAWA — Canada’s annual inflation rate unexpectedly jumped to 2.1 per cent in January, its highest for more than two years, on a surge in gasoline prices, Statistics Canada data indicated on Friday.

Analysts polled by Reuters had forecast an annual rate of 1.6 per cent, below the Bank of Canada’s 2.0 per cent target. The January rate was the highest since the 2.4 per cent recorded in October 2014.

The main reason for the increase was a 20.6 per cent year-on-year jump in gasoline prices, the largest yearly increase since September 2011. Consumers paid 2.4 per cent more for shelter while food prices slipped by 2.1 per cent from January 2016.

All three new measures of core inflation the Bank of Canada established late last year showed underlying inflation below 2.0 per cent. CPI common, which the central bank says is the best correlation to the output gap, was furthest away from target, slipping to 1.3 per cent from 1.4 per cent.

CPI median, which shows the median inflation rate across CPI components, remained at 1.9 per cent while CPI trim, which excludes upside and downside outliers, increased to 1.7 per cent from 1.6 per cent.

© Thomson Reuters 2017

Magna International Inc profit misses expectations as costs rise and sales slide

Canadian auto parts maker Magna International Inc. reported a lower-than-expected quarterly profit as costs rose.

Aurora, Ontario-based Magna said the cost of goods sold jumped 7.7 per cent to US$7.90 billion in the fourth quarter ended Dec. 31.

Magna, which is primarily an auto parts supplier, also assembles cars under contract from motor vehicle manufacturers. Its biggest customers include General Motors Co, Volkswagen AG, BMW and Ford Motor Co.

Vehicle assembly sales in the quarter fell about 30 per cent to US$439 million.

The company said it expects total 2017 sales to be between US$36.0 billion-US$37.7 billion, compared with sales of US$36.45 billion in 2016.

Net income attributable to Magna rose to US$478 million, or US$1.24 per share, in the fourth quarter, from US$476 million, or US$1.17 per share, a year earlier.

Excluding items, the company earned US$1.31 per share, missing the average analysts’ estimate of US$1.36, according to Thomson Reuters I/B/E/S.

Magna’s total sales rose 8 per cent to US$9.25 billion, beating estimates of US$9.23 billion.
© Thomson Reuters 2017

RBC boosts dividend after profit surges 24% to $3 billion, beating expectations

TORONTO — Royal Bank of Canada boosted its first-quarter net income by 24 per cent to $3.03 billion.

That’s compared to the $2.45 billion of net income that RBC had during the first quarter of last year.

The Toronto-based bank said its net income was equal to $1.97 per diluted share for the quarter, up 39 cents from $1.58 per diluted share a year ago.

Revenue for the three months ended Jan. 31 was $9.55 billion, up from $9.36 billion during the same period last year.

After adjustments the lender had $1.87 per share of earnings, higher than the $1.77 per share that analysts had expected, according to Thomson Reuters.

After stripping out the sale of the U.S. operations of Moneris, RBC said it earned $2.82 billion, up 15 per cent from $2.45 billion a year ago.

The bank also boosted its dividend by four cents, or five per cent, to 87 cents per share, payable on May 24.

“RBC reported earnings of $3 billion for the first quarter reflecting strength across our businesses as we continued to invest in growth,” Dave McKay, RBC president and CEO, said in a statement.

“As the operating landscape evolves, we are focused on our strategy of building a digitally-enabled relationship bank to meet the changing expectations of our clients.”

Loblaw’s profit climbs as sales and earnings grow despite lower food prices

TORONTO — Loblaw Cos. Ltd. saw sales and earnings growth in the fourth quarter despite the downward drag of food price deflation.

The country’s largest food and drug retailer reported net earnings attributable to common shareholders of $204 million in the period ended Dec. 31, or 50 cents per share, up from $131 million, (31 cents), in the same period a year ago.

Revenue was $11.1 billion, up 2.4 per cent from $10.9 billion in the fourth quarter of 2015.

Loblaw reported same-store sales growth, a bellwether of retail performance that strips out square footage changes, rose 1.1 per cent. At Shoppers Drug Mart, same-store sales growth climbed 3.4 per cent.

“We continued to lower prices, delivering more value to consumers,” said Galen Weston, CEO of Loblaw. “Our focus on our strategic framework and financial plan delivered solid financial performance in the fourth quarter and demonstrated the strength of our portfolio of businesses amidst a highly competitive food retail environment, and pressures from healthcare reform.”

Adjusted net earnings were in line with analyst estimates, rising to $393 million, or 97 cents per share, an 11.5 per cent jump from last year’s quarter when earnings were $363 million (87 cents).

Grocers have been trying to compete more aggressively on price and drum up more customer traffic as food prices have been going down across the board. Loblaw said its internal food price index declined but was slightly lower than the average quarterly national food price deflation of 2.3 per cent as measured by the national Consumer Price Index.

Loblaw said the improved net earnings resulted from underlying operating performance improvements of $30 million as well as $43 million in adjusted items in the prior year.

The operating improvements included higher sales, stable margins and lowered expenses in Loblaw’s retail division, growth in the credit card portfolio of its financial services segment, and expansion of Loblaw’s Choice Properties property portfolio.

CIBC hikes dividend as profit beats expectations led by gains in capital markets

Canadian Imperial Bank of Commerce beat analysts’ estimates after posting higher first-quarter profit led by gains in capital markets. The firm raised its quarterly dividend 2.4 per cent to $1.27 a share.

Net income for the period ended Jan. 31 climbed 43 per cent to $1.41 billion or $3.50 a share, from $982 million, or $2.43, a year earlier, the Toronto-based firm said Thursday in a statement. Profit excluding some items was $2.89 a share, beating the $2.57 average estimate of 15 analysts surveyed by Bloomberg.

“CIBC delivered strong performance across retail and business banking, wealth management and capital markets,” Chief Executive Officer Victor Dodig, 51, said in the statement.

Earnings were led by a 52 per cent profit surge from its capital-markets operation and helped by a $245 million gain from selling 89 retail sites mainly in Ontario and British Columbia, which the bank disclosed in December. CIBC said adjusted earnings, which exclude the gain, rose 13 per cent to $1.17 billion. The dividend increase is the ninth in the past 10 quarters.

CIBC set aside $212 million for bad loans, down from $262 million a year earlier, the company said. Revenue rose 17 per cent to $4.21 billion, beating analysts’ expectations.

Wealth Management

Earnings from retail and business banking, CIBC’s largest division, rose 39 per cent to $953 million, helped by the gain on selling properties. Wealth management climbed 12 per cent to $133 million. The lender’s capital-markets division had $371 million in profit, up from $244 million on higher trading revenue and lower loan losses.

CIBC reached a record high of $118.20 in Toronto trading Wednesday and the stock has risen 7.9 per cent this year, compared with the 7.5 per cent gain of the eight-company S&P/TSX Commercial Banks Index.

CIBC provided no updates on its $4.17 billion bid to buy Chicago-based PrivateBancorp Inc. in the earnings report. The bank’s offer, which is now at a 10 per cent discount to PrivateBancorp’s share price, still needs approval from PrivateBancorp shareholders.

CIBC is the first Canadian bank to report quarterly results. The country’s eight largest lenders are expected to lift per-share operating profit by an average of 7 per cent from a year earlier, according to Scotia Capital analyst Sumit Malhotra. Royal Bank of Canada is scheduled to post results Friday, with the remaining lenders reporting next week.

Bloomberg.com

Emails reveal EPA’s new chief was arm in arm with industry to fight environmental regulations

Newly installed EPA Administrator Scott Pruitt closely coordinated with major oil and gas companies, refiners and groups linked to the billionaire Koch brothers to combat environmental regulations during his time as Oklahoma attorney general, according to thousands of pages of e-mails released Wednesday.

The documents, released under court order to the Center for Media and Democracy, a nonprofit watchdog, follow a pitched battle over whether Pruitt should lead the Environmental Protection Agency, culminating in a narrow 52-46 vote Friday to confirm him.

The documents show Pruitt collaborated with the top U.S. refining trade group to mount an attack on annual biofuel quotas in 2013. According to an analysis by the center, the American Fuel and Petrochemical Manufacturers group provided Pruitt with drafted sample language for an Oklahoma petition.

Sandy Huffaker/AFP/Getty Images

Sandy Huffaker/AFP/Getty ImagesProtesters display signs in support of the environment in San Diego after the U.S. Senate confirmed fossil-fuel ally and global warming skeptic Scott Pruitt to head the Environmental Protection Agency.

An Oklahoma judge ordered the release of the e-mails on Feb. 16 to the Center for Media and Democracy, which had been seeking the documents since January 2015. Pruitt was narrowly confirmed by the Senate on Friday and sworn in to lead the EPA, the same agency he repeatedly sued while Oklahoma attorney general.

In a July 13, 2013 e-mail, AFPM asks Pruitt to file a petition with the EPA challenging biofuel quotas. “We think it would be most effective for Oklahoma to file a separate waiver petition that emphasizes ‘severe environmental harm,’ as this argument is more credible coming from a state,” an AFPM representative told Pruitt.

A total of 7,564 pages were released by the Center on Wednesday.

“Despite repeated attempts by Pruitt and the Oklahoma AG’s office to stonewall CMD and the public, we’ve won a major breakthrough in obtaining access to public records that shine a light on Pruitt’s emails with polluters and their proxies,” said Nick Surgey, research director for the Center.

The Oklahoma Attorney General’s office said it has gone beyond the requirements of the Open Records Act.

“This broad disclosure should provide affirmation that, despite politically motivated allegations, the Office of the Attorney General remains fully committed to the letter and spirit of the Open Records Act,” the office said in a statement.

Some of the e-mails illustrate Pruitt’s administration’s contact with the Oklahoma Council of Public Affairs, a self-described think tank conducting research and analysis of public issues in the state “from a perspective of limited government, individual liberty and a free-market economy.”

In 2013, Pruitt’s staff solicited then-OCPA President Michael Carnuccio’s participation in a “short social media video to highlight his leadership in the Affordable Care Act lawsuit.” Carnuccio agreed to make himself available, according to a Dec. 3, 2013 message from one of his staffers.

Bloomberg.com