Author: Consultant

CALGARY, AB, Mar. 1, 2023 /CNW/ – Tourmaline Oil Corp. (TSX:TOU.TO) (“Tourmaline” or the “Company”) is pleased to release financial and operating results for the full year and fourth quarter of 2022, as well as 2022 reserves.

Read more at newswire.ca

HIGHLIGHTS

• Full-year 2022 cash flow⁽¹⁾ (“CF”) was a record $4.9 billion ($14.26 per diluted share⁽²⁾) up 67% over 2021. Fourth quarter 2022 CF was $1.4 billion ($4.08 per diluted share).
  
• Tourmaline generated a record $3.2 billion of free cash flow⁽³⁾ (“FCF”) in 2022.
  
• Full-year 2022 after tax net earnings were $4.5 billion ($13.10 per diluted share).
  
• Tourmaline paid $7.90/share in base and special dividends to shareholders in 2022, a 12% trailing yield⁽⁴⁾ based on an average 2022 share price of $66.94.
  
• Tourmaline’s proved plus probable (“2P”) reserve value per diluted share⁽⁵⁾⁽⁶⁾ before tax is $143 ($109 after tax) using the January 1, 2023 engineering price deck and a 10% discount rate. Total proved (“TP”) and proved, developed producing (“PDP”) reserve values per diluted share are $97 and $54 before tax, respectively ($75 and $44 after tax, respectively) using the same pricing and discount rates.
  
• Full-year 2022 average production of 500,832 boepd was up 14% over 2021 average production of 441,115 boepd.
  
• Current production is ranging between 520,000-530,000 boepd, consistent with the expected first quarter average.
  
• At current strip pricing⁽⁷⁾, the Company expects to generate 2023 cash flow of $3.8 billion ($11.12 per diluted share) and free cash flow of $2.0 billion ($5.72 per diluted share) on unchanged EP capital expenditures⁽⁸⁾ of $1.675 billion (as per January 12, 2023 news release). Based on a current share price of $60, Tourmaline is trading at an approximate 10% free cash flow yield⁽⁹⁾.
  
• Exit 2022 net debt⁽¹⁰⁾ was $494 million (0.1 times Q4 2022 annualized cash flow) and well below the Company’s long-term net debt target of $1.0-1.2 billion.
  
• Year-end 2022 PDP reserves of 1.001 billion boe were up 25%, TP reserves of 2.32 billion boe were up 14% and 2P reserves of 4.50 billion boe were up 10% over year-end 2021, after including 2022 annual production of 183 million boe.
  
• Tourmaline replaced 240% of its 2022 annual production of 183 million boe with 2P additions of 440 million boe including 2022 production, with 88% of the addition from the organic EP program.
  
• After 14 years of operations, Tourmaline now has 20.7 Tcf of 2P natural gas reserves, the largest in Canada and one of the largest, lowest development cost, lowest emission natural gas reserve bases in North America.
  
• In January 2023, Tourmaline began delivering gas to the US Gulf Coast, becoming the first Canadian EP company participating in the LNG business with full exposure to JKM (Japan Korea Marker) pricing.

George Weston Ltd. (WNGRF) on Wednesday reported a loss of $76.6 million in its fourth quarter.

On a per-share basis, the Toronto-based company said it had a loss of 61 cents. Earnings, adjusted for non-recurring costs, came to $1.91 per share.

The baked goods maker and parent of the conglomerate Loblaw posted revenue of $10.42 billion in the period.

For the year, the company reported profit of $1.4 billion, or $9.35 per share. Revenue was reported as $43.88 billion.

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This story was generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on WNGRF at https://www.zacks.com/ap/WNGRF

Seattle-based Nordstrom began to wind down outlets in British Columbia, Alberta and Ontario on Thursday by filing for creditor protection. As part of the court-supervised process, the company has shut down its e-commerce platform and plans to hire a liquidator. The chain plans to close its six Nordstrom and seven Nordstrom Rack stores by the end of June.

“We entered Canada in 2014 with a plan to build and sustain a long-term business there. Despite our best efforts, we do not see a realistic path to profitability for the Canadian business,” said chief executive officer Erik Nordstrom in a press release.

Nordstrom expects to take a US$300-million to US$350-million charge as it closes down Canadian operations. Founded in 1901, the retailer has 350 North American outlets. Its major Canadian competitors include the seven-outlet Holt Renfrew chain, owned by the Weston family, and Toronto-based Hudson’s Bay Co., which also runs Saks Fifth Avenue.

George Minakakis, a retail consultant, said Canada isn’t large enough to support so many high-end department stores chains.

“I’ve always felt that the Canadian market was oversaturated with department stores, because the depth isn’t there and the economy isn’t there, and on the high end there’s just not enough deep pockets,” he said.

Over the past three months of 2022, a period that includes the critical holiday shopping season, customers trimmed their spending at Nordstrom. The chain’s overall sales fell by 4 per cent compared with the previous year, while revenue at discount outlet Nordstrom Rack dropped by 8 per cent.

In addition to closing Canadian operations, Mr. Nordstrom said: “We took decisive actions to right-size our inventory as we entered the new year, positioning us for greater agility amidst continuing macroeconomic uncertainty.”

In a sign of how much money Nordstrom was losing in Canada, the company said closing the stores will lower its projected 2023 sales by US$400-million, but improve its earnings before interest, taxes, depreciation and amortization by US$35-million.

Discount retailer Target Corp. shuttered 133 stores in 2015, laying off 17,000 employees and taking a US$5.4-billion loss. Target moved into Canada by acquiring leases from Hudson’s Bay unit Zellers, which closed down. Hudson’s Bay is now bringing back the Zellers brand.

In November, home improvement chain Lowe’s Cos. Inc. sold its Canadian operations, including the Rona chain, to a private equity fund manager for US$400-million, after spending US$2.4-billion in 2016 to acquire Rona. Lowe’s faced stiff competition from Home Depot Inc. and St. Jacobs, Ont.-based Home Hardware Stores Ltd.

Nordstrom’s exit will mean empty space and lost lease payments for mall owners across the country. The chain has six outlets in Toronto and region, two stores in each of Ottawa and Calgary, and single stores in Edmonton, Langley, B.C., and Vancouver.

The chain’s biggest landlord is Cadillac Fairview Corp. Ltd., the real estate arm of Ontario Teachers’ Pension Plan, which owns properties that are home to five Nordstrom stores, including an anchor location in the Toronto Eaton Centre.

Nordstrom’s landlords also include Ivanhoé Cambridge, with two stores, and Oxford Properties, which has one Nordstrom outlet. Ivanhoé is owned by Caisse de dépôt et placement du Québec while Oxford is the real estate arm of the Ontario Municipal Employees Retirement System.

Twenty per cent of Canadian Imperial Bank of Commerce mortgage holders are seeing their loan balances grow, as rising interest rates make it harder for them to pay off their homes.

New data from CIBC show that $52-billion worth of mortgages – the equivalent of 20 per cent of the bank’s $263-billion residential loan portfolio – were in a position where the borrower’s monthly payment was not high enough to cover even the interest portion of the loans. The bank has allowed these borrowers to stretch out the length of time it takes to pay off the loan, which is known as the amortization period. As well, borrowers are adding unpaid interest onto their original loan or principal.

The disclosure, contained in a footnote in CIBC’s recent quarterly financial results, is the first from a major bank outlining the amount of variable-rate loans where payments no longer cover interest costs.

It shows the financial duress homeowners are under because of the jump in interest rates. It also highlights the growing risk borrowers face when it comes time to renew their mortgages and their amortization periods are required to shrink back to the lengths of time specified in the original contracts. Then, the borrower will face much higher monthly payments.

“It’s absolutely a sign of stress to come. It’s just the stress isn’t here yet,” said Mike Rizvanovic, financial services analyst with investment bank KBW.

CIBC and most of the other big Canadian banks offer variable-rate mortgages that have fixed monthly payments. That means when interest rates increase, more of the borrower’s fixed monthly payment is used to cover the interest expense. The borrowers’ payments remain steady because their amortization periods are automatically extended.

Number of private mortgages growing as Canadians struggle to secure traditional loans, FSRA warns

Borrowers can reach a trigger rate, which often requires them to make higher monthly payments so that they are always reducing the size of their loan.

But CIBC’s variable-rate product allows borrowers to go past the trigger rate and stick with payments that don’t cover the full amount of the interest owed, up to a certain threshold. The unpaid portion of the interest is deferred and added to the mortgage principal and the borrower’s loan balance grows, or negatively amortizes.

Asked whether borrowers with negative amortizations will be able to handle the higher mortgage payments at renewal time, CIBC pointed to comments its chief risk officer said on its recent conference call.

“At this time, we still only see a small portion, less than $20-million, of mortgage balances with clients we see as being at higher risk from a credit perspective,” Frank Guse said.

“We actively monitor our portfolios and pro-actively reach out to clients who are at higher risk of financial stress,” he said according to a transcript provided by CIBC. “Overall, our mortgage portfolio is well positioned and continues to perform well within our expectations.”

At least two other major lenders, Toronto-Dominion Bank and Bank of Montreal, offer similar products that allow mortgages to negatively amortize. However, TD and BMO did not provide any disclosure on the share of borrowers that have a negative amortization. TD did not respond to a query on the matter. BMO spokesman Jeff Roman said its “reporting methodologies are in accordance with industry guidelines.”

CIBC’s filing, for the first quarter that ended in January, is the only one to provide increased transparency on the impact of higher interest rates on its variable-rate portfolio. The same filing said that in the fourth quarter, $39-billion worth of mortgages were negatively amortizing. That grew to $52-billion in the first quarter, said the footnote in the filing. Last summer, the bank said its borrowers were not yet putting unpaid interest onto the principal.

“Higher mortgage rates have resulted in a greater portion of fixed-payment variable mortgages where the monthly mortgage payment does not cover interest and principal,” said Nigel D’Souza, financial services analyst with Veritas Investment Research. “The full impact of higher mortgage rates will be reflected on renewal,” he said.

Today, the Bank of Canada’s benchmark interest rate is 4.5 per cent compared with 0.25 per cent a year ago.

The most recent quarterly filings from the big banks show that a chunk of their mortgage loans have amortization periods of more than 30 years.

At BMO, the proportion of residential mortgages with amortization periods longer than 30 years reached 32.4 per cent in January. At CIBC, the percentage was 30 per cent. At TD it was 29.3 per cent and at Royal Bank of Canada, it was 25 per cent, according to their regulatory filings.

Mr. D’Souza said the payment increase or shock at the time of renewal will be higher for negatively amortizing mortgages compared with variable-rate products that do not have fixed monthly payments and have faced payment increases with every Bank of Canada interest rate hike.

LondonCNN — 

Russian oil is still finding its way to buyers around the world. But even those who spend their days tracking its movement across oceans struggle to work out exactly who is ferrying it.

As Western sanctions against Russia have escalated over its invasion of Ukraine, more ships have joined an existing fleet of mysterious tankers, ready to facilitate Russia’s oil exports.

Industry insiders estimate the size of that “shadow” fleet at roughly 600 vessels, or about 10% of the global number of large tankers. And numbers continue to climb.

Who owns and operates many of these ships remains a puzzle. As trading Russian oil became more complex over the past year, many Western shippers withdrew their services. New, obscure players swooped in, with shell companies in Dubai or Hong Kong involved in some cases. Some bought boats from Europeans, while others tapped old, creaking ships that might have otherwise ended up in the scrapyard.

“You’ve gone deeper into the dark arts,” a senior executive at an oil trading firm told CNN, referring to this opaque network.

The under-the-radar fleet has increased in importance as Moscow tries to avoid working with Western shippers, and as customers in China and India supplant those in Europe, now banned from purchasing seaborne Russian oil and refined products such as diesel. Delivery to more distant buyers requires additional boats — and ship owners willing to deal with added complexity and legal risk, especially after Group of Seven countries imposed price caps on Russian oil.

https://edition.cnn.com/2023/03/01/business/russia-oil-shadow-fleet/index.html

U.S. crude oil inventories rose for the 10th week in a row, surging to their most since May 2021, but record U.S. exports of crude oil kept the build smaller than in recent weeks, data from the U.S. Energy Information Administration showed on Wednesday.

Crude inventories rose by 1.2 million barrels in the week ending Feb. 24 to 480.2 million barrels, compared with analysts’ expectations in a Reuters poll for a 500,000-barrel rise.

A widening of U.S. crude and Brent crude spreads contributed to a record 5.6 million barrels per day in U.S. crude exports last week, which resulted in a smaller build than in previous weeks, according to UBS analyst Giovanni Staunovo.

Meanwhile, net U.S. crude imports fell by 1.15 million bpd, the lowest on record, EIA said.

“The record exports helped keep crude supplies in line,” added Price Group analyst Phil Flynn.

Crude stocks at the Cushing, Oklahoma, delivery hub rose by 307,000 barrels in the last week, the most since June 2021, the EIA said.

As a heavy maintenance season continued to weigh on refinery runs, refinery utilization rates fell by 0.1 percentage point in the week while refinery crude runs fell by 31,000 barrels per day, the EIA said.

U.S. gasoline stocks fell by 900,000 barrels in the week to 239.2 million barrels, the EIA said, compared with analysts’ expectations for a 500,000-barrel rise.

Distillate stockpiles, which include diesel and heating oil, rose by 0.2 million barrels in the week to 122.1 million barrels, its most since January 2022, versus forecasts for a 500,000-barrel drop, the EIA data showed.

The drop in home prices in Canada this year will be steeper than forecast three months ago but mild compared with a historic run-up during the COVID-19 pandemic, leaving many first-time buyers still priced out of the market, a Reuters poll showed.

Following nearly a year of mostly aggressive interest rate rises from near-zero that the Bank of Canada has only recently set on pause at 4.50 per cent, mortgage rates have soared over 170 basis points, restricting activity in the once red-hot market.

Average home prices in Canada have already fallen roughly 15.0 per cent from their early 2022 peak and are forecast to drop 12.0 per cent this year, according to the median view from a Feb. 15-28 poll of 13 housing experts.

That is slightly more severe than the 10.0 per cent fall predicted in a November survey.

But that expected decline is dwarfed by the more than 50 per cent rise during the height of the pandemic, and is a very small fraction of prices that roughly tripled over the past two decades, suggesting the dream of owning a home will remain out of reach for many prospective first time buyers.

While most analysts said such a fall in house prices would improve affordability somewhat, others said they needed to drop a lot more to make any difference.

“We think in normal times a 30 per cent house price decline would be a crash, but in this context of what we’re coming from with the two-year surge, it’s a necessary correction to restore affordability,” said Tony Stillo, director of economics for Canada at Oxford Economics.

Asked how much average house prices would fall from peak to trough, the median response was 20.0 per cent, more than the 17.5 per cent predicted in the November poll. The range of forecasts varied from 12.5 per cent to 30.0 per cent.

House prices in Toronto and Vancouver, front runners in the recent house price boom, were forecast to drop 15 per cent and 12 per cent, respectively, in 2023, compared with rises of over 50 per cent and 30 per cent during the pandemic.

Without a large correction, prospective homeowners will continue renting. A strong majority, 7 of 10 analysts, said home ownership would decrease over the next two to three years.

“We view the drop in average prices as only offsetting the run-up in mortgage rates, so net affordability really hasn’t improved in the past year,” said BMO Capital Markets chief economist Douglas Porter.

“Of course, the Canadian housing market is rarely ‘affordable’ for many potential first-time buyers.”

Urban rent affordability is also set to worsen over the next two years, according to eight of 11 respondents, with rents kept elevated through ever-expanding demand from immigration and supply not keeping pace.

“Strong rental demand and low vacancy rates will maintain intense upward pressure on rents,” said Robert Hogue, assistant chief economist at RBC.

Royal Bank of Canada RY-T -3.55%decrease posted a drop in first-quarter profit as it set aside more loan-loss reserves amid deteriorating economic conditions, but it outperformed analyst expectations as higher interest rates boosted fixed-income trading.

RBC and National Bank of Canada NA-T +1.64%increase joined most of their peers in recording lower earnings in the quarter as clients absorbed higher borrowing costs and lenders set aside more funds for bad loans.

“While interest rates may be peaking, they may remain higher for longer as tight labour markets and other supply imbalances keep inflation high and constrain economic and market activity,” RBC chief executive officer Dave McKay said during a conference call with analysts.

RBC earned $3.2-billion or $2.29 a share in the three months that ended Jan. 31. That compared with $4.1-billion or $2.84 in the same quarter last year. Adjusted to exclude certain items, including tax-related adjustments, the bank said it earned $3.10 a share, edging out the $2.94 analysts estimated, according to Refinitiv.

RBC is the fourth major Canadian bank to report earnings for the fiscal first quarter, with National Bank also posting results on Wednesday. Canadian Imperial Bank of Commerce CM-T +0.06%increase and Bank of MontrealBMO-T +0.89%increase also posted lower profit that still beat analyst estimates, while Bank of Nova ScotiaBNS-T +1.48%increase reported lower-than-expected results. Toronto-Dominion Bank TD-T -0.21%decrease is set to post its financial results on Thursday.

RBC set aside more funds to cover sour loans than analysts had expected. The bank posted $532-million in provisions for credit losses, up from the $105-million it reserved in the same quarter a year earlier.

Montreal-based National Bank also posted a drop in earnings, while topping analyst estimates on loan-loss provisions that rose less than expected. In the quarter, National Bank set aside $86-million in provisions for credit losses. In the same quarter last year, it had a recovery of $2-million in provisions.

The Montreal-based lender earned $881-million or $2.49 a share in the three months that ended Jan. 31. That compared with $930-million or $2.64 in the same quarter last year. Adjusted to exclude certain items, the bank said it earned $2.56 a share. That beat the $2.37 analysts expected, according to Refinitiv.

“The uncertainty is really around the path of inflation and how interest rates react, as well as how the tight labour market reacts in the near future,” National Bank CEO Laurent Ferreira said in an interview.

RBC’s revenue climbed 16 per cent to $15.1-billion in the quarter, boosted by a spike in its global markets division as higher interest rates boosted bonds and fixed-income trading. That offset a slump in corporate and investment banking as capital markets profit rose 9 per cent to $1.22-billion. But that bump was largely fuelled by market volatility, and trading activity typically picks up during the bank’s first-quarter earnings, RBC head of capital markets Derek Neldner said on the conference call.

RBC’s share price slumped 3.6 per cent on Wednesday as investors shunned narrowing net interest margins and rising expenses.

“It is hard to get too negative on a 5 [per cent earnings-per-share] beat, but certainly our view of the quarter is coloured by the fact that the bank’s capital markets business did all the heavy lifting with a record trading quarter,” Scotiabank analyst Meny Grauman said in a note to clients. “The problem is that other parts of the business missed the mark,” including costs and lending margins, he added.

As the bank hired staff and invested in technology, expenses in the quarter surged 17 per cent to $7.68-billion. Inflation also caused an increase in salaries and in fees from third-party suppliers, as well as a pickup in travel and conference spending from slow activity during the pandemic, according to chief financial officer Nadine Ahn.

“When you look at technology spend, it’s been a huge contributor to client acquisition,” Ms. Ahn said in an interview. “The focus going forward is that we’re very diligent in terms of what that next dollar of tech spend is, and what it’s going to add in terms of value.”

Lending margins have also been thrust into the spotlight as higher rates push homebuyers and borrowers to the sidelines. RBC’s net interest margin – the difference that the bank earns on loans and pays on deposits – tumbled nine basis points from the previous quarter to 1.47 per cent. (One hundred basis points equal one percentage point.)

While earnings in its retail arm benefited from loan growth, with profit rising 8 per cent from a year earlier, lending margins were offset by weaker lending margins in its U.S. division. Customers also transferred money into longer-term savings accounts to take advantage of higher interest rates. These are costlier for banks than cheaper deposit products, such as chequing accounts, and put pressure on lending margins.

Investors rewarded National Bank as it bucked the trend, boosting the stock 1.6 per cent in Toronto on Wednesday. The lender posted a spike in its net interest margin from the previous quarter, benefiting from higher interest rates. But waning demand for loans could temper margins this year.

“There is so much uncertainty depending on interest rates,” National Bank chief financial officer Marie Chantal Gingras said in an interview, adding that clients could start stashing more money away in high-interest savings products.

TD-T -0.21%decrease prospects of closing a major acquisition in the United States took a hit Wednesday after its merger partner, FHN-N -10.62%decrease, disclosed that the deal is struggling to receive regulatory blessings in a timely manner.

In an annual filing, First Horizon, which is based in Memphis, Tenn., disclosed that TD TD-T -0.21%decrease recently told its management team that TD does not expect to get the required regulatory approvals in time to complete the deal before May 27, which is when their merger agreement is set to expire.

Merger deadlines can be extended more than once, but what makes Wednesday’s filing unusual is that First Horizon FHN-N -10.62%decrease and TD did not seem fussed about approvals only three weeks ago. At the time, the two banks put out a joint press release saying they had “mutually agreed” to extend the merger deadline from Feb. 27 to May 27. “TD and First Horizon are fully committed to the merger and continue to make significant progress in planning for the closing and the integration of the companies,” they added.

First Horizon disclosed in its annual filing Wednesday that “receipt of regulatory approvals for the pending TD merger has taken longer than originally anticipated.”

TD agrees to pay US$1.21-billion to settle Stanford Ponzi scheme lawsuit

First Horizon’s shares closed down 11 per cent to US$22.14. TD agreed to pay US$25 a share in a deal worth US$13.4-billion.

In an e-mailed statement, TD noted that the bank cannot say much until it reports earnings Thursday, but added that it “remains committed to the transaction” and that it has initiated discussions about another extension.

The announcement is the second major development for TD this week after the bank disclosed Monday that it will pay US$1.2-billion to settle a lawsuit from investors accusing it of contributing to a major Ponzi scheme.

Approvals for U.S. bank mergers must come from various parties, including the Federal Reserve, the Office of the Comptroller of the Currency (which is TD’s primary U.S. banking regulator) and various other regulatory, antitrust and other authorities.

Appeasing all of these bodies can take longer than desired for large deals, but it is rare for two merger partners to publicly appear at odds. “We view this as a negative development for TD’s U.S. growth strategy,” BMO Nesbitt Burns analyst Sohrab Movahedi wrote in a research note to clients Wednesday.

First Horizon’s disclosure was also made during a period of heightened scrutiny of U.S. bank mergers. President Joe Biden has asked for a broad review of competition rules, and the banking sector has been specifically targeted because so few deals have been blocked in recent history. Consumer-advocacy groups worry that merger synergies, or savings, are not always passed on to clients in the form of cheaper products.

In mid-February, TD announced a five-year community-benefits plan that focuses on lending, banking access and other services for diverse and underserved groups in the U.S. The package includes opening 25 new branches and promises US$21-billion in home lending for lower-income and minority communities, as well as additional funding for small-business loans and community-development investments.

The bank also said that there will not be any merger-related First Horizon branch closings, and that it will hire additional diverse employees to work on mortgage loans.

Bank of Montreal also faced a lengthy review of its $17.1-billion acquisition of California-based Bank of The West, which it announced in December, 2021. Like TD, BMO had to push back the deal’s closing deadline and participated in multiple public hearings with regulators. However, BMO received the necessary blessings in January and the transaction closed last month.

While TD says it is still committed to the First Horizon transaction, which it would use to build a substantial footprint in the U.S. southeast, National Bank of Canada analyst Gabriel Dechaine noted Wednesday that the takeover was met with mixed reactions.

Since the deal was announced, “common investor concerns relayed to us revolved around valuation/timing and TD’s ability to turn around a business that was generating subpar growth and that had faced integration issues of its own [from] a separate transaction,” he wrote in a note to clients.

TD paid 2.1 times First Horizon’s book value, and anything above two times is viewed as a premium price. U.S. banking-sector stocks have also dropped since the transaction was announced, with the KBW Nasdaq Bank Index falling 14 per cent over the past year.