TC Energy TRP-T +0.45%increase said on Monday it has agreed to sell Portland Natural Gas Transmission System (PNGTS) to BlackRock for $1.14-billion as part of its ongoing efforts to reduce debt and fund investments.
Best known for its Keystone oil pipeline, the company is undergoing an overhaul. Last year, it said it would spin off its liquids business to focus on transporting natural gas.
CEO Francois Poirier had said in 2022 TC Energy planned to raise more than $5-billion through 2023.
The company is grappling with long-term debt of about $49.976-billion as of Dec. 31, 2023, as well high costs at its Coastal GasLink pipeline in British Columbia.
PNGTS is a 475-kilometer (295-mile) transporter of natural gas serving the upper New England and Atlantic Canada markets.
Blackrock will assume $250-million of outstanding debt at PNGTS. The deal is expected to close mid-2024, with the cash being split pro-rata according to the current PNGTS ownership interests (TC Energy 61.7 per cent and Energir, owned by Northern New England Investment Company, 38.3 per cent).
The company is aiming to sell at least $3-billion worth of assets this year to reduce debt, likely through two to four sales.
OPEC+ members led by Saudi Arabia and Russia agreed on Sunday to extend voluntary oil output cuts of 2.2 million barrels a day into the second quarter, giving extra support to the market amid concerns over global growth and rising output outside the group.
Saudi Arabia, the de facto leader of the Organization of the Petroleum Exporting Countries, said it would extend its voluntary cut of one million barrels a day (b/d) through the end of June, leaving its output at around nine million barrels a day.
Russia, which leads OPEC allies collectively known as OPEC+, will cut oil production and exports by an extra 471,000 barrels a day in the second quarter. Russian Deputy Prime Minister Alexander Novak gave new figures showing that cuts from production will make up a rising proportion of the measure.
Oil has found support in 2024 from rising geopolitical tensions and Houthi attacks on Red Sea shipping, although concern about economic growth has weighed. While OPEC+ was widely expected to keep the cuts in place, Russia’s announcement could bolster prices further.
“There was a surprise from Russia,” said UBS analyst Giovanni Staunovo, who called the developments largely expected.
“If the Russian cuts are fully implemented, additional barrels would be removed from the market. So that is a surprise move no one expected and could lift prices,” he added.
Brent crude settled US$1.64 higher, or 2 per cent, at US$83.55 a barrel on Friday, up more than 8 per cent so far this year.
OPEC+ members announced the cuts individually on Sunday and OPEC later issued a statement confirming the 2.2 million barrels-a-day total. Saudi state news agency SPA said the cuts would be reversed gradually, according to market conditions.
“The decision sends a message of cohesion and confirms that the group is not in a hurry to return supply volumes, supporting the view that when this finally happens, it will be gradual,” analysts at investment bank Jefferies said in a report.
OPEC+ in November had agreed to the voluntary cuts totalling about 2.2 million barrels a day for the first quarter, led by Saudi Arabia rolling over a cut it had first made in July.
“The rollover was anticipated but extending it to the end of the second quarter might come as a surprise,” said Tamas Varga of oil broker PVM. “The market is expected to open stronger.”
For the second quarter, Iraq will extend its 220,000 barrels-a-day output cut, UAE will keep in place its 163,000 barrels-a-day output cut and Kuwait will maintain its 135,000 barrels-a-day output cut, the three OPEC producers said in separate statements. Algeria also said it would cut by 51,000 barrels a day and Oman by 42,000 barrels a day.
Kazakhstan said it will extend its voluntary cuts of 82,000 barrels a day through the second quarter.
OPEC+ has implemented a series of output cuts since late 2022 to support the market amid rising output from the United States and other non-member producers and worries over demand as major economies grapple with high interest rates.
The total OPEC+ pledged cuts since 2022 stand at about 5.86 million barrels a day, equal to about 5.7 per cent of daily world demand, according to Reuters calculations.
Sources told Reuters last week that OPEC+ would consider extending the latest round of output cuts into the second quarter, with one saying it was “likely.”
The oil demand outlook is uncertain for this year. OPEC expects another year of relatively strong demand growth of 2.25 million barrels a day, led by Asia, while the International Energy Agency expects much slower growth of 1.22 million barrels a day.
In a further headwind for OPEC+, the IEA also expects oil supply to grow to a record high of about 103.8 million barrels a day this year, almost entirely driven by producers outside OPEC+, including the United States, Brazil and Guyana.
Something unusual is going on with Bank of Nova Scotia’s (BNS-T +0.26%increase) share price this year: It’s outperforming.
That may come as a relief to long-suffering shareholders who have seen the share price trail the other Big Six bank stocks by an average of 49 percentage points over the past five years, to the end of 2023. And it could offer nimble investors a reason to look again at a bank stock that stands out for looking cheap.
Okay, we are talking about a mere two months of peer-beating gains, which might not be enough to establish a clear trend. As well, slim gains of just 1.7 per cent over this period, to Thursday’s close, doesn’t exactly establish Scotiabank as a ripping momentum play just yet.
Still, it is one of only three Canadian big bank stocks in positive territory in 2024 – Canadian Imperial Bank of Commerce and top-performer National Bank of Canada (NA-T +0.74%increase) being the other ones. It is well ahead of Bank of Montreal (BMO-T +0.19%increase), Toronto-Dominion Bank (TD-T -0.22%decrease) and Royal Bank of Canada (RY-T +0.11%increase), which have slumped 6.8 per cent, 5.3 per cent and 2 per cent, respectively, this year.
Even a glimmer of hope that Scotiabank may be on the way to delivering satisfying returns is worth exploring, because this is a stock whose beaten-up valuation offers rebound potential.
Where is this glimmer of hope coming from? The bank’s latest quarterly financial results, released this week, delivered several upbeat figures that maybe pointing the way toward good times.
Adjusted profit, the figure widely used by analysts because it reflects a bank’s regular operations, was $1.69 per share. That was above the $1.61 that analysts, on average, had been expecting, according to Refinitiv.
Another impressive figure: Profit from the bank’s international banking division increased by 35 per cent from the previous quarter, giving investors a reason to embrace Scotiabank’s operations in Mexico, Colombia, Chile and Peru.
Some of the bank’s nerdier financial metrics also looked promising. Revenue from Scotiabank’s Canadian banking division expanded faster than expenses, resulting in positive operating leverage.
And the bank’s net interest margin, which reflects profit from mortgages and other loans, increased during the quarter, offsetting flatlining lending activity.
In particular, margins increased to a multiyear high of 2.56 per cent in the Canadian banking division during the quarter, up from 2.26 per cent in the same period last year.
The difference, a substantial 0.3 of a percentage point, marks the biggest year-over-year increase of the past five quarters and translates into fatter profits on the bank’s Canadian assets of $445-billion.
“This isn’t a strategic turning point for the bank – there is still a long road ahead – but it could be a financial turning point,” Paul Holden, an analyst at CIBC Capital Markets, said in a note.
The best part about Scotiabank’s financial results is that they follow low expectations among investors.
The share price is roughly where it was a decade ago. In terms of valuation, the stock trades at just 10.7 times trailing earnings, making it the cheapest among the Big Six on this metric. Based on estimated 2024 earnings, the stock’s price-to-earnings ratio is 10, which trails the peer average.
The stock also sports the highest dividend yield among the biggest banks, at 6.5 per cent. That’s well above an average of 4.8 per cent among its five peers, and adds to Scotiabank’s neglected appearance – and its appeal for investors counting on a sustained rebound.
These are early days, of course, and the rebound will have to navigate several potential obstacles. Banking in emerging market economies can be volatile, especially during an era with high interest rates and a strong U.S. dollar.
As well, Mr. Holden warns that Scotiabank is more sensitive than its peers to loan losses when the credit cycle is on a downswing. That could weigh on its profits, given that Canadian banks are setting aside big bucks in anticipation of defaults from rising mortgages and wobbling commercial real estate.
Lastly, the bank is operating under a relatively new chief executive officer, Scott Thomson, who unveiled a fresh strategic direction in December. You can’t blame investors for taking a wait-and-see approach until the plans start showing results.
But if Scotiabank’s outperforming stock is any indication, some investors may be gaining confidence in the bank’s ability to turn things around.
The nice part about investing in a stock mired in low expectations is that any improvement is good news. For Bank of Nova Scotia to become the best-performing bank stock, it may only need to become a better bank.
Earnings include: Advantage Oil & Gas Ltd.; Wajax Corp.
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Tuesday March 5
China, Japan and Euro zone services and composite PMI
(9:30 a.m. ET) Canadian S&P Global Services PMI for February.
(9:45 a.m. ET) U.S. S&P Global Services/Composite PMI for February.
(10 a.m. ET) U.S. ISM services PMI for February.
(10 a.m. ET) U.S. factory orders for January. The Street is projecting a decline of 3.0 per cent from December.
Earnings include: Aecon Group Inc.; Ag Growth International Inc.; Bird Construction Inc.; CrowdStrike Holdings Inc.; E-L Financial Corp.; First National Financial Corp.; Franco-Nevada Corp.; Nuvei Corp.; Pet Valu Holdings Ltd.; Ross Stores Inc.; Target Corp.
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Wednesday March 6
China trade surplus and foreign reserves
Euro zone retail sales
Germany trade surplus
(8:15 a.m. ET) U.S. ADP National Employment Report for February. Estimate is an increase of 150,000 jobs from January.
(8:30 a.m. ET) Canadian labour productivity for Q4.
(9:45 a.m. ET) Bank of Canada policy announcement with press conference to follow
(10 a.m. ET) Canada’s Ivey PMI for February.
(10 a.m. ET) U.S. Job Openings & Labor Turnover Survey for January.
(10 a.m. ET) U.S. wholesale inventories for January.
Earnings include: Canfor Corp.; Curaleaf Holdings Inc.; Constellation Software Inc.; Descartes Systems Group Inc.; Linamar Corp.; Peyto Exploration & Development Corp.; Strathcona Resources Ltd.; Tourmaline Oil Corp.
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Thursday March 7
ECB monetary policy announcement
Germany factory orders
(8:30 a.m. ET) Canada’s merchandise trade balance for January.
(8:30 a.m. ET) Canadian building permits for January.
(8:30 a.m. ET) U.S. initial jobless claims for week of March 2. Estimate is 215,000, which is flat from the previous week.
(8:30 a.m. ET) U.S. goods and services trade deficit for January.
(8:30 a.m. ET) U.S. productivity for Q4. Consensus is an annualized rate rise of 3.1 per cent.
(10 a.m. ET) U.S. Fed Chair Jerome Powell testifies before the Senate Banking Committee.
(9 a.m. ET) U.S. President Joe Biden delivers State of the Union address.
Earnings include: Ballard Power Systems Inc.; Broadcom Inc.; Chartwell Retirement Residences; Costco Wholesale Corp.; Denison Mines Corp.; Enghouse Systems Ltd.; Ero Copper Corp.; Freehold Royalties Ltd.; Hammond Power Solutions Inc.; Oracle Corp.; Paramount Resources Ltd.
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Friday March 8
Japan household spending and bank lending
Euro zone GDP
Germany PPI and industrial production
(8:30 a.m. ET) Canadian employment for February. The Street expects an increase of 0.1 per cent, or 21,400 jobs, from January with the unemployment rate rising 0.1 per cent to 5.8 per cent and average hourly wages up 5.3 per cent year-over-year.
(8:30 a.m. ET) U.S. nonfarm payrolls for February. Consensus is an increase of 190,000 from January with the unemployment rate steady at 3.7 per cent and average hourly earnings up 0.2 per cent (or 4.5 per cent year-over-year).
Earnings include: Algonquin Power & Utilities Corp.; AltaGas Ltd.; Kelt Exploration Ltd.
April Nymex natural gas (NGJ24) on Friday closed -0.025 (-1.34%).
Nat-gas prices on Friday settled moderately lower. The outlook for above-average U.S. winter temperatures to persist is weighing on nat-gas prices. On Friday, NOAA said warm spring weather for the central and eastern U.S. regions will last into the middle of the month, which will curb heating demand for nat-gas and keep supplies elevated.
Nat-gas prices have collapsed this year and plunged to a 3-1/2 year nearest-futures low (H24) this week as an unusually mild winter curbed heating consumption for nat-gas and pushed inventories well above average. The U.S. Climate Prediction Center said there is a greater than 55% chance the current El Nino weather pattern will remain strong in the Northern Hemisphere through March, keeping temperatures above average and weighing on nat-gas prices. AccuWeather said El Nino will limit snowfall across Canada this season in addition to causing above-normal temperatures across North America.
Nat-gas prices are also under pressure Friday from the announcement by the Freeport LNG nat-gas export terminal in Texas that one of its three production units will remain shut down until at least the middle of March after extreme cold in Texas damaged equipment. The unit’s closure will limit U.S. nat-gas exports and increase U.S. nat-gas inventories.
Lower-48 state dry gas production Friday was 100.2 bcf/day (+0.4% y/y), according to BNEF. Lower-48 state gas demand Friday was 87.3 bcf/day (+3.8% y/y), according to BNEF. LNG net flows to U.S. LNG export terminals Friday were 14.1 bcf/day (+1.1% w/w), according to BNEF.
An increase in U.S. electricity output is positive for nat-gas demand from utility providers. The Edison Electric Institute reported Wednesday that total U.S. electricity output in the week ended February 24 rose +1.7% y/y to 75,613 GWh (gigawatt hours), although cumulative U.S. electricity output in the 52-week period ending February 24 was unchanged y/y at 4,101,977 GWh.
Thursday’s weekly EIA report was mixed for nat-gas prices as nat-gas inventories for the week ended February 23 fell -96 bcf, a larger draw than expectations of -85 bcf but a much smaller draw than the five-year average for this time of year of -143 bcf. As of February 23, nat-gas inventories were up +12.3% y/y and were +26.5% above their 5-year seasonal average, signaling ample nat-gas supplies. In Europe, gas storage was 63% full as of February 26, above the 5-year seasonal average of 47% full for this time of year.
Baker Hughes reported Friday that the number of active U.S. nat-gas drilling rigs in the week ending March 1 fell by -1 rig to 119 rigs, moderately above the 2-year low of 113 rigs posted September 8. Active rigs have fallen back since climbing to a 4-1/2 year high of 166 rigs in Sep 2022 from the pandemic-era record low of 68 rigs posted in July 2020 (data since 1987).
Canadian stocks turned in a fine performance on Friday with investors indulging in some hectic buying at several counters from across various sectors.
U.S. and European markets closed higher, and the mood was bullish on Bay Street as well amid 0ptimism about interest rate cuts by Federal Reserve and some other central banks, including the European Central Bank.
Firm crude oil and bullion prices triggered strong buying in energy and materials sectors. Technology, healthcare and real estate stocks were among the other major gainers.
The benchmark S&P/TSX Composite Index ended with a gain of 188.74 points or 0.88% at 21,552.35, a near 2-year closing high. The index gained about 0.65% in the week.
On the economic front, data showed the manufacturing activity contracted for a tenth straight month in February, although at the slowest pace in the current sequence. The S&P Global Canada Manufacturing PMI rose to 49.7 in February, from 48.3 in the previous month.
Healthcare stocks Bausch Health Companies (BHC.TO) and Chartwell Retirement Residences (CSH.UN.TO) gained about 5% and 1.9%, respectively.
Energy stocks Kelt Exploration (KEL.TO), Precision Drilling Corporation (PD.TO), Tamarack Valley Energy (TVE.TO), Shawcor (MATR.TO), Canadian Natural Resources (CNQ.TO), International Petroleum Corp (IPCO.TO) and Suncor Energy (SU.TO) gained 3 to 4%.
New Gold Inc (NGD.TO) soared nearly 10%, topping the list of gainers in the Materials Index. Oceanagold Corp (OGC.TO) and Equinox Gold Corp (EQX.TO) advanced 8.5% and 7.25%, respectively.
In the technology sector, Tecsys Inc (TCS.TO) zoomed nearly 9%. Celestica Inc (CLS.TO) climbed 6.4%, Kinaxis Inc (KXS.TO) gained about 6% and Hut 8 Corp (HUT.TO) ended 5.1% up.
Descartes Systems (DSG.TO), Open Text Corp (OTEX.TO), Constellation Software (CSU.TO) and Bitfarms (BITF.TO) gained 1.8 to 2.2%.
SNC Lavalin Inc (ATRL.TO) shares soared 11.5% after the company reported fourth-quarter adjusted net income of $79.5 million, or $0.45 per diluted share, compared to an adjusted net loss of $32.5 million , or $(0.19) per diluted share in Q4 2022.
Ensign Energy Services Inc (ESI.TO) zoomed 14% after the company said its net income for 2023 was $41.2 million, up from $8.1 million in 2022.
Oil prices rose on Friday and were set for weekly gains as markets awaited an OPEC+ decision on supply agreements for the second quarter while weighing fresh U.S., European and Chinese economic data.
Brent futures for May were up 83 cents, or 1.01 per cent, at $82.74 a barrel by 1050 GMT. The April Brent futures contract expired on Feb. 29 at $83.62 a barrel.
U.S. West Texas Intermediate (WTI) for April rose 81 cents, or 1.04 per cent, to $79.07 a barrel.
Both contracts traded more than $1 a barrel higher at their intra-day peaks.
WTI is on track for a 3.4 per cent increase this week, while following the switch in contract months Brent is around 1.4 per cent higher than last week’s settlement price.
Increasing possibilities of Saudi-led OPEC+ continuing with its supply cuts beyond the first quarter, and potentially until the end of 2024, will likely keep oil prices above $80 a barrel, said DBS Bank energy sector team lead Suvro Sarkar.
A decision on extending OPEC+ cuts is expected in the first week of March, sources have said, with individual countries expected to announce their decisions.
A Reuters survey showed the Organization of the Petroleum Exporting Countries pumped 26.42 million barrels per day (bpd) in February, up 90,000 bpd from January.
Strong expectations of Saudi Arabia keeping term prices of crude it sells to Asian customers little changed in April from March levels also underpinned the market on Friday.
On the demand side, Chinese manufacturing activity shrank for the fifth straight month in February, an official survey showed.
Euro zone inflation fell in February according to Eurostat, but both the headline figure and core inflation, which strips out volatile food and fuel prices, just missed analysts’ expectations.
But supporting prices, U.S. personal consumption expenditures (PCE) index showed January inflation in line with economists’ expectations on Thursday, reinforcing market bets for a June interest rate cut.
“The process of disinflation is reassuringly under way, therefore smart money is currently on a June rate cut,” PVM analyst Tamas Varga said in a note on Friday.
The Canadian economy is nearing a soft landing as it resumed growth in the final months of 2023, allowing the country to skirt a recession in what was otherwise a sluggish year.
Real gross domestic product rose at an annualized pace of 1 per cent in the fourth quarter, Statistics Canada said on Thursday, outpacing analyst estimates of 0.8 per cent. The economy rebounded from a 0.5-per-cent slide in the July-to-September period, thus avoiding two consecutive quarters of decline – what some economists refer to as a technical recession.
It also appears that 2024 is getting off to a healthy start. In a preliminary estimate, Statscan said real GDP jumped 0.4 per cent in January, helped by the end of public-sector strikes in Quebec.
The economy has slowed markedly since the Bank of Canada implemented a rapid series of interest-rate hikes to curb demand and bring inflation under control. Outside of 2020, when COVID-19 slammed the economy, real GDP growth of 1.1 per cent in 2023 amounted to the slowest year of expansion since 2016.
Canada’s economic performance looks even weaker after accounting for the strongest population growth in decades, resulting in a decline in per-capita output.
But in aggregate, the economy is managing to eke out growth, boosting the odds that central bankers will pull off a rare soft landing – bringing inflation to heel without a significant rise in unemployment.
The annual inflation rate has ebbed to 2.9 per cent, taking it ever closer to the Bank of Canada’s 2-per-cent target, and analysts expect the central bank to start lowering interest rates around the middle of the year.
“The Canadian economy showed some life in the final quarter of 2024,” James Orlando, senior economist at Toronto-Dominion Bank, wrote in a client note. Even so, “the narrative on the Canadian economy remains the same: High interest rates are weighing on economic growth.”
Canada seems to be getting a big boost from a strong U.S. economy. Exports of goods and services rose at an annualized pace of 5.6 per cent in the fourth quarter. Statscan said the increase was driven by exports of crude oil and bitumen, among other products.
Consumer spending rose at a 1-per-cent-annualized rate, although Statscan noted that per-capita consumption fell for the third consecutive quarter. The increase in aggregate spending “was led by higher spending on new trucks, vans and utility vehicles as supply chain issues continued to ease and back orders were fulfilled,” the report said.
Elsewhere, there was ample weakness in Thursday’s report. Real business investment fell for the sixth time over the past seven quarters, and businesses also slowed their accumulation of inventories, which created a drag on growth.
Final domestic demand – a metric that includes household and government consumption, along with capital investments – fell at an annualized rate of 0.7 per cent. Several analysts said this is an indication that economic conditions are frail in Canada and that overall numbers are being propped up by a resilient U.S. economy.
“The domestic economy appears to be weakening as high interest rates weigh on consumers and businesses,” Royce Mendes, head of macro strategy at Desjardins Securities, said in a client note. “The growth that was seen in the fourth quarter didn’t come from within Canada’s borders and is particularly uninspiring given the population growth seen at the end of last year.”
Many private-sector economists reiterated on Thursday that they expect the Bank of Canada to begin lowering its benchmark interest rate in June, although some investors think there’s a slight chance of that happening in April.
The central bank will make its next interest-rate decision on March 6. Analysts widely expect the bank to hold its policy rate steady at 5 per cent – the highest level since 2001 – for the fifth consecutive meeting.
Bank of Canada Governor Tiff Macklem said in January that his rate-setting governing council is pivoting to a discussion of how long to hold rates at current levels. At the same time, central bankers are hesitant to lower rates too early, in the event that looser monetary policy leads to an acceleration in consumer prices.
Recent economic growth is proving stronger than Bank of Canada projections. “In our view, this will keep the BoC erring slightly on the hawkish side and wait for more evidence that inflation pressures are moderating enough,” Citibank economists Gisela Hoxha and Veronica Clark said in a report. They expect a first rate cut in July.
The household savings rate – the percentage of disposable income left after spending – was 6.2 per cent in the fourth quarter, down slightly from 6.3 per cent in the third quarter. This is much higher than it was before the pandemic, and it suggests people are squirrelling away more money to service their debts, or in anticipation of doing so at a later date, Mr. Mendes said.
ATCO Ltd. (ATCO or the Company) today announced adjusted earnings in 2023 of $432 million ($3.82 per share), which were $9 million ($0.11 per share) higher compared to $423 million ($3.71 per share) in 2022. Fourth quarter adjusted earnings in 2023 of $127 million ($1.13 per share) were $17 million ($0.16 per share) higher compared to $110 million ($0.97 per share) in the fourth quarter of 2022.
