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LNG Canada partner Petronas cuts natural gas output due to plunging prices

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Natural gas prices in Western Canada are so low that a partner in the country’s first LNG export project is shutting off money-losing wells and throttling back its exploration program.

Malaysian-owned Petronas, which has a 25 per cent interest in the $40-billion LNG Canada project, has been curtailing production by between 50 and 200 million cubic feet per day from wells in northeastern B.C. capable of producing 700 million cf/d, the CEO of its Canadian branch says.

The practice is one being adopted by a growing number of western Canadian producers to avoid selling their natural gas at prices that often don’t even cover the cost of pipeline transportation.

“We talk a lot about oil infrastructure,” said CEO Mark Fitzgerald of Petronas Energy Canada Ltd. in an interview, referring to oil price discounts in Western Canada blamed on full crude pipelines.

“Gas is trapped as well and if you compare the prices that Canadian gas producers are receiving against our U.S. peers, the differentials are significant and costing us a significant amount of money.”

Only running 1 rig

The company invested heavily in natural gas exploration in northeastern B.C. from 2012 to 2016, employing more than 25 drilling rigs at peak times to prove the resource potential as part of its longer-term plan to build a liquefied natural gas export terminal.

It is running only one rig now, Fitzgerald said.

Petronas backed out of its $36-billion Pacific NorthWest LNG project in 2017, but joined the LNG Canada partnership led by Royal Dutch Shell last May.

The partners agreed to go ahead with their project this fall, but it isn’t expected to be ready to begin supercooling natural gas and shipping it out until late 2023 or early 2024.

Ian Archer, an associate director with IHS Markit, said Western Canada’s gas industry was stable from 2000 to 2008, with production of about 16 billion cf/d and prices of around $10 per gigajoule, but that changed when new drilling and well completion technologies emerged that allowed the U.S. to dramatically grow shale gas production.

Ian Archer with IHS Markit, said pipeline companies are spending billions of dollars to expand their gas systems in Western Canada, but it’s difficult to see where the gas can be sent to win better prices. (The Associated Press)

Cheaper U.S. gas began displacing western Canadian gas in markets like California, Eastern Canada and New York, and the price in Western Canada dropped by half, with production falling to around 13 billion cf/d by 2012, he said.

The trend worsened when the new drilling technologies began to be used in northeastern B.C. and northwestern Alberta to produce light oil products like condensate, which is in demand as a diluent to mix with raw bitumen from the oilsands to allow it to flow in a pipeline.

Condensate wells also typically contain high levels of natural gas and the boost in gas production back to over 16 billion cf/d has overwhelmed pipeline capacity and dropped gas prices this year to a projected $1.43 per gigajoule, about one-third of the price in 2014, said Archer.

Meanwhile, the U.S. benchmark Henry Hub spot price is forecast to average US$3.17 per GJ in 2018 (about C$4.12), according to the U.S. Energy Information Administration.

Pipeline companies are spending billions of dollars to expand their gas systems in B.C. and Alberta, which will improve market access, but it’s difficult to see where the gas can be sent to win better prices, Archer said.

Gas marketing more important than ever

LNG Canada’s first phase is expected to require about two billion cf/d of gas to produce about 14 million tonnes per year of LNG, but most of that gas is expected to come from the partners, so a big price improvement isn’t expected, he said.

The best hope of better prices is stronger demand from additional LNG facilities, conversions of coal-burning power plants to gas and more growth in the oilsands, where natural gas is used to produce steam and power, Archer said.

Mike Rose, CEO of Tourmaline Oil Corp., says his Calgary-based company froze gas production at about 1.35 billion cf/d at the end of 2017 because of low prices and has switched its focus since to oil production growth.

Gas marketing is more important than ever, he said, as Tourmaline tries to move more gas to any hub that offers better prices than those in Alberta or B.C.

“It’s the most challenging time that I’ve ever seen in the Canadian oil and gas sector by a long shot.”

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Canadian Tire and NuPort Robotics to commercialize Canada’s first automated heavy duty trucks

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Canadian Tire Corporation and Toronto based start-up NuPort Robotics, Canada’s first autonomous trucking company, are partnering with the Ontario government to invest $3 million to undertake an automated heavy duty trucking project to test a “first-of-its-kind-in-the-world” technology. 

The breakthrough technology provides a transportation solution for the middle mile, the short-haul shuttle runs that semi-tractor trailers make between distribution centres, warehouses and terminals each day.

It is designed to enable next-generation automated trucks that are more fuel efficient, safer to operate, and provide an enhanced driver experience.

Backed by $1 million in support from the Ontario government through Ontario’s Autonomous Vehicle Innovation Network and matched by $1 million investments from Canadian Tire and NuPort Robotics, respectively, the two-year project is applying proprietary, artificial intelligence technology from NuPort Robotics to retrofit two conventional semi-tractor trailers – which will always be attended by a driver – with high-tech sensors and controls, a touchscreen navigation system, and other advanced features such as obstacle and collision avoidance.

Caroline Mulroney, Minister of Transportation, says: “Ontario is proud to be a global leader in automated and connected vehicle technology and this innovative project is an exciting milestone toward automated vehicle tech in the trucking industry.

“Ontarians rely on goods being delivered by trucks across the province every day and projects like this are demonstrating the ways that automated truck technology could help businesses meet delivery demands more efficiently while supporting a strong supply chain in Ontario.”

Vic Fedeli, Ontario Minister of Economic Development, Job Creation and Trade, says: “This project applies unique and made-in-Ontario Artificial Intelligence technology that offers increased safety and efficiency, with a reduced carbon footprint, to the goods supply chains on which we all rely.

“This is the latest example of how Ontario’s Autonomous Vehicle Innovation Network acts as a catalyst, fostering partnerships between ambitious technology start-ups and industry to develop and commercialize next generation transportation technologies that strengthen our economy and benefit society.”

Raghavender Sahdev, CEO of NuPort Robotics, says: “The trucks are currently transporting goods between a Canadian Tire distribution centre in the Greater Toronto Area and nearby rail terminals within a 12.5 mile radius, and early results are promising.

“The aim of the project is to develop a system that incorporates an autopilot feature for conventional trucks with a driver, leading to the most efficient way to drive and increase safety.

“The sensors work as a ‘safety cocoon’ to cover blind spots and prevent accidents and the end result is peak fuel efficiency, meaning lower carbon emissions, and peak driving performance for an overall more optimal transportation experience.”

NuPort Robotic’s approach to autonomous trucking is unique in the industry because it focuses only on solving the middle mile challenge, using a known set of predetermined trucking routes that are repetitive and high frequency as opposed to general highway driving.

Ultimately, when implemented on fixed routes in the future, Canadian Tire will benefit from faster commercial deployments and improvements in supply chain sustainability.

Gary Fast, vice-president of transportation, Canadian Tire, says: “Canadian Tire embraces innovation and is always testing new technologies to improve our operational efficiency and safety.

“As proud Canadian companies, the safety of all stakeholders, including drivers, employees, customers, and public will be the top priority as we work together towards deployment of this technology.”

Cari Covent, vice president of intelligent automation, Canadian Tire, says: “Over the last three years, Canadian Tire has made a significant effort to solve complex business problems by using the Canadian start-up Artificial Intelligence ecosystem, and NuPort Robotics exemplifies what we look for in a start-up with a focus on innovation, automation and artificial intelligence.”

Sahdev says: “As NuPort Robotics continues to develop new technologies to overcome middle mile supply chain problems and advance autonomous trucking, I am extremely grateful for the support of the Ontario Government through AVIN and the Ontario Centre of Innovation.

“With their continued support, we are striving to position Canada as the leader in autonomous transportation.”

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Constellation Software is money in the bank, this fund manager says

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If you’re looking for a long-term hold in Canadian tech then Constellation Software (Constellation Software Stock Quote, Chart, News, Analysts, Financials TSX:CSU) should definitely be on your radar. So says Jason Del Vicario of Hillside Wealth Management who likes not only Constellation but its recent spin-off Topicus (Topicus Stock Quote, Chart, News, Analysts, Financials TSXV:TOI) which Del Vicario says could do even better than CSU over the next ten years.

Software consolidator Constellation has been running on the same game plan for years, buying small vertical market software companies providing so-called mission critical software solutions globally. Over the years CSU has completed over 500 such acquisitions, buying the top names in their respective niche verticals and then using its clout and breadth to grow the business and expand into new markets. The resulting cash flow is then plowed back into more acquisitions and the cycle repeats.

The strategy has worked wonders for Constellation, which has grown its revenue from $631 million in 2010 to almost $4 billion for 2020 while taking earnings from $4.12 per share in 2010 to $20.59 per share this past year.

Shareholders were given a special treat last month when Constellation spun out recently acquired Topicus, giving CSU owners about 1.9 Topicus shares for every Constellation share as a dividend-in-kind. Constellation bought Netherlands-based software company Total Specific Solutions BV (or TSS) in 2013 and that subsidiary recently acquired Topicus BV, a Dutch information service company focusing on sectors such as healthcare, education and finance.

Topicus was singled out by Constellation founder Mark Leonard for its ability to grow without using outside shareholder funding. Leonard said the spin-out was part of the intention since a purchase agreement was struck last year.

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Nuvei wins price target raise from National Bank

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Strong quarterly results and an even brighter outlook for 2021 are reasons to celebrate for Canadian payments company Nuvei (Nuvei Stock Quote, Chart, News, Analysts, Financials TSX:NVEI), according to National Bank Financial analyst Richard Tse. In an update to clients on Wednesday, Tse left his rating unchanged at “Outperform” while raising his price target from C$85.00 to C$100.00.

Montreal-headquartered Nuvei is a provider of payment technology solutions to merchants and partners around the world, with a platform geared for high-growth mobile commerce and e-commerce markets. Nuvei’s solutions include a fully integrated payments engine with global processing capabilities, a turnkey checkout solution and a suite of data-driven business intelligence and risk management tools and services.

The company released its fourth quarter and full year 2020 financials on Wednesday, showing Q4 revenue of $115.9 million, up 46 per cent year-over-year, and adjusted EBITDA of $51.3 million, up 61 per cent year-over-year. Total dollar value of transactions processed by merchants (‘total volume’) with Nuvei rose by 53 per cent to $13.9 billion. (All figures in US dollars except where noted otherwise.)

The 2020 year featured revenue up 53 per cent to $375.0 million and adjusted EBITDA up 87 per cent to $163.0 million, with total volume rising a full 76 per cent year-over-year to $43.2 billion.

“Our performance continues to be driven by strong momentum in the high-growth verticals we serve, as well as by our customizable, scalable and feature-rich technology platform which provides one of the industry’s most complete payment technology solutions going well beyond merchant acquiring,” said Philip Fayer, chairman and CEO, in a press release.

The company said the fourth quarter represented the strongest growth yet experienced by Nuvei, driven by wallet share expansion from current merchants along with accelerated uptake of new merchants. New e-commerce business almost tripled compared to a year earlier, Nuvei said, while the company expanded its connectivity coverage over the quarter, introduced new product innovations on its platform and continued to execute on M&A.

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