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April 25th, 2017

Softwood Lumber Dispute Continues

The US put at an import duty on soft wood lumber and it is expected to affect the 24 000 forestry works that are employed by 134 companies across Canada.

The US Commerce department levied countervailing duties ranging from 3.02-24.12% on five large Canadian producers and 19.88 on all other firms that will come into effect May 1st. The duties will also be retroactive for 90 days for JD Irving, and producers other than Canfor, West Fraser, Resolute Forest Products and Tolko.

Anti-dumping duties will be announced on June 23rd are expected to increase the duties to the 30-35% range.

While the deal will impact the forestry industry, the impact on the Canadian economy will be limited considering we export less than 6 billion USD of lumber to the US each year which is only 1.2% of the total exports. So even if US sales were drive to zero (which has yet to happen despite ongoing trade disputes) the impact on Canada’s GDP wouldn’t equate to .5%. .3% of Canadians are employed in the sector which means as a whole, it won’t have much impact on Canada.

It is worth nothing that In BC and New Brunswick, the industry does account for 2% of the GDP. And the impact on the workers in the industry will be directly impacted.

The loonie hit a 14-month low on the news

April 10th, 2017

AT&T Pays Triple for Wireless Start-Up

AT&T just agreed to pay nearly triple Friday’s closing price for the wireless start up Straight Path Communications who owns vast amounts of airwaves rights in 39GHz and 28GHz.

 

This morning, AT&T announced they would pay $95.63 USD for the company that stock closed at $36.48 USD on Friday. The deal is  valued at $1.6 billion US dollars. Imagine if you had bet against this company and sold their shares short?

 

AT&T thinks the valuation is fair since it gives them an increased access to build their 5G wireless networks since Straight Path licenses cover the entire country and are able to carry more data at higher frequencies then lower bands such as 4G networks. The deal will allow them to offer wireless TV service across the nation and faster service for their mobile customers.

 

One thing that makes the deal really interesting is that in a settlement with the FCC, Straight Path had one year to sell all their licenses and pay 20% of the sales price to the FCC. This means that the FCC is going to collect $300 million from the deal to settle a dispute about the company not using the licenses they had acquired.

September 28th, 2016

Breaking News: OPEC reaches deal to limit their output.

OPEC reached a deal to limit their production to 32.5 million barrels per day which is a cut of 1 million barrels per day.

The producing group has agreed to set the concrete level of production by each country at their November meeting. Once their targets have been met they will reach out to non OPEC nations for cooperation.

Oil is up 5% on the news trading at $46.90

September 28th, 2016

Late last night the Trudeau government gave conditional approval of the Pacific Northwest Liquefied natural gas project. The project is estimated to bring over $36 billion dollars of capital investment including $11.4 billion spent on the LNG terminal. The project is expected to be one of Canada’ largest resource development projects.

The conditional approval comes with 190 conditions covering environmental impact, monitoring and cultural heritage sites.

The proposed pipeline will take natural gas from Northern BC to a terminal on Lelu Island, south of Prince Rupert to be delivered to markets around the world.  LNG is natural gas that has been cooled to -162C and converted to liquid to make it easier for shipping. It is safer than crude oil to ship as it converts back to its gaseous state when exposed to air and quickly vaporizes when exposed to water. It can, however, emit combustible plumes of gas.

The project is backed by Malaysian owned energy company Petronas. The project is expected to bring up to $36 billion dollar of investments to Canada when included the upstream natural resource development.  It is estimated that the project will create 4500 jobs during construction and another 630 works will be required to operate the facility.

This isn’t the only pipeline decision to happen this fall. The liberal government must decided whether they will approve the expansion of the Trans Mountain Oil pipeline from Alberta to Burnaby, BC by mid-December.

 

September 7th, 2016 Blog:

 

An Enbridge pipeline facility in North Dakota. (The Globe and Mail)

 

Yesterday Enbridge announced that they are buying Houston based Spectra. The news has been well received in the market as Canadian managers are excited to see a Canadian company become a North American Powerhouse.

 

The deal is worth $37 billion dollars  and will be an all stock takeover. Enbridge will become the biggest North American energy infrastructure company and will consolidate its position next to US transport giants Kinder Morgan and Plains All American pipeline.

 

The takeover is the most significant energy deal since 2014 and highlights how pipeline companies are under pressure to merge as they deal with overcapacity and sliding tariffs that have slowed dividend growth.

 

Spectra shares jumped 13% yesterday, their largest move in three years.

 

Enbridge shares traded up 4% and another 2% today.

 

Enbridge will pay for the deal by issuing 694 million new shares and will take on 22 billion of Spectra’s debt. Enbridge will also divest about $2 billion of non-core assets over the next year.

 

The deal has got the market excited for potential other mergers. I am excited to see what will happen next.

 

 

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