CALGARY — Favorable oil refining margins came to an abrupt end for Parkland Fuel Corp. in the fourth quarter after the Alberta government imposed production curtailments, its CEO said Friday.
The company reported higher-than-expected profits in the last three months of 2018, in because it was able to buy cheap oil in Alberta and transport it on the Trans Mountain pipeline to its Burnaby, B.C., refinery for most of the quarter.
"Canadian crude feedstocks were deeply discounted in the quarter and we did benefit from that," CEO Bob Espey said on a conference call to discuss fourth-quarter results.
"Near the end of the quarter, the Alberta provincial government instituted production curtailments which had the impact of reducing the discount of Canadian crudes relative to world benchmarks.
"This reduction in the discounts will impact our early 2019 operations."
His comments echo complaints by major producers with refining assets such as Husky Energy Inc., Suncor Energy Inc. and Imperial Oil Ltd., which have all said the Alberta curtailment program is an unwanted intervention in the marketplace.
On Thursday, the province increased its quota for producers by 25,000 barrels per day for April, its second easing since it imposed quotas designed to keep 325,000 bpd off the market starting Jan. 1.
Parkland is Canada's largest independent fuel marketer with more than 1,850 retail locations operating under brands including FasGas, Esso and Chevron. It offers services in a total of 25 countries.
It said Friday that its net earnings in the last three months of 2018, were $77 million — up from $49 million in the year-earlier period, and well ahead of analyst expectations for $63 million, according to Thomson Reuters Eikon.
Parkland also increased its dividend by the equivalent of two cents per share per year.
Revenue for the quarter was $3.5 billion, up from $3.4 billion in the same three months of 2017, as the company sold a total of 4.35 billion litres of fuel and petroleum products, down from 4.43 billion litres.
Parkland's growth has resulted in it opening a sales office in Houston to access the U.S. Gulf Coast refining complex, and closing an office in Red Deer, the central Alberta city where it was founded.
Last week, the company said it had offered jobs to 80 per cent of the 120 employees in its Red Deer office if they will move to Calgary, which officially became Parkland's head office in early 2017.
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Companies in this story: (TSX:PKI, TSX:SU, TSX:HSE, TSX:IMO)
Dan Healing, The Canadian Press