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Cest la vie Canadian energy producer accepts French drilling ban with a

CALGARY — The traditional 20th anniversary present is china but Canada’s Vermilion Energy Inc. (TSX:VET) is getting quite a different gift for its second decade as a light oil producer in France: a divorce petition with an implementation date of 2040.France imports 99 per cent of the oil it consumes but the Calgary-based company produces three-quarters of the other one per cent. It thus stands to be more impacted than most by a draft climate change bill that could be law by year-end.The bill would make France the first country in the world to ban all domestic hydrocarbon production.In an interview at his downtown Calgary office, Vermilion CEO Tony Marino is taking the setback in stride, although the company produces about 11,400 barrels of oil per day in France, roughly 16 per cent of its overall output.It even held its investors’ meeting in Paris last spring to mark the 20th anniversary.“We would have preferred to have an open-ended industry with no long-term end point. Perhaps policy will change over the next 23 years,” he said diplomatically, adding the draft bill at least provides some “certainty” over the long term.“It isn’t something for us to get excited about.”Vermilion is an oddity in the Canadian oilpatch, a medium-sized company that produces 42 per cent of its oil and gas in Canada but gets the rest from onshore and offshore wells in Australia, Netherlands, France, Germany, Ireland and the United States. More recently, it has added exploration lands in Slovakia, Hungary and Croatia.The model has advantages in that oil and gas prices have generally been higher outside of North America in recent years.But there are negatives as well, such as delays in receiving drilling permits in the Netherlands this year that forced Vermilion to choke back its natural gas field development plans there.Greg Pardy, who covers the company for RBC Dominion Securities, said Vermilion’s “ace in the hole” is that it makes more money on an operating basis than its peers thanks to that exposure to European oil and natural gas prices.He added it has lower average debt-to-cash-flow ratios and, unlike many other Canadian energy companies, Vermilion has never cut its common share dividend.“Vermilion … chases conventional plays, with a focus on regional diversification and well workovers, optimizations, infill drilling and secondary recovery,” added TD Securities analyst Menno Hulshof. “This is not a crowded space and has served it well.”He praised the company’s skills at navigating jurisdictions with “nuanced” regulatory frameworks.Vermilion’s international reputation is being boosted by a deal through which it will replace supermajor Royal Dutch Shell as operator of the two-year-old Corrib natural gas project off Ireland’s northwest coast. The project accounts for 95 per cent of Ireland’s natural gas production and supplies 60 per cent of its demand, with the rest imported.In July, the Canada Pension Plan Investment Board announced it would buy Shell’s 45-per-cent interest in Corrib for about $1.4 billion.Vermilion, partnering with the Toronto-based investment fund for the first time, would then buy a 1.5 per cent stake to add to its existing 18.5 per cent and take over as operator. Norway’s Statoil will continue to own the rest if the deal closes as expected early next year.Marino said the deal underlines basic philosophy espoused by Vermilion since it was founded in 1994, including feeling “more comfortable” when in control of decisions affecting costs and operating strategy at each of its far-flung assets.“We do feel we can do some very good technical work and put some more emphasis on these assets than the previous owners,” he said, adding Shell was motivated to sell to help pay for its US$53-billion acquisition of BG Group in 2016.“That’s been our way of adding value in places like France, Netherlands, Australia previously and, to some degree, I think it can be true in Ireland.”In Europe, working effectively means doing what you can to be part of a sustainable economy, said Marino, pointing out the company won an French environmental award in 2013 for its project to supply waste heat from oil operations to warm Bordeaux region tomato greenhouses.He said Vermilion is also working with partners to try to use heat from its operations in southern France for social housing. And it’s exploring plans in the Netherlands to repurpose wellbores near urban areas for geothermal heating of buildings.Follow @HealingSlowly on Twitter. read more

Strike begins at Canadian Pacific rail company suspends freight service

TORONTO – Teamsters Canada says a strike against Canadian Pacific is now underway and CP has suspended its freight service across the country.The union, which represents about 5,000 CP workers, says the two sides were unable to reach an agreement despite talks that continued until the deadline.Both the union and CP spokesman Ed Greenberg say the negotiations will continue Wednesday.“We have made every reasonable effort to get a settlement,” said Teamsters vice-president Doug Finnson in a statement posted on the union website.“Every union member knows how important the outstanding issues are. We will not walk away from the negotiation table,” he said.The two sides had met with federal Labour Minister Lisa Raitt on Tuesday morning and continued negotiations throughout the day.Teamsters vice-president Douglas Finnson described the meeting with Raitt as “very positive” without elaborating on the topics discussed.He said major points of contention are pensions, some work rules and fatigue management.In a release Tuesday prior to the strike deadline, Raitt urged CP management and the union to come to an agreement as quickly as possible.“Our government is concerned that a work stoppage would have a negative effect on Canadian businesses and families, and the economy,” she said.The strike is expected to halt shipments of grain, fertilizer, coal and other goods Canadian Pacific (TSX:CP) moves along nearly 24,000 kilometres of track in Canada and the U.S.Both sides said Tuesday that commuter trains in Montreal, Vancouver and Toronto would keep running in the event of a strike.Two inter-city Via Rail routes in Ontario that use CP infrastructure will likely be affected: between Sudbury and White River and the Brockville-to-Ottawa segment of the Toronto-Ottawa route.That list would have been longer had the two sides not reached a deal, said Via spokesman Malcolm Andrews.“We would have had some runs to Kitchener, London, Sarnia that would have been affected, but because of what they were able to do, those lines now are not affected.”George Smith, a former CP vice-president of industrial relations who now teaches at Queen’s University, said he hopes Raitt doesn’t intervene with back-to-work legislation.Raitt stepped in to halt a strike at Air Canada earlier this year that would have inconvenienced March Break travellers.Smith said that experience should have taught Raitt that “you can’t legislate peace” and that she should stand back to allow the collective bargaining process to work.“I’m a firm believer in the process working. I think I’ve heard enough from both sides that they realize what’s at stake,” said Smith, a labour relations expert at the Queen’s School of Policy Studies.“There’s a lot at stake. And generally when there’s a lot at stake, rational people at a deadline find a way to resolve their differences.”The strike threat comes at a time of major changes at Canada’s second-biggest railway.A bruising months-long proxy fight with the railway’s biggest shareholder culminated last week in Fred Green’s exit as CEO.New York hedge fund Pershing Square Capital Management argued the railway was lagging its peers under Green’s leadership and that a change in CEO was necessary.Green and five other board members stepped down hours before the company’s annual general meeting last Thursday after it became evident shareholders had voted overwhelmingly for director nominees on Pershing’s slate.The Teamsters’ Finnson said the union has not yet met with Green’s interim replacement, Stephen Tobias. He said the management shakeup has not affected the bargaining process one way or the other.Pershing Square CEO Bill Ackman told shareholders at the annual meeting that change would not happen overnight, but that Canadian Pacific could become one of the best railways in the world.CP’s new leadership will have a tough time balancing shareholders’ high expectations against the labour challenges the railway is up against, said Smith.“In a certain sense, the new management is boxed in by their declaration of an economic revival for CP,” he said.“The shareholders don’t see that. They see new people who promised great things and here’s the first test of it. Only it came a little sooner than anyone expected.” AddThis Sharing ButtonsShare to TwitterTwitterShare to FacebookFacebookShare to RedditRedditShare to 電子郵件Email Strike begins at Canadian Pacific; rail company suspends freight service by The Canadian Press Posted May 23, 2012 1:24 am MDT read more