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Overflowing production continues to dampen oil prices as Alberta premier mulls solutions

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Oil market analyst Kevin Birn likens Western Canada’s crude supply to a bathtub with a drain that’s too small to keep up with the increasing volume pouring out of the tap.

As barrels of surplus oil lap the edge of the tub, desperate producers are forced to sell at rock-bottom prices to avoid a big mess.

Meanwhile, no one seems to agree on how to either turn down the tap or install a bigger drain.

“You can think of it as a bathtub that’s full. And as long as the bathtub is full, the pressure on the (price) differentials is going to be bad,” said Birn, the vice-president of North American crude oil markets for IHS Markit.

“So you’ve got to drain it. And building rail, it will help. You’re seeing announcements around production curtailments and that’s an attempt to accelerate the meeting between supply and demand to drain the basin.”

Alberta Premier Rachel Notley announced this week the province would buy as many as 80 locomotives and 7,000 rail tankers to move the province’s excess oil to markets, with the first shipments expected in late 2019.

She was scheduled to make a key announcement Sunday evening on oil production, writing in an op-ed sent to Postmedia that she is considering many options including production cuts.

Jason Kenney, leader of Alberta’s opposition United Conservative Party, has said it would provide faster relief if all companies in Alberta were forced to temporarily halt 10 per cent of their production.

4.6 million bpd

Canada had total production of about 4.6 million barrels per day of oil in September, with 4.3 million bpd produced in the West, according to the National Energy Board.

That month, the country exported 3.47 million bpd of oil, with almost all of it going to the United States. Crude-by-rail exports rose to a record of almost 270,000 bpd.

After hitting highs of more than US$52 per barrel in October, the discount on Western Canadian Select bitumen-blend crude versus New York-traded West Texas Intermediate settled at about US$29 per barrel on Friday, according to Net Energy, about double the discount it typically fetches due to lower quality and transportation costs.

Upgraded synthetic crude from oilsands mines was selling at an US$18.50 discount to WTI (it typically trades near par) and Edmonton light oil was receiving about a US$23 discount, although it is of similar quality to WTI.

In an update report on Nov. 21, Scotiabank analysts said the wider-than-usual discounts will cost the Western Canadian oil industry $15 billion to $39 billion of earnings in 2019 compared with a scenario where pipeline capacity is adequate to take away export production.

It added the Alberta government could miss out on $1.5 billion to $4.1 billion (roughly $350 to $950 per Albertan) in royalty revenue in 2019.

$13-billion economic impact

The Canadian Association of Petroleum Producers officially estimates the cumulative economic impact of discounts nationally was at least $13 billion from the start of 2016 to the end of October this year.

The oil industry’s problems are mainly due to the failure to build export pipelines to match increases in oil production, said Birn.

The 525,000-bpd Northern Gateway pipeline was approved in 2014 by the federal Conservative government and then rejected by the Liberal government in 2016. The 1.1-million bpd Energy East pipeline was cancelled by TransCanada Corp. due to “changed circumstances” in 2017.

That leaves the Line 3 replacement pipeline as the most likely to come into service next, adding more than 370,000 bpd of export capacity when it starts up in late 2019, after both the Trans Mountain expansion pipeline project and the Keystone XL pipeline were recently ordered halted by courts in Canada and the U.S.

A hint of the trouble ahead came late last year when the Keystone pipeline was shut down for 10 days due to a leak in South Dakota and the heavy oil discount doubled to as much as US$29 per barrel, Birn said.

The discount fell during the summer when oilsands production declined due to planned and unplanned project shutdowns in northern Alberta but rose again in the fall as refineries in the United States that use western Canadian heavy oil had their own maintenance shutdowns.

Meanwhile, production continued to increase, driven by projects like Suncor Energy Inc.’s 194,000-bpd Fort Hills oilsands mine which began ramping up in late 2017.

Birn said it’s tough to say where prices will go from here. Winter is the most active season for drilling in Canada and production normally rises but early indications are that the industry won’t spend as much as usual this year.

Voluntarily production cuts, increases in crude-by-rail exports and a plan by the 80,000-bpd Sturgeon Refinery to begin processing bitumen will likely help moderate discounts in the months ahead, he said.

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Real Estate

Couple from Toronto buys dream home in Mushaboom

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MUSHABOOM – A couple who lived and raised a family in downtown Toronto developed a five-year plan in 2015 to purchase their dream home.

In September they moved into the home – located on Malagash Island in Mushaboom on Nova Scotia’s stunning Eastern Shore – that met and exceeded their best dreams for their retirement.

The Camerons, Bruce and Tanya, decided in 2019 they would explore the Maritimes to see what real estate was available to become their potential retirement home. In the spring of 2020, during a global pandemic, the real estate boom hit their city, and they were hearing the same for Nova Scotia. Our province was their first-choice for attaining their desire for an entirely different lifestyle – away from the busyness of the city.

“We had $300,000 to $350,000 as a home value in mind to buy. Our semi-detached located off Danforth in Toronto was priced at $850,000. We wanted to come out ahead, so we would be secure in retirement,” Tanya said.

Their century-old home had prime location near the subway and GO Transit Line for a great 13-minute commute downtown.

“We enjoyed our community,” explains Bruce “… we had great neighbours, young children around and street parties – lots of social activity.”

Bruce says, “Our agent suggested a starting quote of $899,000. We did not do any renovations and only some staging. Fifty couples went through and we received four significant offers. Six days later we sold – with zero conditions – and a price of over a million dollars. We just requested a closing of September 2020 to get the kids off to school – which we got.”

The couple got more than they had anticipated.

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Real Estate

Rabobank Announces Leadership Changes in U.S., Canadian Offices

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NEW YORK, Dec. 16, 2020 /PRNewswire/ — Rabobank, the leading global food and agribusiness bank, has appointed two of its top executives, Tamira Treffers-Herrera and Robert Sinescu, to become Co-Heads of North American Client Coverage, positioning the Bank for future growth in the region.

Treffers-Herrera has also assumed the role of Vice Chairperson and Head of the Atlanta office, where she additionally oversees Rabobank Mexico, which is led by Eduardo Palacios. Sinescu is the Head of the Chicago office, and also oversees Rabobank Canada, led by Marc Drouin, who was recently appointed as Canada’s General Manager.

Treffers-Herrera and Sinescu report to David Bassett, Head of Wholesale Banking North America, the Bank’s corporate and investment banking business for the region based in New York.

“Both Tamira and Robert have a demonstrated history of strong leadership, operational excellence and passion for our clients,” Bassett said. “Their broad experience and deep sector expertise will be invaluable in delivering dynamic results for clients while accelerating our growth trajectory in North America.”

Each office will have an even greater focus on key Food & Agribusiness sectors and clients: The Chicago office will drive growth in sectors including Dairy, Farm Inputs and Grains & Oilseeds, which are also key areas of focus for the Canada office. The Atlanta office will focus heavily on sectors such as Animal Protein, Beverages, Sugar, and Supply Chains, which are important sectors in Mexico as well.

“Rabobank is fully committed to our clients throughout North America, and we believe our new sector-focused coverage will improve our ability to provide knowledge-based, value-added solutions that benefit our clients,” Bassett said.

Treffers-Herrera was most recently based in London as CEO of Rabobank’s European Region from 2016-2020, where she took the organization through Brexit. Prior to that, she worked in the Atlanta office from 2002-2016. During her tenure in Atlanta, Treffers-Herrera served as Global Sector Head – Consumer Food & Beverages, and prior to that she was a senior banker for a portfolio of large beverage and consumer foods clients. She holds a Bachelor of Arts degree from the University of Kentucky, a Master of Arts from the Patterson School of Diplomacy and International Commerce and has studied at The University of Chicago Booth School of Business and Harvard Business School.

Sinescu has been with Rabobank for over 21 years and was previously General Manager of Rabobank Canada, where he oversaw all operations, business development, commercial strategy and relationships with regulators. In addition, he continues to serve as CEO of Rabo Securities Canada Inc. Prior to Canada, he was a senior banker, Head of Corporate Banking, European Sector Head for Sugar, and a member of the Management Team for Rabobank France. He holds a Bachelor of Science in Business from the Bucharest School of Business, a Master of Business Administration & Management and a Master of Science in Banking and Corporate Finance from Sorbonne University in Paris, and has studied at Brown University.

Drouin has worked with Rabobank’s Canadian team for more than nine years and most recently served as a senior banker, Head of Rabobank Canada’s AgVendor Program and a member of Rabobank Canada’s Management Team. He brings extensive wholesale banking experience within the Dairy, G&O, CPG and Supply Chain sectors. Drouin holds a Bachelor of Arts degree from McGill University and a Master of Business Administration in International Finance, Marketing and Management from the Schulich School of Business at York University.

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Real Estate

Greybrook Realty Partners & Marlin Spring Brand Jointly Owned Asset Manager – Greyspring Apartments

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TORONTO, Dec. 14, 2020 (GLOBE NEWSWIRE) — Greybrook Realty Partners and Marlin Spring are pleased to announce the new branding of their jointly owned investment and asset management firm, Greyspring Apartments. With a portfolio of more than 2,000 units and CAD$375 million in assets under management, Greyspring Apartments is focused on the acquisition and repositioning of multi-family assets throughout Canada.

The new name and branding is an important step in Greyspring’s evolution as an independent operating business. Formed in 2018 by long standing-partners Marlin Spring and Greybrook Realty Partners, Greyspring Apartments was established with the goal of building a leading asset management firm with a robust portfolio of residential rental real estate assets in primary and secondary markets across Canada.

Greyspring’s talented team of real estate, asset management and finance professionals is overseen and guided by the Management Board, whose members include Benjamin Bakst, CEO, Marlin Spring; Elliot Kazarnovksy, CFO, Marlin Spring; Sasha Cucuz, CEO, Greybrook Securities Inc.; Peter Politis, CEO, Greybrook Realty Partners; Chris Salapoutis, President & COO, Greybrook Realty Partners; Ashi Mathur, President, Marlin Spring; and Karl Brady. In addition to his role on the Management Board, Karl Brady leads Greyspring Apartments as its President. 

“We are pleased to announce the official name and branding of a business we formed with our partners at Marlin Spring a few years ago,” said Peter Politis, CEO, Greybrook Realty Partners. “Greyspring has been diligently focused on the execution of strategic value-add programs across its portfolio that are improving the quality of housing for tenants and overall asset values. For Greybrook investors, expanding from our core business in real estate development to the value-add space through Greyspring, has allowed us to provide our clients with investment opportunities that diversify their real estate investment portfolios.”

“Marlin Spring and Greybrook have partnered on many residential real estate projects in recent years,” said Benjamin Bakst, CEO and Cofounder, Marlin Spring. “To a great extent, Greyspring illustrates our approach to partnerships. We believe in, and strive for, responsible growth through deepening our relationships with our trusted partners. With Greyspring, we’ve formalized our focus on providing better and more affordable living experiences for Canadians. This vision aligns with our mission to deliver exceptional real estate value to all our stakeholders with an uncompromising adherence to our core values.”

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