Market Uncertainty Trump Style, Grows - Earnings: FN, MIC, PKI, CPX, VET
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The world is leaning to a more fragile state. This is attributable to the accumulating impact of changes in three very important areas. These are US foreign relations, trade and economic policy. Each of these has entered a potentially new sphere in the Trump era. This is causing difficult to predict outcomes, raising the anxiety level of markets. Comments this week cover why each of these is agitating markets.
Earnings updates include Vermilion Energy Inc. (VET) , Capital Power Corp. (CPX, CPX.PR.A,C,E,G,I,K) Parkland Fuel Corp.(PKI), Genworth MI Canada(MIC), and First National Financial(FN, FNA.PR.A,B).
Vermilion Energy operates in the upstream segment of the petroleum sector, where exploration and drilling technology advances have resulted in oil and natural gas supply increasing faster than demand. Oil prices have been unable to sustain above $60(US) for WTI, natural gas has an even greater supply glut. Vermilion's strength has been their international diversification where benchmark oil and natural gas prices are consistently higher than for Canadian oil and natural gas. Vermilion is one of the few names in the Canadian E&P sector that have never reduced dividends, actually increasing them in the past two years in anticipation of improving oil and natural gas prices that are proving elusive to the entire upstream petroleum industry. An unplanned third party pipeline outage for their Paris Basin field in France along with weak oil and natural gas prices were substantial negatives for the share price which dropped from the lower $30 range to $22.22 pushing the yield to 12.4%. For a company with the track record and assets that Vermilion has, to experience such substantial share price weakness is a sign of the extremely difficult operating conditions in the upstream oil and natural gas sector. There is upside potential from a major supply disruption, such as uncertain passage for oil tankers through the Straits of Hormuz. Political tensions between Iran the US and other nations are escalating, intervention does not appear to be happening.
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