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Summary
- To provide relief to struggling energy and utility companies, the Alberta government has announced a three-year tax break for the producers drilling wells or constructing pipelines in the province.
- Algonquin stock has rebounded almost 46.4 per cent since the pandemic-led crash on March 24.
- Inter Pipeline has announced to buy Milk River pipeline system from Plains Midstream Canada.
There's been an unprecedented shift in financial markets since the Covid-19 pandemic outbreak. The West Texas Intermediate (WTI) crude oil future collapsed to minus US$37.63 a barrel as economies came to a standstill. As demand dried up and storage space shrunk, oil producers were forced to pay buyers to take the oil barrels off their hands. Meanwhile, Canadian utility companies such as Algonquin Power & Utilities Corp (TSX:AQN) and Inter Pipeline Ltd (TSX:IPL) strived to provide uninterrupted supply of energy to homes and establishments amid these conditions.
As demand flattened and commodity prices continued to be volatile, oil and gas companies reported losses and laid off employees.
To provide relief to the struggling energy companies, the Alberta government Monday (October 20) announced a three-year tax break for the producers drilling wells or constructing pipelines in the province. The relaxations combined are worth between C$ 81 million and C$ 84 million in the first year alone, the provincial government spokesman stated. It will be interesting to see whether other Canadian provinces follow suit.
Let us take a look at the stock market performances of Algonquin and Inter Pipeline:
Algonquin Power & Utilities Corp. (TSX: AQN, NSYE: AQN)
Current Stock Price: C$ 20.39
Ontario-based Algonquin Power & Utilities Corp is a generation, transmission, and distribution utility. The company owns and operates renewable energy facilities, thermal energy facilities, and water distribution and waste-water facilities in the United States. The company generates most of its revenue from its distribution of natural gas.
Algonquin Stock Performance
The power company stock is up 13.4 per cent in the last three months. The stock has rebounded almost 46.4 per cent since the pandemic-led crash on March 24. The company scrips reported a nearly 11 per cent increase year-to-date (YTD). Its current market capitalization is C$ 12.1 billion.
Algonquin’s year-to-date (YTD) Stock Performance Chart / Source: EODHD/Others, Thomson Reuters
The company is paying its shareholders a quarterly dividend of US$ 0.155. It has a current dividend yield of 4.023 per cent, as per the TMX data. The three-year dividend growth stands at 7.43 per cent.
The company’s earnings per share (EPS) is C$ 1.28. Its price-to-earnings ratio is 16.20, and the price-to-book ratio is 2.368. Algonquin’s return on equity (ROE) is 14.39 per cent.
Algonquin Financial Highlights
Algonquin Power and Utilities posted its earnings for the second quarter of 2020 with total revenues of US$ 343.6 million, in the same line with Q2 of 2019.
The company reported an adjusted EBITA of US$ 176.3 million in Q2, 2020, a 7.21 per cent decrease compared to US$ 190 million in Q2, 2019. The company posted adjusted net earnings of US$ 47.4 million in Q2, 2020, a 13 per cent decline compared to US$ 54.5 million in Q2, 2019. Its adjusted net earnings per share fell to US$ 0.09, an 18.18 per cent drop compared to US$ 0.11 in Q2, 2019.
On October 19, 2020, Algonquin acquired approximately 94 per cent of the outstanding shares of Empresa de Servicios Sanitarios de Los Lagos S.A. ("ESSAL") for an aggregate purchase price of US$ 162.1 million. ESSAL is a Southern Chile-based water and waste-water supplier with approximately 230,000 connections.
Inter Pipeline Ltd (TSX:IPL)
Current Stock Price: 12.74
Alberta-based Inter Pipeline operates crude oil pipelines, natural gas liquids extraction, and natural gas liquids extraction company and bulk liquid storage businesses across Canada and northern Europe.
Inter Pipeline Ltd. has announced to buy the Milk River pipeline system from Plains Midstream Canada ULC, a subsidiary of Plains All American Pipeline, L.P., in return for 100 per cent ownership interest in its Empress II plant and half ownership in the Empress V straddle plant. Plains Midstream will also pay Inter Pipeline cash proceeds of C$ 35 million. This transaction is expected to complete in early 2021.
Inter Pipeline Stock Performance
The oil pipeline company stock is down nearly 2.9 per cent in the last three months. However, the stock has surged 118 per cent since the pandemic-led crash on March 19. The company scrips posted a nearly 43.5 per cent decrease YTD. Its current market capitalization is C$ 5.4 billion.
The company is paying its shareholders a quarterly dividend of C$ 0.04. It has a current dividend yield of 3.768 per cent, as per the TMX data. The three-year dividend growth stands at -1.39 per cent. The company earnings per share (EPS) is C$ 0.79. Its price-to-earnings ratio is 16.20, and the price-to-book ratio is 1.313. Its return on equity (ROE) is 7.96 per cent.
Inter Pipeline Financial Highlights
Inter Pipeline reported its earnings for the second quarter of 2020 with total revenue of C$ 539.5 million, a nearly 16 per cent down compared to C$ 641.6 million in Q2 of 2019.
The company posted an adjusted EBITA of C$232.5 million in Q2, 2020, a 22.6 per cent decrease compared to C$ 285.1 million in Q2, 2019. The company posted a net income of C$ 62.5 million in Q2, 2020, a 75.99 per cent fall compared to US$ 260.3 million in Q2, 2019.
Inter Pipeline will announce its third-quarter 2020 financial earnings on November 12, 2020.
