CP Rail agrees to buy Kansas City Southern.

Canadian Pacific Railway Ltd. agreed to buy Kansas City Southern for US$25 billion, seeking to create a 20,000-mile rail network linking the U.S., Mexico and Canada in the first year of those nations’ new trade alliance.The transaction creates the only network that cuts through all three North American countries, giving CP access to the Kansas City, Missouri-based company’s sprawling Midwestern rail network that connects farms in Kansas and Missouri to ports along the Gulf of Mexico. The network would also let CP reach deep into Mexico, which made up almost half of Kansas City Southern’s revenue last year.“I’ve had my eye on the KCS for quite some time,” CP Chief Executive Officer Keith Creel said in a telephone interview. “We extend our reach for our customers through the U.S. and into Mexico, and at the same time KCS can do the same coming from Mexico up to U.S. destinations and Canada.”READ MORE: CP Rail's CEO makes the US$25B deal his mentor wouldn't. The combination -- the biggest purchase of a U.S. asset by a Canadian company since 2016 -- would provide a transportation solution for manufacturers seeking to bring factories back to North America after the pandemic exposed risks of relying on overseas supply chains, Creel said. The merger has a “compelling and powerful environmental impact” by enticing more truck cargo to rail, which is about four times more fuel efficient, he said.

Kansas City investors will receive 0.489 of a CP share and US$90 in cash for each share they hold, valuing the stock at US$275 apiece -- 23 percent more than Friday’s record close, according to a statement from both companies on Sunday.

Creel will be CEO of the new company, to be based in Calgary, and is expected to remain at the helm until at least early 2026, according to a separate statement. The new entity, to be called Canadian Pacific Kansas City, or CPKC, will have revenue of about US$8.7 billion and almost 20,000 employees. Trade PlayThe transaction would be the biggest Canadian purchase of a U.S. asset since Enbridge agreed to buy Spectra Energy for about US$28 billion five years ago, according to data compiled by Bloomberg. That deal closed in early 2017. The deal comes as trade across the three nations is expected to pick up under the Biden administration. Just days after his inauguration, U.S. President Joe Biden spoke with the leaders of Canada and Mexico, his first calls with foreign counterparts, where issues from trade to climate change were discussed. Mexico is a crucial supplier of vehicles, auto parts, electronics and food and a major customer of grain, fuel and consumer goods -- ties that are likely to be strengthened by July’s passage of the U.S.-Mexico-Canada trade pact. Kansas City’s unique network linking Mexico’s largest industrial cities and ports to the U.S. Midwest would be positioned to benefit if the coronavirus pandemic and fraying ties between the U.S. and China prompt companies to move lower-wage manufacturing from Asia to North America. As part of the transaction, CP will issue 44.5 million new shares, to be financed with cash-on-hand and about US$8.6 billion in debt. CP’s debt would jump to about US$20 billion and leverage would increase to about four times earnings before interest, taxes, depreciation and amortization. Free cash flow of about US$7 billion over a three-year period from the combined railroad would help CP whittle that down to 2.5 times.CP expects to boost adjusted diluted EPS in the first full year after completing the deal, and later generate double-digit accretion. The combination will result in about US$780 million of efficiency gains over three years, with about three-fourths of that coming from profit increase.No Job CutsThere will be no workforce reductions, Creel said in the interview, and he predicted the merger will result in job gains as sales grow.CP will file the merger application with the U.S. Surface and Transportation Board on Monday and begin the process of creating a trust that will hold Kansas City Southern’s shares while approval is pending, Creel said. The companies expect a review by the STB to be completed by mid-2022On a conference call with analysts Sunday, Creel said there’s “minimal risk’’ that regulators will block the deal. There are no situations in which the merger will cause shippers to lose access to rail options, he said.“The Canadian Pacific-KC Southern combination has most of the hallmarks for regulatory approval,” said Lee Klaskow, analyst at Bloomberg Intelligence. “It will remain the smallest Class I railroad and the lack of overlap and the extension of the combined networks will not impede competition, in our view, and may result in improved fluidity.” He added that Kansas City Southern is exempt from the regulator’s “high-hurdle merger rules.”Still, there could be other obstacles. CP’s hostile attempt to acquire Norfolk Southern Corp. beginning in 2015 collapsed amid a hail of shipper criticism, including from United Parcel Service Inc., FedEx Corp. and even the U.S. Army, which uses the rails to transport military equipment. Creel called the deal “simple and pro-competition” because the two networks don’t overlap.“It provides a positive impact for all stakeholders, including the public interest,” Creel said. “Existing customers get to extend their length of haul and reach into new markets, as well as new customers that this network will naturally attract.”A Repeat TargetKansas City Southern, the smallest of the U.S.’s Class I freight railroads, has been a takeover target before. In September, Dow Jones reported that the company rejected a US$20 billion offer from Blackstone Group Inc. and Global Infrastructure Partners. Rumors of Kansas City Southern as a takeover target have swirled for years, especially after Canadian National Railway completed the purchase of the Illinois Central Railroad in 1999 that gave it access to ports in the U.S. Gulf of Mexico. Patrick Ottensmeyer, president and chief executive officer of Kansas City Southern, listens during the Latin American Cities Conference in Mexico City, Mexico, on Tuesday, May 23, 2017. The Latin American Cities Conference "Mexico and NorthCreel and Kansas City Southern CEO Pat Ottensmeyer said they began talks on the merger late last year. The two companies, which has work together for years with railcar exchanges, decided the timing was right, especially after the revamped U.S.- Mexico-Canada trade deal that replaced NAFTA, Ottensmeyer said.“This is a combination that just makes tremendous sense given that lack of overlap and the opportunities such as USMCA present for the outlook for rail and the footprint that this company is going to have in terms of an unmatched North American network,” Ottensmeyer said in the telephone interview.BMO Capital Markets and Goldman Sachs are financial advisers for Canadian Pacific, while Bank of America and Morgan Stanley are advising Kansas City Southern.--With assistance from Carla Canivete and Matthew Monks.

Courtesy of BNN Bloomberg

Sellers' market in February leads to rising prices

March 01, 2021

City of Calgary, March 1, 2021 – With gains in every price range, residential sales activity in February totalled 1,836.

This reflects the best February since 2014.

“Despite continued COVID-19 restrictions, housing activity continues to improve. Much of the strong sales activity is expected to be driven by exceptionally low mortgage rates,” said CREB® chief economist Ann-Marie Lurie.

“Confidence is also likely improving as vaccine rollouts are underway. Additionally, some of the worst fears concerning the energy sector are easing with recent gains in energy prices.”

New listings also improved in February, but the gap between new listings and sales narrowed. This is causing the sales-to-new-listings ratio to rise to 65 per cent, keeping the months of supply well below three months.

Conditions are far tighter in the detached sector of the market, especially for product priced below $600,000, where strong sellers’ market conditions are present with less than two months of supply.

The market has faced relatively low inventory levels compared to sales for the past several months and prices continue to trend up. In February, the residential benchmark price rose over the previous month and currently sits four per cent above last years’ levels. 

Detached product has the lowest months of supply and is also exhibiting the most significant gains in prices. On the opposite end of the spectrum, the apartment condominium segment still has a relatively high level of inventory compared to sales, which is impacting price recovery for this property type.

HOUSING MARKET FACTS

Detached

Detached sales improved across every price range this month, but the lack of choice in the lower price ranges likely placed limits on the gains in sales.

New listings did rise, but it was not enough to prevent further tightening in the market, as the sales-to-new-listings ratio rose to 71 per cent and the months of supply fell to under two months. This is the lowest months of supply recorded in February since 2007.

Tighter market conditions occurred across all price ranges, but properties priced below $600,000 saw the months of supply fall to just above one month. These conditions are supporting significant price gains in the detached sector, which recorded a February benchmark price of $502,500. This is nearly two per cent higher than last month and five per cent higher than last year. It is also the first time since 2018 detached prices have risen above $500,000, and currently sits under five per cent below previous highs recorded in 2014.

Prices increased compared to last month and last year in every district of the city. However, the magnitude of those increases varied, with the largest year-over-year gains occurring in the South East district at nine per cent, and the lowest gains occurring in the City Centre at under two per cent. 

Semi-Detached

Semi-detached sales in February recorded significant gains, pushing sales activity to the highest February levels seen in nearly 13 years. However, like the detached sector, the improvements in new listings were not enough to offset sales, ensuring this sector continues to favour the seller.

With lower levels of supply relative to sales, benchmark prices improved over both last year and last month. However, this was not consistent across all districts. The West district continues to see prices that remain over two per cent lower than last year’s levels. The strongest year-over-year price gains were reported in the South East and North districts.

Row

Despite a significant increase in new listings, improving sales offset the gains and the months of supply fell to three months.

Conditions for row properties are not as tight as what we have seen in both the detached and semi-detached sectors. However, they do reflect an improvement relative to the oversupplied conditions recorded last year. However, when considering activity by price range, pockets of oversupply persist in this market.

Citywide reductions in inventory relative to sales supported some price improvements in this segment. The benchmark price trended up from last month and currently sits just over one per cent higher than last year’s levels. Year-over-year gains did not occur across all districts, as prices remain lower than last year’s levels in the North, North West, South and South East districts.

Apartment Condominium

Driven by product priced mostly under $300,000, apartment condominium sales improved to best February levels recorded over the past six years.

However, the gain in sales was not enough to cause any significant changes in inventory levels. February inventory remained elevated compared to levels we typically see at this time of year.

While the months of supply has trended down in this sector, it remains above five months. This is preventing the same type of price recovery seen in other sectors. On a year-to-date basis, the benchmark price remains similar to levels recorded last year.

REGIONAL MARKET FACTS

Airdrie

February sales reached new record highs for the month.

The largest gain in sales occurred in the $400,000 - $500,000 price range. New listings also increased, but the sales-to-new listings ratio remained elevated at 71 per cent and the months of supply dropped to under two months in February. This is the tightest level seen since 2014.

Persistent sellers’ market conditions have resulted in further price gains in the market. The benchmark price has trended up for the past eight months and, as of February, it is over seven per cent higher than last year’s levels. Most of the price growth has been driven by the detached sector.

Cochrane

Cochrane sales more than doubled compared to last February. This represents the strongest February ever recorded for the town.

New listings also rose for the month, but it was not enough to cause any substantial change in inventory levels and the months of supply fell to below two months. This is the lowest months of supply for February seen since the record low in 2006.

Tight conditions supported price growth in February, as the benchmark price rose to $413,700, a four per cent increase from last year’s levels.

Okotoks

New listings have been trending up from the lows seen at the end of 2020, helping to support a significant improvement in sales in February. February sales reach levels not seen for the month since the record high in 2007. 

Inventory levels remain exceptionally low relative to sales and the months of supply dropped below two months. Like other towns around Calgary, the sellers’ market conditions caused prices to trend up. In February, the benchmark price reached $442,600, nearly five per cent higher than levels recorded last year.

Calgary Named Fourth "Most Livable" city in the world.

A new global survey has ranked Calgary as the fourth most “livable” city in the world, with Toronto and Vancouver falling not far behind.

The Economist’s 2018 “Global Livability Index” surveyed 140 cities around the world and ranked them based on 30 factors in five broad categories: stability, healthcare, culture and environment, education and infrastructure.

With perfect scores in four categories, Calgary ranked fourth with an average score of 97.5, falling behind only Vienna, Austria (99.1), Melbourne, Australia (98.4) and Osaka, Japan (97.7).

For full details click the link below

https://www.ctvnews.ca/lifestyle/calgary-named-fourth-most-livable-city-in-the-world-1.4051997

Forget About Oil at $80. The Big Rally Is in Forward Prices

 

By 

Catherine Ngai, Alex Longley, and Javier Blas

May 21, 2018, 5:50 AM MDT Updated on May 21, 2018, 6:46 AM MDT

Brent five-year forward prices outpace gains in spot prices

Brent crude oil grabbed all the attention after spot prices hit $80 a barrel last week. And yet, almost unnoticed, a perhaps more important rally has occurred in the obscure world of forward prices, with some investors betting the "lower for longer" price mantra is all but over.

The five-year Brent forward price, which has been largely anchored in a tight $55-to-$60 a barrel range for the past year and a half, has jumped over the last month, outpacing the gains in spot prices. It closed at $63.50 on Friday.

"For the first time since December 2015, the back end of the curve has been leading the complex higher," said Yasser Elguindi, a market strategist at Energy Aspects Ltd. in New York. "It seems that the investor community is finally calling into question the ‘lower for longer’ thesis."

Bob Dudley, the chief executive of oil giant BP Plc, coined the "lower for longer" mantra in early 2015, warning of a protracted period of cheap crude. He later clarified that he meant "lower for longer, but not forever."

More to Run

While spot prices fluctuate wildly, often driven by geopolitics such as U.S. sanctions on Iran, the five-year forward usually trades in a narrower range, anchored by longer views about future supply and demand.

Over the past three years, long-dated prices had been weighed down by the belief the growth in U.S. shale production, combined with the adoption of electric vehicles, would keep prices under control.

Investors are now questioning that hypothesis, pushing up forward prices. Over the past month, Brent five-year forward futures gained 11 percent, compared with a 6.8 percent increase in futures for immediate delivery.

"We think there is more to go for the longer date contracts,” SEB chief commodities analyst Bjarne Schieldrop said. “This will send very positive price signals into the whole oil space with higher confidence, optimism and evaluations as a likely consequence."

Demand Surprise

There are several reasons for the sudden surge in forward prices. Oil consumption is expanding much faster than anticipated, adding growth in two years that would normally take three. At the same, oil investment has dropped significantly over the past three years, particularly in projects that take longer to develop such as ultra-deep water offshore, raising doubts about future supply growth despite the gains in Texas, North Dakota and other U.S. shale regions.

Moreover, a change in marine fuel oil specifications by 2020, which should increase significantly the demand for diesel-like refined products, is further reinforcing the belief among some investors that the oil market will be tighter than expected in the future.

Morgan Stanley Says a Shipping Revolution Has Oil Headed for $90

The buying has sparked a rally in later-dated contracts in the past week-and-a-half that traders say is even more impressive than Brent’s march past $80. The grade for delivery in December 2022 has surged 10 percent since to beginning of the month to nearly $64 a barrel. The December 2023 has risen above $63 a barrel.

The higher forward prices are also catching the attention of some equity investors as they usually use longer-dated prices to value energy companies.

Despite the rally in forward prices, oil exploration and production companies, which typically hedge their production further out in the curve, have remained reticent to buy in, according to John Saucer, vice president of research and analysis at Mobius Risk Group in Houston. Oil producer selling typically puts pressure on the back of the curve.

Investors aren’t just buying outright long-dated futures, but also betting through the options market on much higher prices in the early part of next decade by buying call options. The contracts, which give investors the right to buy at a predetermined price, are popular among commodities hedge funds.

Call options that would profit from Brent rising to $130 a barrel by the end of 2020 traded 2,000 times on Friday. That follows a similar amount of $100 contracts for the same period trading over the past two weeks.

“The war premium at the front of the market masked the fact that future significant demand increases and questions over supply levels equate to higher prices down the line,” said Richard Fullarton, founder of commodity focused hedge fund, Matilda Capital Management Ltd.

— With assistance by Jessica Summers, and Sheela Tobben

https://www.bloomberg.com/news/articles/2018-05-21/forget-about-oil-at-80-the-big-rally-is-in-forward-prices