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A look at North American equities heading in both directions

On the decline

Cenovus Energy Inc. (CVE-T) gave up early gains and fell 3.6 per cent after it forecast higher capital expenditure and production in 2023, and said its natural gas business could grow by as much as 25 per cent in coming years due to higher prices.

The Calgary-based oil and gas producer said total upstream production will rise around 3 per cent year-on-year to 800,000-840,000 barrels of oil equivalent per day (boepd), and total spending will increase around 21 per cent to between $4-billion and $4.5-billion.

The company will direct up to $1.7 billion towards growth projects including building the offshore West White Rose project in Atlantic Canada, optimizing oil sands assets and improving reliability in its downstream refinery business.

Last week, rivals Suncor Energy (SU-T) and Canadian Natural Resources (CNQ-T) also said they expect higher capital expenditure in 2023.

However, Canadian producers remain cautious given volatile crude prices, which soared nearly 80% earlier this year following Russia’s invasion of Ukraine but have since given up those gains, and stubborn inflation.

“One of the great achievements in this budget is we’ve largely been able to keep operating costs flat year-on-year in most business areas,” Cenovus CEO Alex Pourbaix told Reuters in an interview.

Cenovus expects to hit its target of reducing net debt to $4-billion next year, at which point the company plans to return 100 per cent of excess free funds flow to shareholders.

Natural gas prices have also rallied and Pourbaix said the company has a significant amount of opportunities in western Canada that it will develop over time.

Cenovus’ conventional business, which includes natural gas production, makes up around a sixth of its total output. The company produces 580 million cubic feet a day of natural gas that it uses to feed its oil sands operations. Pourbaix called that business “incredibly attractive at these kind of prices” and said Cenovus plans to grow it beyond its own needs.

“It will depend on opportunities and economics but we are spending about 20-25% more in capital and over time it should not surprise anyone to see production grow around that level,” he said.

Cenovus expects its acquisition of a 50-per-cent interest in the Toledo, Ohio, refinery will close in the first quarter of 2022 and the refinery will restart operations after being damaged by a fire in September.

WSP Global Inc. (WSP-T) was lower after announcing it has entered into an agreement to acquire BG Bonnard & Gardel Holding SA, a leading engineering consulting firm in Switzerland that also has “a strong presence” in France.

Montreal-based WPS said its Swiss workforce will more than quadruple to over 600 professionals.

“WSP is expected to gain a foothold in the French-speaking region of the country while also enlarging its presence in the German-speaking region. Also, as a result of the transaction, WSP is expected to almost double its workforce in France, adding offices and clients in Paris, Lyon, and Marseille,” it said in a release.

The price of the deal was not disclosed.

Canfor Corp. (CFP-T) turned negative despite announcing late Monday a temporary reduction in Canadian production, citing “very weak market conditions.”

The Vancouver-based company says there will be curtailments at all of its solid wood facilities in B.C. and Alberta.

It says the move will reduce production by about 150 million board feet in December and January.

Canfor chief executive Don Kayne says the company will work to mitigate the affects on employees by providing support and identifying meaningful work during the downtime.

The curtailments will begin to be implemented on Dec. 19 and range from one to four weeks across its Canadian operations.

Canfor says it will continue to adjust operating rates to align with market conditions and anticipates that the majority of its B.C. facilities will operate below full capacity in the new year.

Shawcor Ltd. (SCL-T) declined after saying it has acquired Kanata Electronic Services Ltd., a privately owned manufacturer and supplier of specialty cable assemblies and wire harnesses for the nuclear and aerospace industries.

Financial terms of the deal were not disclosed.

Shawcor says the Toronto-based company will be integrated into its ShawFlex wire and cable business.

Kanata president Barbara Miller says the company has been a long-standing partner to ShawFlex and looks forward to an even closer working relationship.

Shawcor says Kanata serves the nuclear and spacecraft industries with custom cable assemblies.

The company says Kanata generated about $3-million in revenue in the first nine months of 2022.

Toronto-based Flow Beverage Corp. (FLOW-T) slipped after early gains on the premarket announcement of a distribution agreement with Starbucks Coffee Canada Inc (SBUX-Q).

The company’s Flow Alkaline Spring Water and Flow Strawberry Rose drinks will become available at over 1,000 locations across Canada in January.

“Flow has achieved another major milestone in its retail growth strategy securing distribution in Canada with the premier roaster and retailer of specialty coffee in the world,” said CEO Nicholas Reichenbach. “We believe Flow remains a top choice for retailers and consumers looking for a delicious functional water produced with a positive impact on the planet and people, and that these attributes will foster growth over the long-term.”

Equinox Gold Corp. (EQX-T) dipped after it announced that it has sold 11 million shares of Solaris Resources Inc. (SLS-T) through block trades for total proceeds of $70.4 million.

It said the sale was for investment purposes and that it now owns less than 10 per cent of Solaris.

Morgan Stanley (MS-N) was down after Reuters reported it has cut about 2 per cent of its workforce.

The job cuts, first reported by CNBC, affect about 1,600 positions and follow workforce reductions at Goldman Sachs Group Inc and Citigroup Inc.

Morgan Stanley is making modest job cuts worldwide, Chief Executive Officer James Gorman said last week. The bank had more than 81,000 employees worldwide as of Sept. 30, according to a quarterly filing.

While financial advisers in Morgan Stanley’s wealth management division are not being let go, there will be job cuts in the unit, the source said.

Wealth management accounted for 47% of the bank’s revenue in the third quarter.

Paramount Global (PARA-Q) plummeted after Chief Executive Officer Bob Bakish said at the UBS Global TMT conference on Tuesday it expects fourth-quarter advertising revenue to be lower than its third-quarter advertising revenue.

Shares of GameStop Corp. (GME-N) was down after Axios reported the video game retailer has begun a round of layoffs, with the team building its blockchain wallet heavily impacted.

The company, , which is among the so-called “meme stocks,” was popular among retail investors during the pandemic, launched a digital wallet earlier this year to enable transactions in a marketplace it is building for gamers and others to buy, sell and trade non-fungible tokens (NFTs).

The news comes ahead of third-quarter results on Wednesday where its is expected to report a 4.5-per-cent year-over-year rise in revenue to US$1.355-billion and a loss of 28 US cents per share.

BorgWarner Inc. (BWA-N) said on Tuesday it plans to spin-off its fuel systems and aftermarket segments into a separate company, in a bid to sharpen its focus on becoming an electric vehicle (EV) supplier.

Shares of BorgWarner, which supplies to car makers including General Motors Co. (GM-N) and Ford Motor Co. (F-N), reversed early gains on Tuesday.

“The intended separation of our Fuel Systems and Aftermarket segments would be an important next step to further our pivot to EVs,” said BorgWarner Chief Executive Frédéric Lissalde.

The Michigan-based company believes it would “ultimately achieve or exceed” its stated target of 25 per cent of revenue from EVs by 2025 as automakers invest billions of dollars to develop environment-friendly vehicles.

After the spin-off is complete, BorgWarner would consist of the e-propulsion & drivetrain and air management segments. The “NewCo”, comprising fuel systems and aftermarket segments, will be publicly traded.

In the first nine months of 2022, BorgWarner’s air management segment’s revenue was US$5.5-billion, while its e-propulsion and drivetrain unit generated about US$3.9-billion.

The fuel systems business had revenue of about US$1.7-billion while the aftermarket unit generated just under US$1.0-billion in sales.

With files from Brenda Bouw, staff and wires

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