CALGARY — Fuel retailer Parkland Corp. has lowered its full-year earnings forecast as sluggish market conditions continue to take a bite out of margins at the company’s Burnaby, B.C. refinery.
The Calgary-headquartered company is experiencing similar challenges to refiners worldwide, as the industry deals with a glut of fuel supply and weak global economic conditions that have reduced demand.
On a conference call to discuss the company’s third-quarter financial results Thursday, CEO Bob Espey said adjusted earnings from the company’s refining segment fell 73 per cent year-over-year, to $49 million compared to $188 million in the same three-month period last year.
He said this was in spite of Parkland’s Burnaby refinery operating smoothly, with a strong utilization rate.
Globally, refiners are dealing with weak “crack spreads,” an industry term that measures the difference between wholesale petroleum product prices and crude oil prices.
When crack spreads are strong, refineries make more money, and when they are weak, refineries make less money.
Crack spreads globally are currently low due to a variety of factors, including weak economic conditions that have reduced fuel demand in China as well as the U.S. government’s sale of 1 million barrels of gasoline last quarter from its Northeast supply reserve, which pushed more fuel onto the market.
“In terms of the dynamics that are causing the crack spreads to come down, there is a period here where we’re seeing lots of supply, so the market is sloppy,” said Espey.
“Generally what we see in times like that, which we’ve seen in the past, is the market does work to clean itself up … We do see global demand continuing to grow next year, which will start to improve some of the oversupply globally.”
The current market conditions are so difficult that some U.S. refiners have announced plans to temporarily curb their output as a result of the weak market conditions.
Many global oil majors are also reporting decreased third-quarter earnings due to weakness from their refining segments. Reuters reported Thursday that French giant TotalEnergies saw its third-quarter earnings hit a three-year low this year, in large part due to the collapse of refining margins.
For its own third quarter, Parkland reported its earnings declined by 60 per cent year-over-year, from $230 million in 2023 to $91 million in the third quarter of 2024.
Espey said while he does believe the market will ultimately correct itself, he expects the challenging refinery market conditions to persist through the remainder of the year.