Management’s Discussion and Analysis
Winter prices appear to have stabilized looking forward, as expectations for cold weather are offset by warmer weather outside the prairie provinces and adequate storage levels across the continent. The following chart shows AECO natural gas prices:
AECO Monthly Index Historical Prices
$8.00
$7.00
$6.00
Forward Price at June 30, 2022
Limited Export Capacity from Alberta
$5.00
2015-Present Average Price $2.45/GJ
$4.00
$3.00
$2.00
$1.00
$0.00
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
CONSOLIDATED FINANCIAL RESULTS Consolidated Net Income
Three months ended June 30,
(millions)
2022
2021 Change
$
3
Income (loss) before unrealized market value adjustments
$
(5)
$
8
(1) (1)
Impact of fair value adjustments Revaluation of natural gas in storage
15
(16)
-
( 1) (9)
$
1
$
Consolidated net income
$
10
Income before unrealized market value adjustments was $3 million in 2022, $8 million favourable compared to the $5 million loss in 2021, resulting from a higher asset optimization margin, delivery revenue and transportation & storage revenue. This was partially offset by higher operating expenses and finance expense costs. The Corporation was able to take advantage of increasing natural gas market prices and higher market price volatility to improve asset optimization margins. Delivery revenue improved in 2022 due to weather being eight per cent colder than 2021. Transportation and storage revenues are higher in 2022, primarily resulting from rate increases effective April 1, 2022 on receipt and delivery services, as the Corporation addresses increasing third party transportation expenses, combined with customers increasing firm transportation contracting on receipt, delivery and export services. These were partially offset by higher operating costs, due to increasing third party transportation expenses and higher vehicle costs, which are resulting from fuel price increases. Finance expense costs are higher due to increasing average interest rates on short-term debt and lower borrowing costs capitalized to qualifying assets. The three months ended June 30, 2022 observed stronger natural gas market prices throughout most of the quarter, however near-term forward market prices declined below March 31, 2022 levels leading up to June 30, 2022. The result being a decline in the favourable price differentials on future commodity purchase contracts outstanding at June 30, 2022. The decline in near-term natural gas market prices also caused asset optimization natural gas in storage to be recorded at net realizable value at June 30, 2022, which was $1 million below cost and had a $1 million unfavourable impact on net income.
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