Irving Oil says a strategic review of the company is underway and that it is looking at a series of options about its future, including a possible sale of the business.
The Saint John-based company operates Canada’s largest refinery, and is a major employer in New Brunswick and the region.
In a statement released Wednesday, the company said a review was underway, but that “no decisions have been made about where this strategic review may lead.”
“Consideration will be given to a new ownership structure, a full or partial sale, or a change in the portfolio of our assets and how we operate them,” read the statement, which was signed by Arthur Irving, Ian Whitcomb and Sarah Irving.
Arthur Irving is chairman of Irving Oil, Whitcomb is president, and Sarah Irving is the executive vice-president.
The statement goes on to say that the company will evaluate options “in the coming months” but that they were focused on its team, customers and communities.
Irving Oil, which was founded in 1924 by K.C. Irving, has more than 900 gas stations and a network of distribution terminals. It also operates Ireland’s only refinery.
‘Climate change is a reality’
Rob Moir, an associate professor with the University of New Brunswick’s faculty of business, said he was caught unaware by the announcement.
“They tend to hold their cards close to their chest, and then make an announcement. And this one certainly came that way,” he said.
Moir said he wonders what the reason is behind the company’s move. However, he said because it’s a private company, it’s not open to scrutiny the way a publicly traded company would be.
He pointed to the wildfires currently raging across the country even though the fire season has barely begun.
“Climate change is a reality. Fossil fuel companies — they don’t want to wake up to that reality, but it is a reality,” he noted.
“Is it going to be that big a change if a fossil fuel company that focuses on fossil fuel has to change its operations? Not necessarily, because guess what — that’s where we were going, whether or not we liked it.”
The sensible thing for the company to do, Moir said, would be to divest itself.
Others in the industry say the review is not out of the ordinary.
Jeremy McCrea, the managing director of energy research for the investment company, Raymond James, said there’s a growing shift in oil and gas producers examining how they fit into a changing energy landscape as the world moves away from fossil fuels.
“It’s not surprising that anybody would be making these type of explorational processes just to see what’s out there,” he said.
For some companies, McCrea added, that may mean cashing out entirely.
“No one wants to be sitting on something and a project that suddenly has no bid here,” said McCrea.
“So if there are clearly bids out there — and we do see that with other companies right now — it’s good foresight for these companies to kind of just explore to see what else is out there.”
While speaking with reporters Wednesday, New Brunswick Premier Blaine Higgs, who is a former Irving Oil executive, drew a direct link between federal clean fuel rules and Irving Oil’s strategic review. Higgs said the federal government is making it more challenging for oil and gas businesses to operate.
“I think the emissions standards that are being forced upon this industry are very significant and they do bring into play how do you deal with this going forward,” Higgs said.
‘Conglomerates are kind of a relic’
Scott McKnight, a research associate with the University of Toronto’s Lupina Foundation Innovation Policy Lab, said the motivations of the sale could stem from Irving Oil being an intergenerational company, and the family may have run their course.
“So they now may be contemplating not just a big strategic change but possibly an outright sale,” he said.
Adding to that, he said while oil companies are still making record profits, it’s not the record incomes they had some time ago.
It’s also possible that the company could break up their “dirtier, fossil-fuel centric” assets from their non-carbon intensive assets, he said.
“Conglomerates are kind of a relic of actually many decades ago,” McKnight said.
“That’s not really a dominant business model these days where companies would have this far ranging empire with their thumbs in every different pie. … Irving (is) perhaps trying to catch up with the times.”
— With files from The Canadian Press