Canadian oil company will stay put in Russia, even as scores of energy companies suspend operations
While scores of energy companies have left Russia since the Ukraine conflict erupted, a Calgary-based oil company is staying in Western Siberia where it conducts extraction services for Russia's largest oil producer.
Calfrac Well Services Ltd., one of the largest hydraulic fracturing companies in the world, told investors on Wednesday it was evaluating the options" for its Russia operations but did not indicate it was joining the hundreds of companies that have exited the country since it invaded Ukraine in February.
According to recent corporate filings, Calfrac has operated under multi-year contracts in Western Siberia to provide services to Russia's largest oil producer," though it does not specify the company.
In its fourth-quarter results, released Wednesday, the company reported earnings of $28.1 million from its Russian operations in the last three months in 2021 - four per cent higher than the year before. Overall, Calfrac earned $122.2 million from its Russian operations in 2021, comprising 12 per cent of its $1.2 billion in revenue for the fiscal year.
The ongoing conflict between Russia and Ukraine has added a level of risk and uncertainty around the company's operations in Russia," the company wrote in a public statement on Wednesday.
As a result of this dynamic situation, Calfrac is currently evaluating the options for its Russian operations. The company expects that it will have more to discuss in conjunction with the reporting of its first-quarter results in early May."
Rosneft, the state-owned company widely seen as Russia's largest oil producer, is one of several Russian energy groups facing scrutiny and divestment from Western governments and companies that view the gas producers as bankrolling a war that has resulted in mass fatalities and wanton destruction.
News of Russia's invasion was enough to prompt London-based multinational British Petroleum to abandon its 19.75 per cent stake in Rosneft in late February, a decision that resulted in charges for BP of up to $25 billion.
In a statement, BP CEO Bernard Looney said the company severed ties with Rosneft after 30 years of partnership because Russia's attack on Ukraine is an act of aggression which is having tragic consequences across the region."
It has led the BP board to conclude, after a thorough process, that our involvement with Rosneft, a state-owned enterprise, simply cannot continue," said Looney.
ExxonMobil exited Russia early in March, leaving $4 billion in assets behind, while Shell PLC said it would stop buying Russian oil and gas.
The Canadian federal government has also imposed sanctions on 10 executives in Russia's energy sector working for Rosneft and Gazprom, Russia's largest natural gas company.
On Tuesday, the European Union introduced sweeping new sanctions on Rosneft, Transneft and Gazprom aimed at banning new investment across the Russian energy sector," EU officials said.
Since Canada has not placed sanctions directly on Russian energy companies, legal experts say Canadian companies can still conduct business with them.
But critics say the decision to stay is disappointing."
I would hope that any Canadian company working in Russia or profiting from a Russian state-based corporation would think twice about what they're doing," said Marcus Kolga, a leading expert on Russia and a fellow at the Macdonald-Laurier Institute, who was placed on the Kremlin's sanctions list of 300 Canadians on Tuesday.
Large global corporations have pulled their Russian operations. Canadian operations still in Russia need to do the same. Otherwise, they're indirectly enabling Vladimir Putin's war and invasion of Ukraine."
A flurry of Canadian companies have suspended their operations in Russia.
Early in March, Toronto-based Kinross Gold Corp. suspended its mining operations there out of consideration for the safety and well-being of its more than 2,000 employees," the company said in a statement.
Last week, auto manufacturer Magna International paused work at its six plants in Russia, which employ roughly 2,500 workers and generated $345 million in revenue in 2020.
French-fry producer McCain Foods Ltd. ended construction of a $212-million manufacturing plant in Russia and announced it was abandoning the project entirely last Thursday.
In an open letter to the federal government, 100 Canadian business leaders - including executives from BlackBerry Ltd., Norton Rose Fulbright Canada LLP and Wealthsimple Inc. - recently vowed to sell off their Russian investments and cut off business ties.
If anyone can sit there and watch what's happening and your conscience can say allocating capital in Russia is the right thing to do in this time,' I would love them to come and talk to me," Purpose Investments CEO Som Seif previously told the Star.
Anyone who takes advantage of moments like this for their profit, in my opinion has to answer transparently to their customers."
Calfrac did not respond to the Star's requests for comment.
Jacob Lorinc is a Toronto-based reporter covering business for the Star. Reach him via email: jlorinc@thestar.ca