Parkland Fuel Corp. said Thursday its Burnaby, B.C. refinery is not for sale, even in the face of pressure from an activist investor.
The Calgary-based fuel retailer and convenience store operator has been the subject of a campaign by U.S.-based Engine Capital LP, which owns about a two per cent stake in Parkland.
The activist investor has been calling on Parkland to consider selling or spinning off its Burnaby refinery in order to become a pure-play fuel marketer and retailer.
As part of its campaign, Engine Capital had warned Parkland it would withhold support from the company's incumbent directors at Parkland's annual meeting Thursday.
But in a conference call with analysts held just prior to that annual meeting, Parkland CEO Bob Espey said the company has completed a detailed review of strategic alternatives for the Burnaby refinery, and a sale is not in the cards.
"We reviewed several options, including a sale or spin-off and considered the impact of leverage and synergies," Espey said.
"Following this detailed review we concluded that Parkland should retain ownership of the refinery to maximize shareholder value at this time."
Parkland purchased its Burnaby refinery – which refines 55,000 barrels per day of crude and synthetic oil into gasoline, diesel, jet fuels and more – from Chevron Canada, along with Chevron's retail fuel business in this country, for $1.5 billion in 2017.
On the retail side, Parkland is one of the fastest-growing independent fuel suppliers and marketers in North America, with a network of retail service stations across Canada, the northern U.S. and the Caribbean.
Its On the Run convenience store brand is expected to have more than 1,000 locations by 2024.
The Burnaby refinery supplies about a third of the gasoline sold on B.C.'s Lower Mainland and Vancouver Island., and Espey noted the remainder of the gasoline sold in the area has to be imported from the U.S. or from Edmonton via the Trans Mountain Pipeline.
"The Burnaby refinery is a highly strategic and integrated asset, and approximately 90 per cent of its output supplies Parkland customers," Espey said.
Instead of selling the refinery, Espey said Parkland instead has plans to generate up to $500 million by divesting what it calls "non-core assets."
“Work is well underway. At the end of the first quarter, we had more than $200 million of assets up for sale," Espey said, adding many of those assets are high-value U.S. retail locations for which negotiations with prospective buyers are already under way.
Engine Capital had also been critical of Parkland's approach to executive compensation. The activist investor noted last month that CEO Bob Espey's total direct compensation increased 23 per cent in 2022 to $5.3 million.
On Thursday, Parkland shareholders voted approximately 91 per cent in favour of the company's approach to executive compensation in a say-on-pay vote.
Shareholders also voted in favour of the company's slate of nominees to the board of directors. Engine Capital had expressed concern that Parkland has once again nominated 24-year tenured chair Jim Pantelidis to the board, but Pantelidis' re-appointment Thursday was approved by more than 90 per cent of shareholders.
Engine Capital has not replied to a request for comment.
Parkland Corp., which released its quarterly earnings Wednesday after the close of markets, said it earned $77 million in the first quarter of 2023, up 40 per centfrom $55 million a year earlier.
The company said its sales and operating revenue for the quarter ended March 31 were $8.2 billion, up 7.2 per cent from $7.6 billion during the first quarter of 2022.
Diluted earnings per share were 43 cents, up 23 per centfrom 35 cents a year ago.
This report by The Canadian Press was first published May 4, 2023.
Companies in this story: (TSX:PKI)
Amanda Stephenson, The Canadian Press
