Heatwaves, Wildfires Start Showing Up In Operations And On The Bottom Line

Whether you are a railroad in Canada or a oilfield equipment maker in Texas, extreme heat and wildfires are cutting into productivity.

Heatwaves, Wildfires Start Showing Up In Operations And On The Bottom Line
Photo by Landon Parenteau / Unsplash

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Diverse industries are starting to cite the recent North American heatwave, and resulting wildfires, as a risk to their earnings going forward.

For some companies – like the largest HVAC companies – the heatwaves has been a profit driver. Five of the seven largest air conditioning manufactures are predicting earnings records.

For others, climate-driven heat and wildfires are cutting into their operating ability.

In Canada, hundreds of wildfires that have burned more than 47,000 square miles of forest have upended Canadian National Railway Company operation's, said CEO Tracy Robinson, cutting into transport volumes and damping the railroad's ability to move some commodities.

COO Edmond Harris offered more detail on the impact in the earnings call last week:

We experienced a nearly 800% increase in heat-related delay hours in Western Canada with almost 750 hours of delay versus 80 last year. Heat slows mean running trains slower than track speed, which impacts network train speed and car velocity, even requiring a new heat category called extreme heat conditions.

Canadian sawmill and forest products company Canfor told investors that the company was relying on its European and Southern US operations to take up the slack as it continued to measure the damage in its core market.

CEO Don Kayne said:

While it is too early to determine the long-term fiber supply impacts, we have seen significant short-term disruptions to our operations, including a 3-week curtailment of our facility in Fox Creek, Alberta in the second quarter.

In the US, the heatwave is having a knock on effect of cutting energy production as fields, refineries and fracking operations go off line to accommodate the rising temperatures.

Pump-jack mining crude oil with the sunset
Photo by Zbynek Burival / Unsplash

Matthew Gillard, Chief Operating Officer of NexTier Oilfield Solutions, told analysts:

The extreme summer heat is very hard on our equipment. And recently, we have seen a spike in heat-related equipment issues. While the nature of the issues is minor, they are frequent and require us to take pumps out of service for repairs, which lowers our pumping efficiency. Along those same lines, protecting our employees from extreme heat is the highest priority, and we require all employees to move slower when the temperatures get to these extremes. In the Northeast, the Canadian wildfires impacted air quality on several occasions, forcing us to temporarily suspend operations when we felt it was unsafe for our employees to be outside. These anecdotes should serve as a reminder that frac efficiency is a function of many changing factors, some of which are outside our control.

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