2017 Annual Report - Petroleum | UFA Co-operative Ltd.

2017 Annual Report

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> PETROLEUM >>>

UFA’s extensive network of petroleum sites is comprised of 106 cardlock operations in Alberta, supplemented by two in B.C. and three in Saskatchewan. We are a reseller of fuels and lubricants to our members and customers and we do this through bulk delivery directly to member and customer sites and through our network of cardlocks, which are designed for 24/7, large vehicle access, with high speed pumps.

SALES VOLUME

1,236.5m

In 2017, Petroleum sales volume increased by 14 per cent or 149 million litres over 2016.

GROSS MARGIN

$103.6m

The gross margin for Petroleum increased by 18 per cent from 2016.

UFA Petroleum is committed to providing effective business solutions that enable our customers and members to be at their competitive best in an ever-changing economic environment. Our group literally fuels our customers’ ability to operate and grow their businesses. We are where our members and customers need us to be, particularly in rural locations, where our service is second to none. Broad geographic coverage means members and customers can easily find our locations in their communities and we can be on-site quickly, so they can get back to doing business.

> Don Smith

Vice President, Petroleum

Performance

We proudly source from the best western Canadian refiners and top lubricant manufacturers to provide high quality fuel and lubricant solutions that our members and customers need and expect. We are also proud of our partnership with the Commercial Fueling Network, which allows us to provide customers with access to a network of more than 2,500 locations in B.C. and across the United States.

For our agricultural-based members, fuel and lubricants are major inputs into their operations. Crops and livestock don’t wait so we have developed our model to ensure our members have what they need, when they need it.

We also have a significant non-member customer base, which is largely associated with oilfield service work. Their requirements are for on-time, safe and high-quality fuel and lubricants and we go above and beyond to service our valuable customers in the oilfield sector.

From Lethbridge to La Crete and all throughout the network we serve, our customers rely on high-quality fuel. This is why our fuels meet or exceed the stringent quality standards set by the Canadian General Standards Board for commercial fuel quality. We continually monitor the quality of all our fuels, and conduct benchmark testing, to ensure that our products meet the rigorous demands of today’s agricultural, commercial, construction, oil field and on-road equipment. In 2017 we produced a fuel quality video to explain where we source our fuel from and how we deliver high quality fuel to our customers and members. Visit UFA.com/FuelQuality to see our latest video on fuel quality.

Petroleum

We are where our members and customers need us to be, particularly in rural locations, where our service is second to none.

The Petroleum team is happy to share that our volumes are well-ahead of the last two years and our margins are solid. We know that one of the main drivers in the improvement in volume is thanks to a recovery in oil field activity, particularly in the western corridor of Alberta. Member volumes continue to increase, which provides evidence that our competitive pricing efforts and strategies are paying off. Our Bar W Petroleum & Electric business supports two major industry sectors in Alberta: the industrial/commercial electrical industry and the downstream petroleum industry. It maintained revenues in 2017, and remains as the primary service provider for a major fuel distributor in its northern Alberta locations.

We continued with the hedging program that was created in 2016 to reduce exposure to significant inventory holding losses. Our hedging strategy has paid off, reducing UFA’s exposure to inventory losses in 2017.

We continued to test the market with alternate value propositions that demonstrated a commitment to finding different ways of providing business solutions to our customers. Joint offers with AgriBusiness, deferred credit options, tank and fuel offers were all successful propositions we extended to our members and customers in 2017. We also increased our focus on lubricant product offerings with strong results.

At the end of 2017 we supported the North West Redwater Partnership and Sturgeon Refinery when it was announced that the first Alberta diesel was flowing from the facility. We hosted a celebratory event at the Morinville UFA Petroleum Agency where we accepted the first litre of diesel fuel produced by the refinery. This significant moment marked the upgrader’s milestone on its way to full commercial operation in 2018. We completed rebuilds of our agencies in Spirit River and Beaverlodge in 2017, recognizing and filling a need in those communities. Through projects like these, we strengthen the local economies of municipalities across the province through employment, spending and community investment.

At UFA, we care for the land and about the communities in which we live and work. This past year, we saw an 85 per cent reduction in the volume of product releases, our lowest level since 2014. We’ve implemented new processes and technology to improve our safety results such as automatic tank gauging, which gives our carrier agents remote visibility to their tanks. We also have a new valve management process which eliminates the risk of large spills. Our continued work with third-party carriers and our agent network to implement new operating procedures that are environmentally safe, reduces risk and improves our environmental stewardship.

We also have a significant non-member customer base...their requirements are for on-time, safe and high-quality fuel and lubricants and we go above and beyond to service our valuable customers in the oilfield sector.

Petroleum

> Driving Forward >>>

The UFA Petroleum team is focused on adding greater value to our members and customers. We will continue to train and develop our employees, agents, and contractors to better serve you. In addition, we will also be evaluating our product lines to understand where we can potentially offer you new products and make UFA the preferred choice for our members and customers.

Meet NTL PIPELINES

Meet NTL Pipelines Meet NTL Pipelines

When you pound the pavement as much as the crew from NTL Pipelines does, you must be efficient with your dollars. It’s also why Doug Roemer is a proud UFA member of nine years and counting.

The Clairmont resident is the Corporate Fleet Manager at NTL and, on any given day, he has 100 pieces of heavy equipment, 100 pickup trucks and 25 semi-trucks on the go. With fuel economy, Roemer is often crunching numbers down to the half cent.

He uses UFA for all kinds of services, such as fuel, tank rentals, deliveries and construction materials.

“We utilize UFA wherever we go workwise,” says Roemer. “Everyone always wants to help you. If I ever have a problem or need something fixed, I’ve never had someone not help or say, ‘that’s not my job.’”

To illustrate this, Roemer recalls an unforgettable experience.

Last winter in Fox Creek, his camp was running out of fuel and wouldn’t have petroleum for the morning unless something happened — and quick. “I called UFA in Fox Creek and got ahold of Dennis. I said, ‘I know this is not a normal thing, but I was wondering if you could run a truck out and put 2,000 gallons in [our tank] so my guys can go to work.”

Before sunrise the next day, Dennis himself was at camp, filling the fuel tanks and had Roemer’s men up and running, no time lost.

“That meant the world to me. It kept our crew going,” says Roemer. “The service was exceptional and demonstrated UFA’s commitment to customers.”

The fuel world has tight margins and Roemer himself is often buying 1 million litres of fuel, so you can imagine his surprise when he recently learned his loyalty was literally paying him back.

“I got a notification that I was getting a discount, because we’ve become such a large purchaser,” he says. “I’ve been doing this for 20 years and I’ve never had a petroleum company give me a discount. The whole company is built on people and it shows. It’s not just a logo, it’s the people.”

Community Investment

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