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Calgary Flood: Productivity Losses Loom After Office Towers Evacuated

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Some of the energy companies headquartered in downtown Calgary could see productivity losses after being forced out of their offices by severe flooding, but the good news is that oil and gas production are largely unaffected, analysts said Friday.

"These downtown offices are centrepoints for planning," said Brian Pow, vice-president of research at Acumen Capital Partners Ltd.

"When you don't have minds congregated, because they're not all in the office, that's where you're losing productivity."

And, although it's a "major inconvenience," the evacuations are unlikely to have a huge impact on oil and gas producers' bottom lines, added Todd Hirsch, an analyst at ATB Financial.

"Corporate Calgary is very good at working remotely," said Hirsch.

"That's why we all have these smartphones and email and remote servers, so that when these disruptions happen, at least the bare bones of business can still happen."

The Calgary headquarters of several energy companies — including Encana Corp., Suncor Energy (TSX:SU), Enbridge Inc. and Imperial Oil (TSX:IMO) — were closed Monday.

Employees were still able to work remotely, although many companies said they were focusing only on the most essential business activities.

Encana Corp. (TSX:ECA) asked employees to work from home Tuesday and said it will do the same Wednesday as the office will remain closed.

"We are encouraging people, if they are capable, to work from home, but in our instructions to employees number one is, ensure the safety and security of your family and your property and yourself," said spokesman Jay Averill.

Encana said only two of its gas well sites, located southeast of Calgary, have been impacted by flooding.

"Outside of Calgary we've had almost zero impact," said Averill.

Talisman Energy (TSX:TLM) said a small number of employees who are engaged in "critical" business activities, such as those supporting exploration and production, were given access to the company's offices, as some parts of the city have been reopened.

The head office of Enbridge Inc. (TSX:ENB) in Calgary was also closed Monday as the company grappled with a spill from its Line 37 pipeline in northern Alberta, possibly as a result of shifting ground due to unusually heavy rains.

Suncor Energy said late Monday that it has temporarily reduced production from its Fort McMurray oilsand operations as a result of the precautionary shutdown of the Enbridge pipeline system within the Fort McMurray region.

"We're using our existing storage capacity, as well as moving volume on our oilsands pipeline, to mitigate the impact while we work with Enbridge to facilitate safely bringing the pipelines back into operation," said president and CEO Steve Williams.

"At this time, Suncor does not anticipate an impact on its ability to meet annual production guidance," the company added.

Hirsch, meanwhile, said the impacts of the flooding will be felt most in the tourism industry and in small businesses, said Hirsch.

"Mother nature is undiscerning about these things, but this came at a really, really bad time because in the next 10 days Alberta is heading into its largest tourist draw of the year, and that is the Calgary Stampede," he said.

Although the event will still take place, Hirsch said the number of tourists flocking to the area and the amount of money they spend will be lower than in other years.

Meanwhile, sectors involved in rebuilding the city, such as construction and renovation companies, are likely to see a boost, said Pow.

"There are whole neighbourhoods that have to be rebuilt," he said. "House builders and renovation experts are going to have a heyday for the next number of years."

But, Pow added, paying for all those renovations will mean dipping into savings or taking on loans.

Although most analysts and insurance companies said it was too soon to estimate the cost of repairing the damages, a preliminary report from BMO analyst Tom MacKinnon said it could be in the realm of $3 billion to $5 billion.

MacKinnon said he arrived at that figure by multiplying $500-million by 10, after reading Hirsch's comments that the price tag could be 10 times higher than that of the flood that occurred in the area in 2005.

Hirsch cautioned that his estimate was not a scientific one.

"I wouldn't be surprised if in fact that is the number at the end of the day, but I'm basing that on nothing else than just the scale of magnitude of how much larger this flood is than 2005," said Hirsch.

"There's no possible way anyone can really quantify with much sense of logic at this point — it's still way too early."

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