Markets react to CP Rail’s ‘ non- event’

When Canadian Pacific Railway Ltd. revealed its chairman and another board member had abruptly resigned this week, it was through a terse 72- word news release.

In contrast, one day earlier Nexen Energy needed almost 200 words to express how “sincerely” it regretted that a duck had died after a pipeline rupture at its oilsands operations in northern Alberta and explain its efforts to prevent future incidents as the cleanup continues.

CP might’ve taken a page from Nexen’s crisis communication plan.

“There’s really nothing more that I can say about that,” chief operating officer Keith Creel said after he briefly extolled the virtues of new chairman Andrew Reardon and confirmed the solidarity of the rest of the board to begin a conference call Tuesday.

Controversy over resignation of another director earlier this month prompted the departures.

Moments earlier, Creel explained the surprising absence of talismanic CEO Hunter Harrison from the call to discuss second- quarter results as the 71- year- old architect of the remarkable turnaround at the Calgary- based railway recuperated from surgery on his legs and mild a case of pneumonia.

“It’s business as usual at CP,” Creel assured investors and analysts.

The succinct explanation didn’t resonate with the markets. Despite CP’s record $ 390- million profit in the second quarter, the blue chip stock lost more than five per cent of its market value Tuesday. It was neither businessasusual nor the last word.

The railway hastily issued another news release “in response to questions from investors and to address inaccurate speculation” to clarify the status of the leadership of the $ 32- billion market- cap company, and Harrison defied doctors’ orders to rest.

In an interview with The Wall Street Journal, Harrison said: “I really didn’t have any idea my not being on the call because of illness was going to cause the issues it did ... . I thought it was going to be kind of a non- event.”

The U. S.- based Institute of Crisis Management defines a crisis as “any problem or disruption that triggers negative stakeholder reaction that could impact the organization’s financial strength and ability to do what it does.”

Even for top organizations, the potential for unexpected reputation damage is ever- present.

Harrison told the newspaper he expects to return to work in three or four weeks and will retire when his contract expires in 2017. As the news disseminated, the stock recovered above $ 200 a share. It’s still a stark reminder of the cost of losing control of your message — and the effort it takes to get it back.

It’s also a scenario Nexen is working round- the- clock to avoid following the perplexing failure of a year- old pipeline given the interest in — and widespread opposition to — oilsands development and pipelines by media, environmentalists and politicians.

In the week after a worker discovered the 31,500 barrels of bitumen, water and sand, the subsidiary of Chinese state oil company CNOOC has held a news conference in Calgary and a visit to the remote site for journalists. CEO Fang Zhi flew back from Beijing to oversee the situation.

The ramifications of the spill extend well beyond the Alberta muskeg. Critics contend the rupture reveals pipelines — regardless of the “fail safe” new technology — aren’t as reliable as the industry’s safety statistics suggest.

From the outset, Nexen has made the point it “sincerely apologizes” for the leak while promising to be as transparent as possible about its investigation. ( One piece of advice: Even if the site tour takes place on a sunny day, it’s a challenge to see eye to eye with Fang as he makes his case — particularly on the national TV news — if he’s wearing wraparound sunglasses.)

After Canadian Natural Resources discovered a leak at its Primrose oilsands operations in June 2013, the company quietly acknowledged it allowed critics dominate the news immediately after the story emerged. CNRL subsequently had to play catch- up to make its top executives available for comment and arranged site visits for media.

Pipeline company Plains Midstream has been rebuked by the Alberta Energy Regulator and the National Energy Board for a lack of transparency and communication with a pair of high- profile pipeline ruptures recently in Alberta.

On Friday, Energy Minister Marg McCuaig- Boyd and Environment Minister Shannon Phillips will visit the Nexen site along with a representative of a nearby First Nation to get a briefing on the spill and the cleanup.

Communications alone won’t resolve the issues but it addresses societal demands for greater engagement with stakeholders.

At this point, Nexen doesn’t know exactly when the rupture occurred, why it happened or when the spill — about two Olympic swimming pools of liquids spread over an area the size of two football fields — will even be cleaned up. That hasn’t stopped it from saying what it can.

Negligence or incompetence likely caused the pipeline failure and — to maintain CNOOC’s reputation as a good corporate citizen — Nexen will eventually explain what happened regardless whether it reflects poorly on the company.

Given its self- inflicted crisis this week — and examples to the contrary — CP should rethink its less- is- more approach to communications.

Especially once the shoot-from-the- lip Harrison really is gone.