Energy Summary for Nov. 28, 2022
2022-11-28 20:22 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for January delivery added 96 cents to $77.24 on the New York Merc, while Brent for January lost 44 cents to $83.19 (all figures in this para U.S.). Western Canadian Select traded at a discount of $29.07 to WTI, unchanged. Natural gas for December lost 31 cents to $6.71. The TSX energy index lost 4.33 points to close at 258.22.
Oil prices had another choppy day. They spent the morning falling to their lowest levels since January, as anti-lockdown protests in China muddied forecasts for fuel demand. Protesters and police are in their third day of clashes over the country's harsh COVID restrictions. Later in the day, prices regained ground -- with WTI even swinging to a daily gain -- on rumours that OPEC+ is weighing another production cut. The group will have its next meeting this Sunday, Dec. 4.
Paul Colborne's Alberta- and Saskatchewan-focused Surge Energy Inc. (SGY) lost eight cents to $9.44 on 1.66 million shares, after pocketing another $10.5-million from an equity offering. It initially raised $70-million last week through a bought deal of 7.58 million shares at $9.25. Now the underwriters have exercised the full overallotment option, bringing the number of shares issued to 8.7 million and the total proceeds to $80.5-million.
One of the underwriters was National Bank, whose research division wasted no time singing Surge's praises. In a recent research note, National Bank analyst Dan Payne hiked his price target on the stock to $15 from $14 -- or nearly two-thirds higher than the bought deal price of $9.25 -- and reaffirmed his "outperform" rating. He noted that Surge is using the proceeds in part for a $245-million asset acquisition from Enerplus Corp. (ERF: $24.59). "Pro forma the transaction, [Surge's] corporate strategy and orientation remain intact to maximize free cash ... [for] deleveraging and sustainable dividend increases," wrote Mr. Payne. Surge already wants to boost its monthly dividend to four cents from 3.5 cents with the closing of the asset acquisition. Gazing into his crystal ball, Mr. Payne predicted "a potential doubling of its payout ... through mid-2023," while murmuring about "implications" of an $18 share price based on 5-per-cent dividend yield.
Further afield, Gabriel de Alba's Frontera Energy Corp. (FEC) lost 28 cents to $10.43 on 46,500 shares, while Dr. Suresh Narine's CGX Energy Inc. (OYL) stayed unchanged at 97 cents on 56,400 shares. The two of them are facing yet another drilling delay at their exploration-stage Corentyne block off the coast of Guyana. This time they pinned the blame on the yet-to-arrive drill rig, which is still busy in Trinidad. Rather than drilling their well by the end of September (as originally planned) or by the end of November (as required under their licence), they have received government approval to move the spud date to the end of January.
Investors have had to get used to long waits for anything involving CGX. The junior has been operating in Guyana since the late 1990s, but has yet to bring a single well on production. (It did, of course, have to halt work for about seven years during the 2000s because of a border dispute between Guyana and Suriname. This delay -- and the fact that CGX shouldered millions of dollars of Guyana's legal costs during the dispute -- goes a long way in explaining the government's patience in repeatedly extending CGX's drilling deadlines.) Investors were optimistic when Frontera, an experienced producer in Colombia and a long-time shareholder of CGX, got more deeply involved as CGX's official joint venturer in 2018. Yet the delays persisted. The two have drilled just one well so far, in late 2021 (also far behind schedule), and now their second well is getting pushed into 2023.
Management of both companies kept up a bright smile in today's update. Thanking the government for its good "stewardship" in extending the deadline, they reiterated their "continued commitment" to "unlock[ing] the potentially transformational opportunity before us." They also made sure to remind investors that their first well made a successful discovery of light oil and gas condensate. (The extent of success has proved hard to measure, as the companies were unable to collect high-quality samples -- let alone run tests -- but they kept that reminder to themselves.)
Back in Canada, Rob Zakresky's six-month-old B.C. Montney junior, Coelacanth Energy Inc. (CEI), lost three cents to 82 cents on 134,800 shares. The drop came despite an attempt by its president and chief executive officer, Mr. Zakresky, to stir up some good press. He gave a boosterish interview today to The Market Herald about the third quarter financials that Coelacanth released last Thursday. (The Market Herald is a self-described business news outlet that seems mainly to provide PR services. It disclosed that the interview was "sponsored" -- paid for -- but did not disclose a price.)
Last week's financials covered the first full quarter since Coelacanth's formation last May. Mr. Zakresky summed them up in today's interview with a brisk, "Everything was on track." He was more interested in hyping his grand ambition to boost production, which was about 300 barrels a day during the quarter, to over 20,000 barrels a day within three years. Having told investors last week that Coelacanth had received its very first drill permits, Mr. Zakresky confirmed today that drilling has begun on the first two wells. Many more will follow in 2023 and 2024. By 2025, the expected start-up year for Shell's LNG Canada megaproject (to export liquefied natural gas off the B.C. coast), Coelacanth expects to be a sizable producer. "We're really pleased with the progress to date," concluded Mr. Zakresky.
He is not alone in his optimism. Coelacanth has been enjoying steady buying support lately from major shareholder Vermilion Energy Inc. (VET: $25.45). It was Vermilion that bought Mr. Zakresky's prior promotion (Leucrotta Exploration) in May, leading to the creation of Coelacanth as a spinout. Vermilion received 7.5 million shares of Coelacanth as part of the deal and immediately bought 53.3 million more through a private placement. Since then, largely through open-market purchases, Vermilion has boosted its position to 69.9 million of Coelacanth's 425 million shares. These include 108,300 shares bought in the past week.
We end with some Monday mania from eco-activists (who actually carried out the stunt last week, but the memory of it is a delightful way to open this one). Since mid-October, when anti-oil protesters tried to hurl soup over a Van Gogh painting in London, a trend has emerged in which eco-vandals target works of art to try to draw attention to their anti-petroleum message, despite simultaneously enjoying an array of petroleum-derived clothing, electronics and home comforts. Two activists in Germany hopped on the bandwagon last week by attempting to disrupt a symphony performance in Hamburg. They clambered on stage and glued themselves to the rail of the conductor's podium before beginning to lecture the audience.
The stunt did not go as planned. With Teutonic efficiency, security detached the removable rail and marched the protesters off stage, to applause from the audience. An article in the local press calculated that the disruption lasted six minutes. Although the protesters were taken into police custody, they had paid for their tickets and thus will not receive any eco-merit badges, otherwise known as arrests.
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