Stockwatch Energy today
Energy Summary for April 22, 2021
2021-04-22 20:21 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for June delivery edged up eight cents to $61.43 on the New York Merc, while Brent for June added eight cents to $65.40 (all figures in this para U.S.). Western Canadian Select traded at a discount of $12.00 to WTI, down from a discount of $11.70. Natural gas for May added six cents to $2.75. The TSX energy index lost 1.21 points to close at 112.46.
Brian Schmidt's Alberta- and Saskatchewan-focused Tamarack Valley Energy Ltd. (TVE) edged down one cent to $2.23 on 2.18 million shares. It is toiling away at its planned takeover of the private Anegada Oil for $494-million, as announced April 12, with the preacquisition contract now filed on SEDAR. Another SEDAR filing indicated that shareholders holding 100 per cent of the Anegada shares have now tendered them to Tamarack's offer. Tamarack still needs to secure its own shareholders' approval, as it will be issuing 105 million shares to close the acquisition, and this is more than one-quarter of its current share count of 298 million. The company is planning to hold a special meeting on May 28 and to close the deal on May 31.
The above-noted Mr. Schmidt, Tamarack's president and chief executive officer, headed to BNN to hype the deal on Tuesday. Anegada is adding "just a phenomenal asset ... It makes just a huge impact on the company," he declared. He was referring to Anegada's holdings in the Charlie Lake play of Alberta. Between the Charlie Lake play and the Clearwater play, another area of Alberta where Tamarack has been expanding recently, the company will be active in some of "the top [plays] in North America in terms of economic return," cheered Mr. Schmidt.
His interviewer noted that Tamarack has relied heavily on its shares to enter these plays. (Its share count will soon surpass 400 million, up from 222 million just four months ago.) Mr. Schmidt brushed aside the dilution. By his estimates, Tamarack will enjoy a 20-per-cent boost in cash flow per share in 2022, even with the extra shares outstanding.
Naturally, the mere mention of the words "cash flow" was enough to have the interviewer speculating that Tamarack will introduce a dividend. Mr. Schmidt went happily along with it. Given the "huge free cash flow generation" that Tamarack is expecting from its "very impactive" new assets, a dividend is "obviously something we have to look at and would want to look at it," he declared. Yet he said it is not a near-term priority. The company wants to focus for now on repaying its roughly $200-million debt. Mr. Schmidt is confident that Tamarack can completely eliminate this debt by mid-2023.
Further afield, Guyanese oil explorer CGX Energy Inc. (OYL) added nine cents to 90 cents on 396,500 shares, after hiring a contractor for its planned offshore drill program. It is doing the program alongside joint venturer (and majority shareholder) Frontera Energy Corp. (FEC: $6.20). As discussed in Monday's Energy Summary (after CGX secured a $19-million (U.S.) loan from the very supportive Frontera), the companies have had a joint venture in Guyana since 2018, but have yet to spud their first well. They are finally planning to crack on with things in the third quarter of this year.
Their first well will be Kawa-1 on the Corentyne block, whose location gives them high hopes. Corentyne is right next to Exxon's Stabroek block in Guyana, where Exxon has announced 18 discoveries (which by its estimate could hold a total of eight billion barrels). It is also immediately across the border from Apache's block 58 in Suriname, where Apache has announced four discoveries, including Maka, which is only about 25 kilometres away from the proposed location of the Kawa-1 well. CGX and Frontera have hired offshore drilling specialist Maersk Drilling to do this well. One hopes it will be worth the long, long wait by CGX's shareholders. The last time CGX drilled a well was way back in 2012.
Elsewhere in South America, Charle Gamba's Colombia-focused Canacol Energy Ltd. (CNE), stayed unchanged at $3.52 on 152,600 shares. It failed to impress investors with the new resource estimates on its conventional gas blocks and its unconventional shale oil blocks. The gas blocks would be more relevant to most investors, as Canacol shifted its focus to gas several years ago and became Colombia's largest independent gas producer. It estimated today that it had 5.7 trillion cubic feet of unrisked prospective gas resources as of Dec. 31, 2020. This is a low level of certainty, but speaks to the success of Canacol's exploration programs, particularly considering that the same number three years earlier (on Dec. 31, 2017) was just 2.6 trillion cubic feet.
As for the unconventional shale oil assets, investors could be forgiven if they were unaware of their existence. The last resource update that Canacol published on them was way back in 2014. Yet today it slid right back into old spiel, talking up the "excellent" La Luna shale. Investors seemed bemused by the about-face. While the La Luna has attracted its share of hype over the years (cheerleaders liken it to the famous Texas Eagle Ford), Canacol has rarely mentioned it since shifting its attention to gas in 2014. The company even exited nearly all of its oil properties over the following years, keeping only a 20-per-cent interest in the VMM-2 and VMM-3 blocks, which are operated by ConocoPhillips. Seven years have passed since a well was drilled at either block. Now Canacol says that far from ignoring these blocks, it has in fact been working closely with Conoco to "evaluate the technical data" and "plan next steps toward the evaluation of the La Luna."
Canacol's resurgence of interest likely has to do with Colombia's thawing attitude toward fracking. This would be key to developing the La Luna shale, and indeed has been suggested for over a decade as a key solution to Colombia's economic and energy woes. The Colombian Petroleum Association (an industry group) has estimated that fracking would increase the country's production by half a billion barrels a day and attract $5-billion (U.S.) worth of investment. Colombia has historically been resistant to fracking, but now, facing a stalled economy in the wake of the COVID-19 pandemic, it is warming up to the idea. The head of the national energy regulator told Reuters last month that Colombia will likely lift its fracking ban next year.
Canacol is likely hoping that a fracking boom is on the horizon. While its own La Luna exposure is relatively small, it seems to be getting ready to reclaim its role in the hype machine. Its president and CEO, Mr. Gamba, declared today that the company's shale oil assets offer "materiality and significant potential."
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