Stockwatch Energy today
Energy Summary for April 26, 2021
2021-04-26 20:22 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for June delivery lost 23 cents to $61.91 on the New York Merc, while Brent for June lost 46 cents to $65.65 (all figures in this para U.S.). Western Canadian Select traded at a discount of $12.40 to WTI, up from a discount of $12.55. Natural gas for May added six cents to $2.79. The TSX energy index added a fraction to close at 113.71.
Trans Mountain must halt construction for four months on a section of its eponymous pipeline because of bird nests, say federal wildlife officers. The stop-work order, which affects a roughly 900-metre section of land and will stay in place until Aug. 21, was issued by Environment and Climate Change Canada after the discovery of hummingbird nests along the Brunette River in Burnaby, B.C. Eight active nests were found. Under the Migratory Birds Act, disturbing or destroying the nest of a migratory bird -- such as a hummingbird -- is illegal. Trans Mountain may not proceed with tree-clearing and other activities in this section until the end of the nesting season.
Naturally, opponents of the pipeline were all aflutter to see such tiny birds deal a setback to such a large project. "It is very symbolic that a tiny hummingbird has stopped local construction," claimed Judy Wilson of the Union of B.C. Indian Chiefs. "... Many stories honour the qualities of Hummingbird, and one that stands out, in particular, is Hummingbird's tenacious loyalty to the forest." The 350 Canada green group chortled that "even the hummingbirds" want Trans Mountain to "back off."
As for Trans Mountain itself, it said in a statement that its wildlife protection measures have been "extensively reviewed by federal and provincial regulatory authorities," and that it is now "reviewing its procedures for the protection of migratory birds during construction." It did not mention whether or how the stop-work order will affect the pipeline's timeline and costs. The pipeline, which has already been plagued for years by regulatory delays and cost overruns, is currently scheduled for completion in late 2022 at a projected cost of $12.6-billion. In a public affidavit from December, 2020, a company official noted that if Trans Mountain failed to complete its tree-clearing activities before the start of the nesting season -- which it has clearly failed to do -- then it would face "additional risks and delays if active nests are present ... [which] may ultimately delay the project schedule." The affidavit specified that each month of delay to the in-service date would cause "lost earnings of approximately $100-million" as well as "millions of dollars in excess capital costs."
Far away from any pesky hummingbirds or pipeline battles, Craig Steinke and David Elliott's Reconnaissance Energy Africa Inc. (RECO) added $1.07 to $7.95 on 1.41 million shares, after announcing that it will spud its second Namibian well on May 1. The first well was a marvellous success, as far as investors are concerned. Reconnaissance announced the preliminary results of that well on April 15 and the stock has since rocketed up to $7.95 from $3.51. (Shareholders who got in even earlier, say a year ago, would have paid as little as 26 cents.)
The first well has not been tested, so the market's enthusiasm reflects the early-stage petroleum indicators (with over 200 metres of oil and gas shows discovered) and the marine source rock (which is promising as it suggests that the rock will be homogeneous throughout the basin, improving Reconnaissance's chances of further discoveries). The second well will evaluate the thickest part of the system discovered in the first well. In a research note dated April 15, Haywood Securities analyst Christopher Jones speculated that good results from the second well would "open up the door to potential farm-in/JV [joint venture] negotiations in the back half of the year." Mr. Jones has a $10 price target on the currently $7.95 stock. (Investors may wish to note that the above-mentioned Mr. Elliott has a connection to Haywood, in that he is a founding partner, director and vice-president.)
Likely looking to burnish its JV chances, Reconnaissance has brought in two new IR executives. It announced today that Diana McQueen is becoming its senior vice-president of corporate communications and stakeholder relations. Ms. McQueen's name will ring a bell for Canadian political junkies; she held various provincial cabinet roles in Alberta from 2008 to 2015, including Minister of Energy, Minister of Environment and Water, and Minister of Municipal Affairs. These days she has her own consulting company and also serves on the board of oil sands producer MEG Energy Corp. (MEG: $6.49). Separately, Reconnaissance has hired Grayson Andersen as manager of investor relations. He has previously held IR roles at two South American producers -- Frontera Energy Corp. (FEC: $6.20) and GeoPark Ltd. (U.GPRK: $16.11) -- and at oil sands giant Canadian Natural Resources Ltd. (CNQ: $36.94). The two of them will take over the duties of former senior IR vice-president Doug Allen, following his abrupt resignation in late March.
Another of Reconnaissance's more high-profile executives is Nick Steinsberger, best known for his past work as a petroleum engineer at Mitchell Energy, where he is famed for "unlocking" the Barnett shale of Texas. (His idea led to the first commercially successful fracked well in the basin and indeed in the United States.) Mr. Steinsberger appears to be enjoying his current role as Reconnaissance's senior vice-president of drilling and completions. On Friday, he exercised an option to acquire 150,000 shares at 70 cents. He paid $105,000. The shares are currently worth $1.19-million.
Another company with insider buying activity is Charle Gamba's Colombian gas producer, Canacol Energy Ltd. (CNE), down one cent to $3.48 on 244,700 shares. The stock has been hovering around the $3.50 mark for most of the year. One institutional investor seems optimistic that it is due a jump. Ari Merenstein's Fourth Sail Capital, a Brazil-based "boutique asset manager" that has been buying Canacol steadily since January of last year, has bought another 1.28 million shares so far this month. It now owns 33.6 million of Canacol's 179 million shares. What it paid for all of these shares is not clear, but according to SEDI, roughly eight million were acquired at a cost base of $3.56 -- barely any different from today's closing price of $3.48. The above-noted Mr. Merenstein, Fourth Sail's founder and managing partner, joined Canacol's board in March of last year to try (thus far unsuccessfully) to chivvy the investment along. The current buying activity comes just as Canacol is preparing to release its first quarter financials. It announced late on Friday that it will release the financials on Thursday, May 13, and hold a conference call to discuss them on Friday morning.
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