Stockwatch Energy today
Energy Summary for Sept. 8, 2021
2021-09-08 19:46 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for October delivery added 95 cents to $69.30 on the New York Merc, while Brent for November added 91 cents to $72.60 (all figures in this para U.S.). Western Canadian Select traded at a discount of $12.03 to WTI, up from a discount of $12.05. Natural gas for October shot up 34 cents to $4.91. The TSX energy index lost 1.15 points to close at 124.25.
Traders continued to eye the aftermath of Hurricane Ida along the U.S. Gulf Coast. Offshore oil producers are making slow progress in restoring output that they took off-line as the storm ripped through the region last week. Today, however, offshore gas producers were the ones in the spotlight. Nearly four-fifths of the region's gas production remains off-line, according to the U.S. government. This could put continued pressure on gas inventories, which, after a summer of scorching heat waves and high cooling demand, are already nearly one-fifth lower than they were a year ago. Mounting anxiety about a winter supply crunch is now pushing gas prices to their highest level since 2014.
Within the energy sector, Vermilion Energy Inc. (VET) lost 20 cents to $8.45 on 1.81 million shares, after rejiggering its top management for the second time in less than two years. It has promoted Dion Hatcher to the role of president. Mr. Hatcher is an engineer by training and has been with Vermilion for the last 15 years, most recently as the vice-president of its North American unit, which contributes about two-thirds of its total production. (The rest comes from Europe and Australia.) Before Vermilion, Mr. Hatcher held various engineering, operations and project management roles with Chevron Canada.
Mr. Hatcher succeeds Curtis Hicks, who took over as Vermilion's president in May, 2020, following the abrupt exit of former president and chief executive officer Tony Marino. Mr. Marino had found himself in the unfortunate position of defending Vermilion's sky-high dividend almost right up to the moment it was suspended. By that point, the stock was worth barely one-10th of its high of $78 in 2014 -- though Mr. Marino, to be fair, had been CEO only since 2016 -- and the company decided it wanted a change. It lured out of retirement Mr. Hicks, who had been its chief financial officer from 2003 to 2018. Unsurprisingly, Mr. Hicks devoted himself to the balance sheet. He vowed that Vermilion would prioritize reducing its $2.15-billion net debt before reviving a dividend.
Now Mr. Hicks is apparently ready to get back to his retirement. If he has not fully righted the ship, he has certainly made his point. Vermilion's current net debt is around $2.00-billion -- still lofty, but according to today's press release, incoming president Mr. Hatcher is "fully aligned" with the Hicks-ian "conservative business principles." Mr. Hatcher himself emphasized that he is "excited" to take charge of Vermilion and "deliver on our near-term commitment to reduce debt." A dividend will return eventually, he suggested, but not until "the appropriate time."
(As for the above-mentioned Mr. Marino, he recently found a new promotion. Just last week on Aug. 30, little Alberta producer Altura Energy Inc. (ATU: $0.26) announced that it is recapitalizing, overhauling its board and management, and going on an international shopping spree, with the goal of becoming a major dividend-paying corporation. Mr. Marino is to oversee all of this as its new president and CEO.)
Back in the world of gas, Alberta Montney producer Advantage Energy Ltd. (AAV) hovered unchanged at $5.99 on 1.18 million shares, taking a breather after more than tripling since January on stronger gas prices. CEO Andy Mah tried to keep the excitement going in an appearance on BNN yesterday. "The future looks very bright," he proclaimed. Speaking broadly about gas prices, he noted that gas production and inventories have been dwindling, both in Canada and the United States, while demand has held strong. This has created "very constructive" prices for gas producers.
Turning specifically to Advantage, Mr. Mah said the company is seizing the moment to boost its production by 10 per cent in 2022, a decision he expects to lead to a greater than 10-per-cent boost in free cash flow. The interviewer then seized that moment to ask whether Advantage will use any of the extra cash for dividends or share buybacks. Mr. Mah demurred, saying Advantage's focus for the next year or two is on becoming "absolutely resilient" -- in other words, reducing debt, as he later clarified. Yet he did make sure to add that dividends and buybacks "could be on the table in the future."
This will likely be a future in which Mr. Mah is no longer Advantage's CEO. He announced in July that he plans to step down on Dec. 31, 2021, and turn the CEO job over Advantage's current president and chief operating officer, Mike Belenkie. Mr. Mah will remain on Advantage's board. He also used his BNN appearance as an opportunity to put out some feelers, noting that he wants to "stay active with industry advocacy and support" and would happily consider joining other boards, too.
Elsewhere in Alberta, Alex Verge's Journey Energy Inc. (JOY) added 17 cents to $1.33 on 317,400 shares, enjoying its best and busiest trading day in about six months. It did not have any news to explain the excitement. Six months ago, the excitement reflected the fact that oil prices -- and Journey's resulting cash flow -- were high enough that the company could lower the "going concern" red flag in its financials. It also made noises about wanting to "monetize" its assets in the Alberta Duvernay. (This was a time when the Duvernay was much in the news, as Crescent Point Energy Corp. (CPG: $4.33) had just agreed to buy Shell Canada's Duvernay assets for $900-million.) Nothing has come of the Duvernay marketing yet, but Journey did find itself at the opposite end of the table in June, agreeing to buy the private Briko Energy in the Alberta Cardium. That deal closed last month. All in all, Journey's stock has trekked up to $1.33 from about 20 cents since the start of the year.
One insider seems particularly confident that the stock will climb higher. Craig Hansen, Journey's relatively new chairman, has spent the last four weeks more than quintupling his shareholdings. He previously held 35,000 shares. According to new SEDI filings (some filed yesterday), Mr. Hansen bought a total of 170,000 shares from Aug. 13 to Sept. 2, spending just under $200,000. These are the first shares he has bought on the market since he became a director of Journey in June, 2019. He then became chairman in May, 2021. In addition, Mr. Hansen is the founder of his own consulting firm, C.H. Hansen Engineering. He is also the former president and CEO of Zargon Oil, which had a 27-year run before going bankrupt last year and being acquired by the private Blue Sky Resources in January, 2021.
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