Stockwatch Energy today
Energy Summary for Oct. 5, 2021
2021-10-05 20:15 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for November delivery added $1.31 to $78.93 on the New York Merc, while Brent for December added $1.30 to $82.56 (all figures in this para U.S.). Western Canadian Select traded at a discount of $12.07 to WTI, down from a discount of $11.97. Natural gas for November shot up 54 cents to $6.31. The TSX energy index added 4.16 points to close at 152.46.
Canadian energy stocks rose with oil and gas prices, with analysts tagging along for the ride. "[Buy] with reckless abandon," urged Desjardins analysts Justin Bouchard and Chris MacCulloch, as they updated their commodity price forecasts to reflect the "fever pitch" in energy markets. Some of the stocks they singled out were Athabasca Oil Corp. (ATH: $0.97), with a revised price target of $1.25 instead of 85 cents, Crew Energy Inc. (CR: $3.41), with a target of $4 instead of $2.25, and Tourmaline Oil Corp. (TOU: $45.78), with a target of $70 instead of $52. Mr. Bouchard and Mr. MacCulloch were not the only excitable analysts.
Their counterparts at Canaccord Genuity were similarly upbeat about the "surge [in prices] ahead of the coming winter." Some of their target increases were for Pine Cliff Energy Corp. (PNE: $0.74), hiked to $1 from 70 cents, Baytex Energy Corp. (BTE: $3.75), hiked to $4.75 from $3.50, and Peyto Exploration & Development Corp. (PEY: $9.83), hiked to $12.50 from $10.50. Meanwhile, BNN published an article about a one-week-old report from the analysts at Scotia Capital, who like Gran Tierra Energy Inc. (GTE: $1.23) and Kelt Exploration Ltd. (KEL: $4.95). (Gran Tierra seemed particularly thrilled by its BNN bump. Its stock was one of today's biggest gainers, adding 21 cents to $1.23 on 9.2 million shares, its heaviest volume in five months.)
Within the sector, the above-mentioned Peyto Exploration & Development Corp. (PEY) added 28 cents to $9.83 on 2.53 million shares, as it got an extra dose of hype from president and chief executive officer Darren Gee. He has published his latest monthly letter to shareholders on Peyto's website. As usual, he included an estimate of Peyto's production. This jumped to 94,000 barrels of oil equivalent a day (mostly gas) in September, up from 88,000 barrels a day in August and from an average of 80,000 barrels in 2020. Mr. Gee has repeatedly claimed that Peyto will hit 100,000 by year-end. Although he did not repeat the prediction in his new letter, the September increase puts the company in fine shape.
Less fine is the "full-blown energy crisis in some parts of the world," as Mr. Gee put it. Tightening gas supplies have sent prices in parts of Asia and Europe up to four times higher than in North America, setting consumers up for a painful winter. Mr. Gee blamed short-sighted government policies for throttling supply, ignoring the realities of demand, and demonizing or downplaying the industry to the point of causing a widespread worker shortage. This is the main reason why producers are struggling to fulfill sharply rising demand. "It's not because we don't have the plays or the economics ... It's because we don't have the people," opined Mr. Gee. He warned that without more energy workers, "we are much more likely to experience an energy crisis before we experience an energy transition."
Shareholders looked past the doom and gloom and focused on rising gas prices. AECO gas prices, the benchmark in Alberta, are currently around $5, up from about $3.50 in September (and from just $2 in 2020). Peyto's stock has correspondingly climbed to nearly $10 from less than $7 since the start of September.
Another Alberta gas player, Sue Riddell Rose's Perpetual Energy Inc. (PMT), edged up 1.5 cents to 33.5 cents on 36,500 shares. Its stock has more than quintupled from 6.5 cents over the last year, thanks in part to rising gas prices. Another factor was the recent cleanup of its balance sheet through the creation of a company to buy and hold its Clearwater oil assets. That company is the newly created Rubellite Energy Inc. (RBY), which today added 40 cents to $2.70 on 578,600 shares, after announcing that it has closed $83.5-million in financings to help it get started.
Rubellite started trading less than a month ago. It paid Perpetual $60-million for the Clearwater assets, a generous price tag in light of the associated production of barely 350 barrels a day, but Rubellite has every confidence that it can increase this to over 2,000 barrels a day by the end next year. Investors seem confident as well. All of the $83.5-million that Rubellite finished raising today was in the form of equity financings priced at $2 a share. With the stock closing today at $2.70, subscribers are already sitting on 35-per-cent gains on paper.
The main subscribers included the above-mentioned Ms. Riddell Rose, the president and CEO of both Perpetual and Rubellite. (She also happens to be the wife of Mike Rose, who runs Tourmaline Oil Corp. (TOU: $45.78), and the sister of Jim Riddell, who runs Paramount Resources Ltd. (POU: $19.21).) Ms. Riddell Rose now controls a 32-per-cent interest in Rubellite. The Alberta Investment Management Corp. (AIMCo) holds a further 8.3-per-cent interest.
Another Alberta junior, Don Gray's Petrus Resources Ltd. (PRQ), added six cents to 79 cents on 135,000 shares. Like Peyto, it has just published a monthly update to shareholders on its website, although for August rather than September. Petrus pegged its August production at 6,000 barrels of oil equivalent a day, up from 5,700 in July. Two new wells in the Alberta Cardium came on production and offset declines from older wells. Petrus spent just $300,000 during the month, noting that "improvements in the commodity price outlook, combined with pricing protection" -- hedging contracts -- will help the company keep its spending within its cash flow.
As the update was for August, it did not mention the financings that Petrus closed in September, which included a $10-million private placement and an even larger shares-for-debt swap (settling $39.3-million in debt for $15.8-million worth of shares). The major participants in those financings were the brothers Gray. Don Gray is the chairman of Petrus and founded it in 2011. Two of his brothers, Glen Gray and Stuart Gray, hold no official roles at Petrus beyond their new ones as major shareholders. The fourth and final brother, Ken Gray, agreed to become Petrus's president and CEO last April. Together the four brothers (but mostly Don, Glen and Stuart) hold 71.6 million of Petrus's 96.6 million shares.
The shares have climbed nicely from the 55-cent financing price to today's close of 79 cents. Petrus has promised its shareholders "significant momentum in the coming months" -- assuming that it can manage to stay listed on the TSX. The financings were done using a financial hardship exemption and triggered an automatic delisting review. The Grays have until Jan. 5 to prove that their company still deserves a ticker.
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