Stockwatch Energy today
Energy Summary for Sept. 21, 2022
2022-09-21 20:13 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for November delivery lost $1.00 to $82.94 on the New York Merc, while Brent for November lost 79 cents to $89.83 (all figures in this para U.S.). Western Canadian Select traded at a discount of $21.20 to WTI, unchanged. Natural gas for October added six cents to $7.78. The TSX energy index lost 5.34 points to close at 230.61.
Oil prices had a rocky day, after Russian President Vladimir Putin ordered a partial mobilization to hold occupied land in Ukraine. He also warned Western governments that "it's not a bluff" that Russia would use "all the means at our disposal" to defend what it sees as its territory. While concerns about further European supply disruptions initially sent oil prices higher, attention then shifted to the U.S. Federal Reserve, which announced another 75-basis-point hike in interest rates to try to curb inflation. The Bank of England is also widely expected to announce a rate hike at its meeting tomorrow.
Here in Canada, energy stocks fell with prices, despite some determined efforts to prop some of those stocks up. Montney giant ARC Resources Ltd. (ARX) lost 46 cents to $18.02 on 5.08 million shares, even as it enjoyed a lovely mention this morning from RBC analyst Michael Harvey. He reiterated his "constructive outlook" on ARC and put it on "a shortlist of heavyweights for strategic LNG [liquefied natural gas liquids] supply."
By Mr. Harvey's estimate, ARC's reserves could already support a 1.8-billion-cubic-foot-a-day LNG megaproject for over 10 years, "and when adding future drilling could increase to 40 to 50 years." (For context, Shell's $40-billion LNG Canada terminal being built in Kitimat, B.C., will have a phase 1 capacity of about 1.8 billion cubic feet a day, although the eventual goal is to double this to 3.4 billion.) LNG companies should thus view ARC as a "key supplier or alternatively as a strategic asset for operators looking for vertical integration," said Mr. Harvey. In the meantime, shareholders can reap the benefits of "strong organic FCF [free cash flow]." The analyst predicted that ARC will double its quarterly dividend (currently 12 cents, for a yield of 2.7 per cent) by the end of next year, while gobbling up shares through buybacks.
Mr. Harvey reiterated his "outperform" rating on ARC and hiked his price target to $27 from $26. The target would be a 50-per-cent gain over today's close of $18.02, which in turn would be wonderful news for Mr. Harvey's employer, RBC. Investors may wish to note the bank's mandatory disclosure that it owns 1 per cent or more of ARC's shares (the disclosure does not have to be more specific than that). It also "makes a market" in ARC's securities and receives compensation from ARC for various banking and non-banking services.
As it happens, RBC has been making other headlines this week, after two executives made clear that the bank has no intention of shunning oil and gas companies. This has been a bit of a trend for some banks and insurers in recent years, such as HSBC (which vowed this year to "phase down" fossil fuel financing), Societe Generale (which said in 2017 that it would not finance oil sands projects) and Royal Bank of Scotland (which made the same anti-oil-sands claim in 2018). RBC disagrees. Indeed, the sector needs more investment, not less, if companies are to reduce emissions and help Canada meet its climate goals, argued the executives.
Derek Neldner (RBC Capital Markets' chief executive officer) and Lindsay Patrick (RBC's head of ESG -- environmental, social and government -- and strategic initiatives) made the comments at an energy conference yesterday in Calgary. Mr. Neldner predicted that it will cost Canada $2-trillion to get to net zero emissions by 2050. Pouring money into "green" companies will not do the trick by itself, added Ms. Patrick, saying banks are increasingly recognizing that oil and gas companies should get support in their efforts to clean up their operations (particularly while their end-products continue to be used daily by consumers).
In other words, oil and gas financing is not going anywhere at RBC. This likely means that the howls of eco-activists are not going anywhere either. They have certainly had a busy few months: News junkies may recall the protest outside RBC's annual meeting in Toronto in April, or the fake oil derrick that blocked the road outside an RBC branch in Nanaimo in June, or the "Rave Against RBC" held at an RBC-sponsored golf tournament in Toronto in July (complete with dancing, DJs and a 15-foot inflatable bust of RBC CEO Dave McKay covered in fake flames, because "RBC is Burning Our Future"). These are just a smattering of the stunts. No doubt there will be many more to come.
Further afield, offshore international explorer Eco (Atlantic) Oil & Gas Ltd. (EOG) added one cent to 48 cents on 943,800 shares, regaining a fraction of the seven cents it lost yesterday on 1.55 million shares -- its heaviest volume all year. Yesterday's discontent likely stemmed from a new SEDI filing. It showed that chairman Moshe Peterburg disposed of 1.22 million shares on Monday, reducing his position to 9.98 million shares. Prices were unlisted and the type of transaction was filed as "other."
Insiders sell for all sorts of reasons. Rarely, however, does the reason appear to be fraud. In an announcement this morning, Eco said Mr. Peterburg "has apparently been the victim of fraudulent activity concerning his personal trading account," resulting in the unauthorized sales by a broker of the above 1.22 million shares. The sales took place in a series of small transactions from July 21 to Aug. 15. All of them were "without his knowledge or authorization," continued Eco on behalf of Mr. Peterburg, "with the funds in the trading account also having been apparently misappropriated." The relevant authorities have begun criminal proceedings against the broker.
The press release did not reveal how Eco or Mr. Peterburg happened upon the suspicious activity. Presumably some investors will be taking it as a cue to double-check their own accounts. The chairman's remaining position of 9.98 million shares is enough to keep him as one of Eco's largest shareholders, with just under 3 per cent of its 344 million shares outstanding. Co-founder and CEO Gil Holzman holds another 6.37 million shares. The company's largest shareholder is the Lundin Group's Africa Oil Corp. (AOI: $2.52), which has amassed 54.9 million shares since 2017, spending a total of $30.5-million. The position is currently worth $26.3-million.
© 2022 Canjex Publishing Ltd. All rights reserved.