Stockwatch Energy today
Energy Summary for Oct. 12, 2022
2022-10-12 19:56 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for November delivery lost $2.08 to $87.27 on the New York Merc, while Brent for December lost $1.84 to $92.45 (all figures in this para U.S.). Western Canadian Select traded at a discount of $27.43 to WTI, down from a discount of $24.40. Natural gas for November lost 16 cents to $6.44. The TSX energy index lost a fraction of a point to close at 237.66.
Oil prices took another dip, amid continuing recession fears. This morning, in its widely watched monthly report, OPEC lowered its global oil demand forecasts for 2022 and 2023. "The world economy has entered into a time of heightened uncertainty and rising challenges," intoned the group. It cited "high inflation levels, monetary tightening by major central banks, high sovereign debt levels in many regions as well as ongoing supply issues." While OPEC still expects demand to rise in 2022 and 2023, the predictions for each rise are lower than in last month's report.
Here in Canada, oil sands giant Suncor Energy Inc. (SU) shook off today's price malaise, adding 14 cents to $43.32 on 7.95 million shares. The company announced this morning that it will hold an investor presentation in Toronto on Nov. 29. The presentation will include "updates on production and operational actions and plans to ensure safe and reliable performance."
Investors may recall that exact phrasing from an announcement of a similar event that Suncor was going to hold in mid-July. Even more memorably, Suncor cancelled that event after a worker died at one of its oil sands facilities -- the 13th fatality for the company since 2014 -- which led to the abrupt resignation of Mark Little as president and chief executive officer on July 8. Suncor hurriedly appointed Kris Smith, executive vice-president of the downstream division, as interim CEO, while an executive search firm scouts for a permanent successor. If the search is not finished by the rescheduled presentation on Nov. 29, investors will undoubtedly want an update on its progress.
In other CEO news, a candidate has been found for Baytex Energy Corp. (BTE), down 15 cents to $6.49 on 7.7 million shares. Baytex, which has operations in Texas, Saskatchewan and Alberta, previously told investors in July that president and CEO Ed LaFehr wanted to retire by Dec. 31, after six years on the job. Now he can take it easy starting Nov. 4. That will be the first day for the newly announced incoming president and CEO, Eric Greager.
The 51-year-old Mr. Greager is a licensed engineer who spent the last four years as president and CEO of Civitas Resources (formerly Bonanza Creek Energy), one of the largest oil and gas producers in Colorado. Before that, starting in 2006, he worked for EnCana, the Canadian predecessor to what is now the U.S. shale player Ovintiv Inc. (OVV: $71.78). He also previously worked for Dominion Resources and contract driller Helmerich & Payne. "[Mr. Greager] is an excellent leader recognized for building engaged and empowered organizations," declared Baytex chairman Mark Bly. Mr. Greager in turn heaped praise on Bayex's "talented people," its "high-quality assets" and its "focus on long-term value creation and increasing direct shareholder returns."
The bit about shareholder returns may have raised some intrigued eyebrows. Under Mr. LaFehr, Baytex focused primarily on debt reduction -- and deservedly so; when he became CEO in 2016, Baytex's net debt of $1.8-billion was far above its market cap of $1.1-billion. Now its market cap of $3.5-billion is more than triple its net debt of $1.1-billion (as of June 30). In a show of confidence, Baytex launched a share buyback program in May. Yet it has still not revived its long-dormant dividend, which it paid faithfully from 2003 until an ostensibly temporary suspension in 2015. The idea at the time was to reinstate the dividend "when commodity prices recover to a supportive level." While this was not a priority under Mr. LaFehr, perhaps Mr. Greager will take a second look.
In other people-related news, U.S. Bakken player Enerplus Corp. (ERF) added 22 cents to $21.51 on 2.34 million shares, while Lundin Group promotion Africa Oil Corp. (AOI) added nine cents to $3.13 on 1.89 million shares, as both welcomed some newcomers. Enerplus is adding Sherri Brillon to its board of directors. From 1985 until her retirement in 2019, she held increasingly senior roles at EnCana (now Ovintiv), including executive vice-president and chief financial officer. She is also a past director of the Alberta Energy Regulator and the Canadian Chamber of Commerce.
Meanwhile, Africa Oil has finally found a chief operating officer to replace Timothy Thomas, who retired last year but has obligingly stayed around as a consultant. It has promoted Craig Knight. He joined Africa Oil last year as vice-president of production, and before that worked for Spirit Energy in Scotland, Maersk Oil in Denmark and Woodside Energy in Australia.
Another international player, Abby Badwi's TAG Oil Ltd. (TAO), lost 4.5 cents to 41 cents on 1.06 million shares, after announcing a dilutive equity financing. It originally announced last night that it would raise $20-million by selling shares at a price to be determined. This morning, it hiked the proceeds to $22-million and set the price at 40 cents, meaning that it will sell 55 million shares, relative to 91 million currently outstanding. The lead underwriters will be Research Capital and Echelon Capital.
The company will use the proceeds largely for exploration and (it hopes) production in Egypt. As announced on Sept. 20, TAG has just entered Egypt by way of a service agreement to develop unconventional resources at the Badr oil field. Executive chairman Mr. Badwi hyped the project's "high probability of successful commercial development." He made no mention of the expected timing or cost. Having waited two whole years between Mr. Badwi's arrival in 2020 and his procurement of a promotable new asset, investors seemed less than impressed with what he chose (though it is in familiar territory; one of his past promotions was Rally Energy, an Egyptian operator that he sold in 2007). The stock has slid to 41 cents from 51 cents since the announcement.
Although the dilutive new financing hardly improved investors' mood, TAG kept up a stream of happy chatter about how it will use the $22-million, which will go toward drilling and equipment, general working capital, and "other acquisition opportunities in Egypt." It emphasized that insiders will participate in the financing. Investors should find out some of the specifics once the financing closes, which TAG expects in the first week in November.
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