Stockwatch Energy today
Energy Summary for Oct. 14, 2022
2022-10-14 20:50 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for November delivery lost $3.50 to $85.61 on the New York Merc, while Brent for December lost $2.94 to $94.57, both benchmarks notching a weekly decline on continuing recession fears (all figures in this para U.S.). Western Canadian Select traded at a discount of $28.70 to WTI, down from a discount of $27.43. Natural gas for November lost 29 cents to $6.45. The TSX energy index lost 8.30 points to close at 237.27.
Jeff Tonken's Montney-focused Birchcliff Energy Ltd. (BIR) lost 93 cents to $10.86 on 7.65 million shares, as commodity jitters offset the news of a 20-cent special dividend. Birchcliff announced the special payout late yesterday. The company also pays a regular quarterly dividend of two cents, for a yield of 0.7 per cent. The nominal yield caused grumbling among investors, so Birchcliff told investors in May that it would hike the regular quarterly dividend all the way to 20 cents in 2023, once it makes some more progress on debt reduction. It has evidently decided that a 20-cent special dividend in the meantime will be just the thing to whet investors' appetite.
The payout will be a welcome gift for Birchcliff's larger shareholders, including Mr. Tonken (co-founder, chairman and chief executive officer) and James Surbey (a fellow co-founder, former officer and current director). Mr. Tonken holds 1.45 million of Birchcliff's 265 million shares and Mr. Surbey holds 2.25 million. This means they will pocket $290,642 and $451,916, respectively, on the special dividend payment date of Oct. 28.
Mr. Tonken and Mr. Surbey have worked together for decades, with Birchcliff being their fourth promotion. The first was Stampeder Exploration, bought by Gulf Canada Resources in 1997 for a pleasing $713-million. The second was Big Bear Exploration and was far less pleasing. Big Bear paid $200-million in 1998 for a rival called Blue Range, only for the new subsidiary to fall into insolvency shortly afterward, its assets being far worse than advertised. An injured Big Bear was bagged by Canadian Natural Resources Ltd. (CNQ: $73.57) for $235-million in 1999. The third promotion was Case Resources, which sold for a profitable if unremarkable $52-million in 2004.
Birchcliff came along in 2004 and has since become one of the Montney's largest gas players. For a long time, it was also a major investment of Canadian billionaire Seymour Schulich, who from 2007 to 2017 amassed 40 million shares (about a 15-per-cent interest). He told the media that he began investing at $3.90. At his peak ownership position in April, 2017, the stock was worth nearly $8. Mr. Schulich began unloading the shares in the fall of 2017 and dipped below the insider threshold that October, likely completing a full exit later that month, according to analysts. He told the media in 2019 that he sold because he thought Birchcliff's production was "too much gas."
On that note, elsewhere in yesterday's update, Birchcliff unveiled preliminary 2023 guidance, calling for gas-weighted production of 81,000 to 83,000 barrels of oil equivalent a day. That compares with the 2022 target of 78,000 barrels a day. About four-fifths of Birchcliff's production is gas. Birchcliff expects to spend $240-million to $270-million next year, and rather pointedly mentioned that it also expects to fork over $217-million in provincial and federal royalties and taxes. In an atmosphere where windfall taxes are high on some political agendas, there is no harm in a reminder that Canada already has a system to ensure benefits from higher commodity prices, called the sliding scale.
Further afield, Randy Neely's Egypt-focused TransGlobe Energy Corp. (TGL) lost two cents to $5.06 on 714,500 shares, in what should be its final day of trading. The company announced this morning that it has completed its merger with West African oil producer Vaalco Energy Inc. (U.EGY: $5.39) and should delist after the close. Vaalco confirmed the news and added that it is welcoming three former TransGlobe directors to its own board in order to "guide our strategy." The three it picked are David Cook (TransGlobe's chairman), Dr. Timothy Marchant (a former BP and Amoco executive who joined TransGlobe's board in 2020) and Ed LaFehr (a TransGlobe director and the soon-to-be-retired president and CEO of Baytex Energy Corp. (BTE: $6.39)).
Another international producer, Wayne Foo's Parex Resources Inc. (PXT), lost $1.57 to $21.00 on 808,500 shares, despite trumpeting "strong production growth" in Colombia. The boasts fell flat in light of a reduction to Parex's production guidance. According to a quarterly operational update last night, Parex averaged 51,100 barrels a day in the third quarter, failing to meet its forecast of 53,000 to 55,000 barrels a day. It blamed local blockades and "operational and weather-related setbacks. While management said production recovered heading into the fourth quarter, it nonetheless lowered its full-year guidance to a range of 52,000 to 53,000 barrels a day (down from 54,000 to 56,000).
As if to offset the production stumble, management let out a hearty cheer as it announced that Parex has maxed out its share buyback program for the fourth year in a row. The most recent program, which launched in January, allowed the company to buy back up to 11.8 million shares within one year. Parex did so by Sept. 30. By its calculations, in reducing its share count to 110 million from 164 million since 2017, it has returned over $1.1-billion to its shareholders -- and that does not count its current quarterly dividend of 25 cents, for a yield of 4.8 per cent. Despite management's best efforts, the stock headed down.
We end with some Friday foolishness. Today in London, two youthful anti-oil activists from green group called Just Stop Oil attempted to douse a famous painting in tomato soup, which they hurled over Vincent Van Gogh's "Sunflowers" at the National Gallery. They then glued themselves to the wall and demanded to know if the unwitting and unimpressed onlookers were "more concerned about the protection of a painting or the protection of our planet and people."
The painting was in fact quite protected (covered by a glass barrier), well defended from any protesters who would chant anti-petroleum slogans while wearing petroleum-derived clothing, carrying petroleum-based electronics (and glue) and living in petroleum-reliant homes. In any case, gallery staff swiftly removed the soup-tossing activists. There is no word on whether staff first discussed wiping up the soup, leaving the protesters glued to the wall and turning off the lights on the way out.
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