Stockwatch Energy today
Energy Summary for Oct. 28, 2022
2022-10-28 20:48 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for December delivery lost $1.18 to $87.90 on the New York Merc, while Brent for December lost $1.19 to $95.77, both benchmarks notching a weekly increase (all figures in this para U.S.). Western Canadian Select traded at a discount of $28.75 to WTI, down from a discount of $27.25. Natural gas for December lost 20 cents to $5.68. The TSX energy index lost 1.04 points to close at 257.98.
It was a fruitful Friday in the oil and gas sector, as heavyweights turned the flood of quarterly financials into a tidal wave of profits. U.S. giants Exxon and Chevron published their third quarter reports this morning and raked in combined net income of over $30-billion (U.S.). For Exxon, the $19.7-billion (U.S.) net profit was the highest in its 152-year history; for Chevron, its $11.2-billion (U.S.) profit was its second best in 143 years. These came on the heels of near-record financials released by European competitors Shell and Total earlier this week.
Not everyone is happy to see such gorgeously gushing black ink. U.S. President Joe Biden complained yesterday (after Shell raised its dividend and expanded a share buyback program) that oil companies should be "going to the pump and lowering the prices," rather than rewarding shareholders with payouts and buybacks. The American Petroleum Institute, a U.S. trade group, promptly fired back that high oil prices are the fault of a "global mismatch between energy demand and available supply," and suggested that Washington could perhaps be doing more to encourage more domestic production.
One can imagine what Mr. Biden might have to say about the third quarter financials released this morning by Alberta oil sands giant (and Exxon investment) Imperial Oil Ltd. (IMO), up $6.16 to $73.63 on 3.71 million shares. Imperial turned a profit of $2.03-billion. This was more than double its profit of $908-million in the same period last year (though fell short of $2.4-billion in the second quarter of this year). Production of 430,000 barrels a day matched analysts' predictions, while cash flow of $4.06 a share was nicely above predictions of $3.50 a share. Imperial -- avert your eyes, Mr. President -- also announced a $1.5-billion (U.S.) special buyback program and a quarterly dividend hike to 44 cents (from 34 cents), for a yield of 2.4 per cent.
Elsewhere in Alberta, Andy Mah's Montney-focused Advantage Energy Ltd. (AAV) lost 24 cents to $10.00 on 2.61 million shares. It too released its third quarter financials, but had less success than Imperial in impressing investors. Net earnings of 22 cents a share and cash flow of 52 cents a share were both markedly below analysts' predictions of 29 cents a share and 59 cents a share, respectively. Management blamed "extremely weak" AECO gas prices (the benchmark in Alberta) caused by third party pipeline maintenance. It emphasized that it is steadily expanding its reach into non-AECO markets.
To that end, Advantage is bringing in a new director, one with a "strong background in crude oil and natural gas marketing." That would be Janine McArdle. Ms. McArdle is the founder and chief executive officer of Apex Strategies, a global mid- and downstream energy consulting firm. Before Apex, she spent 13 years at Apache (including its oil and gas marketing division) and nine years at Aquila (including Aquila Energy Marketing). "She brings strategic expertise ... [to our] market diversification plans," cheered Advantage. It is aiming to have barely one-10th of its production exposed to AECO this time next year. (For context, its exposure this year is about three-fifths.)
Speaking of production, Advantage's third quarter output averaged 54,200 barrels of oil equivalent a day (88 per cent gas), only slightly short of analysts' predictions of 54,600 barrels a day. Management reiterated the company's full-year guidance of 53,500 to 56,500 barrels a day. It also set an ambitious target of a 10- to 15-per-cent production increase every year for the next three years, although it included the following caveat, "depending on commodity pricing."
Another company looking to impress investors with its third quarter financials was Brian Schmidt's Alberta- and Saskatchewan-focused Tamarack Valley Energy Ltd. (TVE) up 13 cents to $5.16 on 8.11 million shares. President and CEO Mr. Schmidt toasted the "positive" and "resilient" numbers. Production of 43,500 barrels a day and cash flow of 40 cents a share were both mildly higher than analysts' predictions of 43,100 barrels a day and 36 cents a share, respectively. Mr. Schmidt noted that production should rise significantly in the fourth quarter as a result of Tamarack's $1.4-billion takeover of Deltastream Energy, which closed two weeks ago. Deltastream's production so far this month has averaged 20,400 barrels a day.
Because the takeover did not close until October, the effects of Deltastream's $1.4-billion cash-and-share price tag -- which was mostly cash, obliging Tamarack to take on significant debt -- did not show up in the third quarter balance sheet. This accordingly showed just $283-million in net debt as of Sept. 30. Current net debt is sharply higher, and investors likely would have appreciated a number, but management opted not to provide it. It did promise that once its net debt gets to an initial target of $1.1-billion, it will hike its dividend (which at 1.25 cents a month represents a yield of 2.9 per cent). This could happen in late 2023, according to analysts. Tamarack may have more to say when it unveils its 2023 guidance in December.
In the Alberta Cardium, the Gray brothers' Petrus Resources Ltd. (PRQ) lost two cents to $2.70 on 58,600 shares. While it did not release its third quarter financials, it did publish its latest monthly update to shareholders on its website, and given that this update was for September, investors now have a good sense of what the full quarter looked like. Production in September averaged 6,400 barrels a day. This brings the third quarter average to 6,600 barrels a day.
While the third quarter average was down from 7,300 barrels a day in the second quarter and 7,400 in the first quarter, to Petrus, this is in fact a sign of how busy it has been with its drill program. A burst of new drilling means a burst of fracking and completions, which (for wellbore safety reasons) often leads to temporary shut-ins of nearby wells, causing dips in production. Petrus has been working since late June on what it has boasted will be "our largest drilling program in recent years." September was certainly busy; today's update showed that Petrus spent a total of $26.3-million in September, nearly equal to the $33.5-million that it spent from January through August combined.
To accommodate the extra activity, president and CEO Ken Gray announced last month that Petrus would double its full-year budget to $110-million from about $55-million. He added that the company expects to exit the year producing as much as 11,000 barrels a day. Investors seem intrigued, with the stock having risen to $2.70 from about $2 since the budget boost. Ken Gray's brothers will be pleased. Don Gray (Petrus's chairman and founder) and Glen Gray and Stuart Gray (who are not directors or officers but whose shareholdings make them insiders) collectively control 87.5 million of Petrus's 122 million shares. Ken Gray holds another 3.5 million.
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