Energy Summary for Sept. 23, 2022
2022-09-23 19:13 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for November delivery tumbled $4.75 to $78.74 on the New York Merc, closing below $80 for the first time since January, while Brent for November lost $4.31 to $86.15 (all figures in this para U.S.). Western Canadian Select traded at a discount of $22.50 to WTI, unchanged. Natural gas for October lost 26 cents to $6.83. The TSX energy index lost 17.67 points to close at 208.72.
Oil prices notched their fourth weekly decline -- the first time this has happened since last December -- amid a broader market bloodbath, on rising fears of a global recession. New S&P Global data showed a deepening downturn in business activity across the euro zone during September. Meanwhile, the U.S. dollar hit a fresh 20-year high as other currencies tumbled (particularly the pound, against which the greenback is now at its highest level since 1985). A higher U.S. dollar makes oil more expensive in other currencies, hurting oil demand and thus pushing down prices.
Here in Canada, another organization has jumped on the trend of stripping sticky fossil fuels out of its brand. The Petroleum Services Association of Canada (PSAC), the four-decade-old trade association for the energy service, supply and manufacturing sectors -- founded in outraged response to Ottawa's National Energy Program (NEP) of the early 1980s -- announced this morning that it is renaming itself Enserva. "This exciting rebrand ... is meant to commit the organization to continually serve our members' and communities' needs in everything we do," claimed president and chief executive officer Gurpreet Lail. "... At Enserva, we are the energy behind the energy."
One wonders what the founders of PSAC, who spent five years relentlessly lobbying Ottawa before celebrating the end of NEP in 1985, would make of the fashionably sanitary new name. Yet the group is hardly the first to take up the trend. Just a few months ago, the erstwhile Newfoundland and Labrador Oil and Gas Industries Association reinvented itself as Energy NL. Within the oil patch, gone are the old companies Advantage Oil & Gas, Penn West Petroleum and Canadian International Oil; now they are Advantage Energy Ltd. (AAV: $9.70), Obsidian Energy Inc. (OBE: $9.53) and the private Hammerhead Resources (to name a few). International companies do it too: British Petroleum is now BP, Norway's Statoil is now Equinor, and so on. (Some have to be careful that their green rebrands do not inadvertently cause red faces. Danish Oil and Gas did a memorable stint as Dong, before rethinking and switching quickly to Orsted.)
No amount of brand-polishing was enough to save the sector from a day deep in the red. That was certainly the case for Doug Bartole's Alberta-focused InPlay Oil Corp. (IPO), which lost 34 cents to $2.55 on 893,500 shares today, despite trumpeting the release of its inaugural sustainability report. It thumped itself on the back for its "significant environmental success." The report clocks in at 20 pages, which is fairly trim as far as these things go. The company did not explicitly lay out its green goals but vowed to "establish benchmarks and to set realistic emissions targets in the future."
Elsewhere in Alberta (and Saskatchewan), Paul Colborne's Surge Energy Inc. (SGY) lost $1.08 to $7.65 on 1.92 million shares, after giving debentureholders a notice of redemption. The company has $44.5-million in outstanding convertible debentures due this Dec. 31. It plans to redeem them on Oct. 28. Investors may recall that Surge issued the debentures in 2017, seeking to raise money to pay for a $37-million asset acquisition in Alberta. The stated conversion price was $2.75 a share. That might look good next to today's closing price of $7.65, but investors will also recall that Surge conducted a 1-for-8.5 rollback in 2021, pushing the effective conversion price to a little over $23. One presumes that the holders will opt for cash.
Further afield, the Lundin Group's Africa Oil Corp. (AOI) lost 14 cents to $2.38 on 1.42 million shares, as a buyback announcement staunched some of today's bleeding. The company has received TSX approval to buy back up to 40.4 million of its 477 million shares. This is the first time it has announced such a program, and follows the board's announcement last month that it had any interest in such a program. President and CEO Keith Hill called it "the second step in delivering on our shareholder capital return aspirations." The first step was a twice-a-year dividend of 2.5 U.S. cents (or five U.S. cents annualized), as unveiled in February, for a current yield of 2.9 per cent.
While these sorts of buybacks are merely an option for companies, not a guarantee, shareholders have good reason to hope for follow-through. Fellow Lundin promotion International Petroleum Corp. (IPCO) is a vociferous buyer of its own shares, repurchasing roughly 16 million of them since the start of the year and trimming its current share count to 139 million. The Lundins control about 40 million of those shares. Their level of control over Africa Oil is hazier, as they fell below the 10-per-cent insider disclosure threshold years ago, but the company is nonetheless listed on the Lundin Group's website as a portfolio company. The late Lukas Lundin estimated in 2014 that the group's holdings in Africa Oil worked out to about 8 per cent. There were 310 million shares outstanding at the time.
Incidentally, some of the Lundins are currently working on a different kind of promotion: a film. To honour the late Lukas Lundin, who died two months ago of brain cancer, two of his sons, Jack and Will, plan to climb Mount Everest in the spring of 2023. They plan to have the climb filmed and turned into a documentary about their father's life. The goal is to "bring more awareness and publicity to funding brain cancer research," according to the Lundin Group, which started promoting the film on its website last week. The working title is "No Limits."
© 2022 Canjex Publishing Ltd. All rights reserved.