Energy Summary for Dec. 16, 2022
2022-12-16 19:51 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for January delivery lost $1.82 to $74.29 on the New York Merc, while Brent for February lost $2.17 to $79.04 (all figures in this para U.S.). Western Canadian Select traded at a discount of $26.50 to WTI, unchanged. Natural gas for January lost 37 cents to $6.60. The TSX energy index lost 6.51 points to close at 232.71.
Down for the day, oil prices still notched their largest weekly gain since October (though the feat was less impressive in light of the fact that last week brought the worst rout since August). Recession apprehension continued to battle with boosterish demand signs. China is continuing to unwind its harsh anti-COVID policies ahead of next month's Lunar New Year holiday. Meanwhile, the U.S. government said today that it will repurchase oil for the Strategic Petroleum Reserve (SPR) for the first time since tapping it for 180 million barrels earlier this year. While the initial buyback is for a mere three million barrels, optimists see it as the start of a bullish trend.
Here in Canada, George Fink's Alberta Cardium producer, Bonterra Energy Corp. (BNE), lost 47 cents to $6.35 on 751,300 shares. Yesterday after the close, it unveiled its 2023 guidance and finally gave investors a glimpse of its plan to revive its dividend. New chief executive officer Patrick Oliver declared that 2023 will "represent a new era for Bonterra as we advance forward with new leadership [and] a refreshed vision."
That Bonterra has a new leader is without doubt -- Mr. Oliver took over just three months ago from the above Mr. Fink, who was the founding CEO for two decades and remains a director and major shareholder -- but investors seem to have their qualms about the vision. The 2023 guidance calls for production of 13,500 to 13,700 barrels a day on a budget of $120-million to $125-million. Taking inflation into account, these numbers are not hugely different from the 2022 guidance of 13,300 to 13,700 barrels a day on a budget of $70-million to $75-million. Mr. Oliver emphasized that the program is intended to "build momentum for growth in 2024." Sticking to that theme, he added that Bonterra will also pursue "growth-oriented acquisition opportunities."
The emphasis on growth is a new one for Bonterra. Prior to the 2020 downturn, the company (which started out as an income trust) was content to keep production stable, watch cash come in and then dole it out through dividends. Nearly eight years have passed since its last significant acquisition. The dividend vanished in early 2020 so Bonterra could attend to a debt-burdened balance sheet, but as recently as March, 2021, then-CEO Mr. Fink aired his view that shareholders "just want to go back to getting a cheque." At Bonterra, he said, "we don't feel like we need to grow."
Mr. Oliver seems to have a different feeling. While he mentioned the word "dividends" twice in the press release, the word "growth" got no fewer than 10 mentions. He did, however, acknowledge the importance of "restoring a returns-based business model," and promised to try to "deliver sustainable dividends to shareholders by the end of 2023." The precise timing and potential size of the dividend remained unspecified.
Another Cardium operator, Stephen Loukas's Obsidian Energy Inc. (OBE), lost 43 cents to $9.15 on 2.34 million shares. Its shareholders will have to wait a little longer for its 2023 guidance. Several weeks ago, interim CEO Mr. Loukas told investors that the company's guidance would arrive in mid-December, along with details of "return-of-capital intentions." Today he said they will not arrive until January. He pointed to volatile energy prices and Obsidian's own "considerable optionality," which he said necessitated "more time to refine and optimize" the company's plans.
To try to cheer investors up, Mr. Loukas presented a fresh batch of drilling updates. Obsidian is just about finished its 35-well drill program for the second half of the year, and seemingly made an effort to find 35 different adjectives to describe the results, including "strong," "prolific," "encouraging," "top-tier," "notable" and more. Mr. Loukas also hyped the release of Obsidian's inaugural ESG (environmental, social and governance) report, highlighting its "commitment to sustainability across the organization and the communities it works in." Despite his best efforts, the stock headed down. Better luck in January.
South of the border, Brett Herman's North Dakota Bakken-focused Lucero Energy Corp. (LOU) lost half a cent to 49.5 cents on 2.51 million shares. Its shareholders were also told to expect guidance in mid-December, and yesterday after the close, they got it. Lucero said it will aim for average production of 11,500 barrels a day on a budget of $70-million (U.S.). Both goals are greater than their 2022 counterparts of 10,500 to 11,000 barrels a day on a budget of $45-million (U.S.), but unsurprisingly, the budget is rising at a faster clip. Management said the program should still deliver "significant" free cash flow that Lucero can use to repay debt.
Management added that Lucero could also use the money for "compelling growth initiatives" such as "strategic acquisitions." Of course, this has been part of management's spiel since taking over Lucero almost exactly a year ago. Prior to that, the company was called PetroShale, but Mr. Herman and his people -- fresh off the sale of their prior promotion, TORC Oil, to Whitecap Resources Inc. (WCP: $9.68) in 2021 -- recapitalized it, changed its name to Lucero and indicated that they would take it shopping. As TORC and their two other prior promotions (Result Energy and TriStar Oil) were all active in Western Canada, the assumption was that they would look for assets north of the border. Yet other than a few small top-up acquisitions in the U.S. Bakken, Lucero has yet to close a single notable deal.
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