Energy Summary for Dec. 21, 2022
2022-12-21 20:35 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for February delivery added $2.06 to $78.29 on the New York Merc, while Brent for February added $2.21 to $82.20 (all figures in this para U.S.). Western Canadian Select traded at a discount of $28.00 to WTI, unchanged. Natural gas for January stayed unchanged at $5.33. The TSX energy index added 6.40 points to close at 241.31.
Oil prices headed higher on bullish U.S. storage data. The U.S. Energy Information Administration reported today that domestic crude inventories fell by 5.89 million barrels last week, well above analysts' predictions of a drop of 1.66 million barrels. Separately, Saudi Energy Minister Prince Abdulaziz bin Salman said in an interview with the Saudi state news agency that OPEC+ made the right decision in curtailing production to try to stabilize the market. His comments prompted speculation that the group will continue to keep supplies tight.
Here in Canada, Andy Mah's Advantage Energy Ltd. (AAV) added 60 cents to $9.86 on 2.02 million shares, while Pat Carlson's Kiwetinohk Energy Corp. (KEC) added 54 cents to $14.88 on 28,100 shares. The two Alberta Montney producers got twin boosts from higher commodity prices and share buyback programs. Advantage patted itself on the back for completing a previously announced buyback for a total of $100-million, which saw shareholders tender 8.92 million shares (out of 181 million then outstanding). The tender price was $11.20. With the stock closing today at $9.86, any investors who wish to nab their shares back on the open market can do so at a discount.
Meanwhile, Kiwetinohk (a Cree word that means north and is pronounced "key-wheat-in-no") has received TSX approval to launch a regular buyback program, through which it plans to repurchase up to 2.2 million of its 44.1 million shares over the next year. The launch keeps a promise that Mr. Carlson, Kiwetinohk's chief executive officer, made just last week. Then and now, he gave the standard spiel about the market value of the shares "not adequately reflect[ing] their value." He no doubt had higher hopes for the promotion when he took it public almost exactly a year ago. At today's close of $14.88, the stock has risen from $12.50 since its first day of trading last January, but has slipped from a June high of $18.92.
Further afield, Charle Gamba's Colombian gas producer, Canacol Energy Ltd. (CNE), added 19 cents to $1.94 on 818,400 shares. It likely enjoyed the bump, after sliding by 25 cents over the last two weeks. Yesterday's close of $1.75 was the lowest the stock has gone since 2014. Management tried to stir up some excitement today with the unveiling of the company's 2023 budget, which calls for production of 160 million to 206 million cubic feet of gas a day (the equivalent of 28,000 to 36,000 barrels a day) on a budget of $138-million (U.S.) to $163-million (U.S.).
As usual, management drew attention to the budget's promise of a "focus on material reserve adds" through exploration. This has long been part of Canacol's pitch, if not always its follow-through. Last year, for example, it said it would drill nine exploration wells, yet ended up drilling six -- a high number next to competitors, but not what investors were promised. The company's reserve report last March gave it a reserve life index (a measure of how long the reserves will last at current production rates) of 8.9 years. Investors generally prefer a minimum of 10 years.
Canacol will face further pressure to bulk up its reserves in 2023, because it is committed to opening a pipeline in 2024 to add capacity of 100 million cubic feet a day. To that end, president and CEO Mr. Gamba promised that "the bulk" of next year's program will focus on exploration, with "up to a total of 10" exploration and appraisal wells. He expressed confidence that Canacol will ultimately "ensur[e] sufficient productive capacity" to meet its pipeline commitment. As well, he boasted, the company will do so while buying backing shares and maintaining its 5.2-cent quarterly dividend, for a generous current yield of 10.7 per cent.
The recent slide in the share price suggests some doubt on shareholders' part. As it happens, Canacol has a plan to boost its share price, if only artificially. The company is about to conduct a 1-for-5 rollback. It first began making noises about the rollback in October, with Mr. Gamba indicating that the goal is to reduce institutions' trading fees. "Many corporate accounts have discussed trading fees with us. We believe that [a rollback will decrease] the price they pay on a per-share basis and they can lower their trading costs, perhaps attract more interest [to Canacol]," he said during a conference call in November. The explanation appears to have fallen on skeptical ears. Even so, shareholders approved the rollback at a special meeting earlier this week, and Canacol expects to carry it out on Jan. 17.
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