Tonight's Stockwatch Energy Summary
Energy Summary for May 9, 2022
2022-05-09 20:22 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for June delivery plunged $6.68 to $103.09 on the New York Merc, while Brent for July lost $6.45 to $105.94 (all figures in this para U.S.). Western Canadian Select traded at a discount of $13.07 to WTI, down from a discount of $12.81. Natural gas for June plummeted $1.01 to $7.03. The TSX energy index lost 17.94 points to close at 236.14.
Oil prices tumbled into the week, contributing to a broad decline that saw the S&P/TSX Composite Index slide to its lowest level in more than three months, while the S&P 500 hit its lowest level in more than a year. Pundits pinned the blame on everything from Chinese COVID lockdowns to the war in Ukraine to U.S. Federal Reserve policy. "I've been in the markets for 25 years and I've never seen anything like this," Danielle DiMartino, chief executive officer and chief strategist of the U.S. research firm Quill Intelligence, told CNN. She added, "It's violent, not just volatile."
Bullish energy executives had a different term for it: buying opportunity. A wave of SEDI filings poured in today from officers and directors taking advantage of the dip. CEO Mike Rose of Tourmaline Oil Corp. (TOU) (down $3.32 to $68.75) spent $698,000 buying 10,000 shares. Kam Sandahar, an executive vice-president of Cenovus Energy Inc. (CVE) (down $1.92 to $24.36), picked up 17,500 shares for $430,000. CEO Grant Fagerheim and three other insiders of Whitecap Resources Inc. (WCP) (down $1.18 to $9.67) bought a combined total of 28,500 shares for $284,000. Other companies that enjoyed insider buying today were Crew Energy Inc. (CR: $4.79), Gear Energy Ltd. (GXE: $1.44), Obsidian Energy Ltd. (OBE: $8.75), PrairieSky Royalty Ltd. (PSK: $17.85), Rok Resources Inc. (ROK: $0.22) and Topaz Energy Corp. (TPZ: $22.54).
All told, as of this writing, insiders of the above companies plunked down a combined $2.07-million in a single day, buying a total of 337,500 shares. These are only the insiders who were the fastest at reporting their trades. The numbers could head higher as the filings get up to date.
In other insider buying news, Petrus Resources Ltd. (PRQ), down 24 cents to $2.06 on 294,300 shares, disclosed this morning that its founder and chairman has bought another 4.1 million shares. That would be Don Gray (who is also the chairman of the above Gear Energy and Peyto Exploration & Development Corp. (PEY: $13.33)). Mr. Gray's purchase did not take place today, but rather through Petrus's $20-million rights offering last week. Today Petrus revealed that $5.5-million of that total came from Mr. Gray. He now owns 32.7 million of Petrus's 121 million shares. Incidentally, two of his brothers, Glen Gray and Stuart Gray, own another 25 million shares each, while brother Ken Gray controls three million shares and also serves as president and CEO. This makes Petrus quite the family affair.
The Gray brothers are presumably confident in Petrus's plans to boost production and cash flow in the Alberta Cardium. One potential hiccup, as discussed in the Energy Summary last Tuesday, was that Petrus owed about $57-million under a credit facility that was due to mature at the end of this month. All of the proceeds from the rights offering were earmarked for the facility, but Petrus nonetheless warned investors that it faced the possibility of default if it could not arrange some sort of refinancing. Fortunately, late last week, Petrus did just that. It secured two new credit facilities -- one from ATB Facility and one from Stuart Gray -- for a total of $55-million. CEO Ken Gray cheered the arrival of such "supportive lenders." He will now be able to narrow Petrus's focus on its operations.
Further afield, Gabriel de Alba's Frontera Energy Corp. (FEC) lost $1.44 to $13.57 on 263,900 shares, while his CGX Energy Inc. (OYL) -- majority owned by Frontera -- lost 29 cents to $1.41 on 959,000 shares. The drop came in spite of joint headlines trumpeting a "light oil and gas condensate discovery at the Kawa-1 exploration well" off the coast of Guyana. The discovery is actually four months old. Today's update, as clarified later in the press release by Mr. de Alba (Frontera's chairman and CGX's co-chairman), simply showed "further support for the joint venturer's initial interpretations" in January.
More specifically, Mr. de Alba said the companies had engaged third party experts to carry out mapping and other studies on the well. They were able to amend their estimate of the well's net pay to 69 metres (up from 54 metres in January, and from 61 metres in a different analysis in March). Seeing as the companies were unable to collect core samples in January, the experts are relying on lower-quality drill cuttings and wellbore fluid samples. This has sapped investors' enthusiasm about the well since the initial announcement in January.
Mr. de Alba's spirits remain undimmed. The updated Kawa-1 results "further support our belief in [this] potentially transformational opportunity ... in one of the most exciting basins in the world," he declared today. He added that Kawa-1 "derisks the forthcoming Wei-1 exploration well," which the joint venturers are hoping to spud next quarter. (The poorer joint venturer, CGX, is stuck in the "hoping" stage until it raises more money for its share of the costs. It had a working capital deficit of $70.3-million (U.S.) as of March 31. Although it subsequently received a $35-million (U.S.) loan from Frontera in April, it said today that it is still in the process of "assess[ing] several strategic opportunities to obtain additional financing.")
Back in Canada, John Jeffrey's Saskatchewan-focused Saturn Oil & Gas Inc. (SOIL) lost 24 cents to $2.58 on 205,800 shares. This was on top of the 11 cents it lost on Friday after releasing its first quarter financials. It turned a net loss of $97.6-million, dragged into the red by hedging losses. CEO Mr. Jeffrey stayed upbeat and hyped the company's "record" production of 7,500 barrels a day, a "historical high point for Saturn," which produced barely 200 barrels a day in the first quarter of last year. The gain largely reflects acquisitions.
Kevin Smith, Saturn's vice-president of corporate development, took up the promotional mantle in an interview this afternoon with The Market Herald (a self-described news firm that seems mainly to provide PR services). Mr. Smith noted that if one strips out royalties, operating costs and hedging "adjustments" -- all the things promoters love their accounting wizards to flick into non-existence -- Saturn enjoyed "record adjusted funds flow" of $13.5-million. That worked out to about 50 cents a share. Given that Saturn is trading below $3 a share, Mr. Smith concluded that he sees "lots of value in Saturn shares." His smiling interviewer cooed her thanks. A disclaimer on the website noted that the interview was "sponsored" -- paid for -- but did not disclose a price.
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