Stockwatch Energy todayHappy long weekend to all !
Energy Summary for April 1, 2021
2021-04-01 20:11 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for May delivery added $2.29 to $61.45 on the New York Merc, while Brent for June added $2.12 to $64.86 (all figures in this para U.S.). Western Canadian Select traded at a discount of $10.30 to WTI, unchanged. Natural gas for May added three cents to $2.64. The TSX energy index added 3.76 points to close at 120.48.
Oil prices rose in spite of a surprise decision by OPEC+ to increase oil production over the next three months. The group has been restricting its production by about eight million barrels a day, with Saudi Arabia voluntarily cutting its own production by an extra one million barrels a day. Today the group held a meeting to discuss easing the restrictions. As of this writing, the results of the meeting are not on OPEC's website, but a source told CNN that OPEC+ has decided to increase output by 350,000 barrels a day in May, then another 350,000 barrels a day in June and then about 440,000 barrels a day in July. Saudi Arabia will gradually unwind its voluntary cuts and eliminate them by the end of July.
The news came as a surprise to analysts who had been expecting OPEC+ to roll over the existing cuts, given its recent downward revision to its 2021 oil demand forecast. As noted in yesterday's Energy Summary, the group is now expecting global oil demand to rise by just 5.6 million barrels a day in 2021 (relative to 2020), which is more bearish than its previous forecast of 5.89 million. Analysts took the downgrade to mean that OPEC+ would delay boosting production. Yet "research and actual market decisions don't always go together," Rystad analyst Louise Dickson told CNN. She pointed out that several OPEC+ countries have oil-reliant budgets and have been "itching to boost their output."
Here in Canada, Andy Mah's Alberta Montney-focused Advantage Oil & Gas Ltd. (AAV) added 60 cents to $2.97 on 10.2 million shares, after trumpeting its role in inventing a "breakthrough" carbon capture and storage technology. Advantage developed the technology alongside Allardyce Bower Consulting. The two of them have also jointly established a company called Entropy, which will own the technology and try to find new customers to use it. The first site to use it will be Advantage's Glacier gas plant in the Montney. They expect to get the technology all set up and running at Glacier by March, 2022.
Advantage is the second company in two weeks to trumpet its interest in a carbon capture company. On March 18, Suncor Energy Inc. (SU: $27.02) proudly proclaimed itself a "new strategic investor" in Svante, which is a Vancouver-based company that has been using its carbon capture technology for years at a Husky Energy plant (now owned by Cenovus Energy Inc. (CVE: $9.86)). Brett Henkel, Svante's co-founder, told the Context Energy magazine last month that Svante's "long-term goal" is to cut the cost of carbon capture to a range of $30 to $50 per tonne, which he said was around half the cost of other approaches. Interestingly, Entropy is already boasting about those kinds of numbers. "[This technology is] capable of commercial profitability at a carbon price below $50 per tonne," declared Advantage. Of course, what the technology is "capable" of doing and what it will actually do could be worlds apart, as it has not been commercially demonstrated.
Despite the uncertainties, Advantage's announcement drew applause from Scotia Capital analyst Cameron Bean, who opined this morning that the technology "could add material value to an already attractive equity." He noted, however, that two of Advantage's most senior executives -- Michael Belenkie, president and chief operating officer, and Craig Blackwood, chief financial officer -- will now start splitting their time between Advantage and their new senior roles at Entropy. This is not an ideal set-up, mused Mr. Bean. He nonetheless concluded that the overall arrangement looks "well worth the risk in an increasingly carbon-conscious macro environment."
Speaking of a carbon-conscious environment, oil sands giant Imperial Oil Ltd. (IMO) added $1.14 to $31.58 on 1.9 million shares, after publishing a new sustainability report. "Imperial is developing pathways in support of a net-zero future," it proclaimed. The report runs 122 pages and is chock full of graphics, charts, and photographs of healthy plants and smiling people.
It also contains some carefully worded promises. As discussed in the March 22 Energy Summary, Imperial is currently trying to dissuade shareholders from forcing it to adopt a net-zero-by-2050 target. This target was outlined in a shareholder-submitted proposal from Batirente (a Quebec group retirement system) for consideration at Imperial's annual meeting on May 4. Imperial is recommending that shareholders reject the proposal because, in its view, a net-zero-by-2050 target is "premature" until the technology exists to achieve it. The technology does not exist yet, so in the meantime it is better to have "concrete targets" with "clear, achievable steps," argued Imperial in its circular. Now it has talked up its targets and progress at length in the new sustainability report. The report seems geared toward reassuring Batirente and any like-minded shareholders that Imperial does not need an explicit net-zero deadline to take environmental issues seriously. Ideally, it will curry enough favour that the proposal either fails at the meeting on May 4 or is withdrawn prior to that date, both of which are common outcomes for these sorts of shareholder-submitted demands.
Toward the bottom, Alfred Sorensen's Pieridae Energy Ltd. (PEA) lost one cent to 45 cents on 392,400 shares, after hiring a new COO. Former COO Tim de Freitas left in January to pursue other interests. He was previously the president and CEO of Ikkuma Resources, an Alberta gas producer that Pieridae merged with in 2019. After moving into the COO role at Pieridae, Mr. de Freitas oversaw an expansion of its gas production to around 42,000 barrels of oil equivalent a day from 17,500 (almost wholly done through acquisitions) and pushed for the development of Pieridae's more unusual promotion, a $10-billion (U.S.) liquefied natural gas (LNG) proposal in Nova Scotia. The LNG project is called Goldboro. As discussed most recently in the March 25 Energy Summary, Pieridae is due to make a final investment decision on Goldboro by June 30, 2021, and is aiming to start LNG exports in 2025 or 2026.
Now it has a COO to help with that. Mr. Sorensen, Pieridae's chief executive officer, declared today that he is "extremely pleased" to welcome new COO Darcy Reding. Mr. Reding is an engineer and was most recently the vice-president of operations at NAL Resources. NAL was acquired in January by Whitecap Resources Inc. (WCP: $5.75), boosting Whitecap's gas production. Experience with gas production is exactly what Pieridae needs in a COO, said Mr. Sorensen. He added that Mr. Reding has also experience managing a "billion-dollar multiyear program" and is thus a good fit for building Goldboro. Mr. Reding, for his part, complimented Pieridae's "world-class" assets and vowed that he will be "hitting the ground running."
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