Stockwatch Energy todayWOW! says it all some folks don't get it-ENB
nergy Summary for July 15, 2021
2021-07-15 18:05 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for August delivery lost $1.48 to $71.65 on the New York Merc, while Brent for September lost $1.29 to $73.47 (all figures in this para U.S.). Western Canadian Select traded at a discount of $13.20 to WTI, down from a discount of $13.19. Natural gas for August lost five cents to $3.61. The TSX energy index lost 1.95 points to close at 129.85.
Enbridge Inc.'s (ENB: $49.41) Line 3 replacement project is preparing for the next stage of battle with anti-pipeline activists. In a move that surprised no one, opponents of Line 3, who lost their fight to overturn the pipeline's permits in the Minnesota Court of Appeals last month, have now taken their grievances to the Minnesota Supreme Court. They want the court to strip away the approvals that allowed construction of the line to begin last December. (For clarity, the original Line 3 has been in the ground since the 1960s. Enbridge is now upgrading and expanding it.)
The move is just the next round in a long, long fight. Line 3 is one of the most reviewed pipelines in Minnesota's history, with Enbridge beginning its scoping studies in 2013. Years of hearings and review produced an initial draft of the environmental impact study (EIS) clocking at 5,000 pages. More hearings and revisions followed, until the state's Public Utilities Commission (PUC) finally had an EIS that it deemed adequate -- at a grand total of 13,500 pages. That was in 2018. Then the legal skirmishes kicked off, with opponents snagging a 2019 victory when a court ordered Enbridge and the PUC to review just one more thing. They did, bringing the EIS up to 15,800 pages, and the PUC signed off once again in 2020. Construction began later that year. When not trying to block construction in court, opponents busy themselves gleefully protesting along the route line, while Enbridge ignores the nuisance as best it can. It expects to start service on the line by year-end.
Further afield, Craig Steinke's Reconnaissance Energy Africa Ltd. (RECO) lost 87 cents to $9.92 on 1.74 million shares, on top of the 66 cents it lost yesterday, despite two determinedly cheerful press releases. Yesterday's was about the completion of drilling of Reconnaissance's second test well in the Kavango basin of Namibia. The company previously announced in June that it had only partially finished this well and had already hit 134 metres of light oil and gas shows. The press release yesterday, however, made no mention of any shows, merely noting that Reconnaissance is preparing for logging. Investors seemed subdued.
Their mood did not improve today, as Reconnaissance announced the approval of shareholders of its takeover target, Renaissance Oil Corp. (ROE: $0.455), to proceed with the deal. (The companies have similar names -- and similar backers; Mr. Steinke is Renaissance's chief executive officer -- so for readability, we shall now use Reconnaissance's preferred nickname of ReconAfrica.) Investors in both companies were bemused last week after Renaissance postponed its shareholder meeting with no explanation. The explanation may have arrived in ReconAfrica's update today, which suggested that long-time Renaissance shareholder Eskandar Maleki was digging in his heels. By way of background, a press release about Mr. Maleki's initial investment in 2017 noted that he was to enjoy perks from Renaissance, including "performance-based compensation ... for value created for the company." Perhaps Mr. Maleki saw the takeover meeting as a good time to try to collect. Without going into details, ReconAfrica today announced a settlement and termination of "the Maleki agreement," with Mr. Maleki now set to receive options and warrants of ReconAfrica.
All of this is proceeding under the baleful gaze of U.S. short-seller Viceroy Research. Viceroy announced its short position in ReconAfrica three weeks ago, and unleashed another torrent of criticism yesterday, accusing the company of displaying "clear contempt for stakeholders and a willingness to distort the truth to further their aims." The short-seller fumed that yesterday's drilling update was "almost entirely devoid" of information. It also accused ReconAfrica's promoters of being "sleazy" spinners of "delusions." ReconAfrica's stock has weakened somewhat during the three-week onslaught, falling to $9.92 from $13.34, for a $560-million loss in market cap. (The market cap was previously above $2-billion, which is likely what attracted Viceroy to the non-producing, non-revenue-generating wildcatter in the first place.) Yet the stock remains well above its year-ago level of just 50 cents.
Another international player -- which is producing oil and generating revenue, though hardly very much -- had some news today. Richard Gonzales and Charles Cotter's Brazil-focused Petro-Victory Energy Corp. (VRY) edged down one cent to $2.19 on 1,200 shares, after securing a $700,000 (U.S.) top-up on a debt financing. The creditor is T. Lynn Bryant's 579 Max Ltd. It previously lent Petro-Victory $2-million (U.S.) and is now lending an additional $700,000 (U.S.) -- subject to a speedy repayment, if Petro-Victory should manage to obtain separate financing from another lender.
The above Mr. Bryant is also a shareholder of Petro-Victory and controls 6.9 per cent of the company's 8.2 million shares. In light of this support, Petro-Victory has now added Mr. Bryant to its board of directors. It pointed admiringly to his current role as CEO and founder of Ridge Petroleum, which it described as "an independent operator of more than 200 wells in the United States and Canada." Two hundred must seem a marvellous number to Petro-Victory, which in SEDAR filings gives its own number of producing wells as "several." These several wells were producing a total of 34 barrels a day as of late May. In any case, Mr. Bryant obligingly returned the compliments, dubbing himself "thrilled" to join such a "high-growth E&P [exploration and production] company within the dynamic Brazilian market."
Petro-Victory will need more than $700,000 (U.S.) to experience much growth. It is cash flow negative and had a working capital deficit of $3.4-million as of March 31. Fortunately, as discussed in Monday's Energy Summary, Petro-Victory recently hired a European investment firm called Gneiss Energy to launch a search for financiers. Gneiss is led by former Macquarie Capital managing director Jon Fitzpatrick. He is now hard at work hyping Brazil as "one of the most exciting deal spaces globally" and Petro-Victory as the sure-to-be "pre-eminent acquisition and development firm" in the country. With any luck, the fanfare will translate into financing shortly.
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