Stockwatch Energy today
Energy Summary for Aug. 24, 2022
2022-08-24 20:19 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for October delivery added $1.15 to $94.89 on the New York Merc, while Brent for October added $1.00 to $101.22 (all figures in this para U.S.). Western Canadian Select traded at a discount of $19.70 to WTI, unchanged. Natural gas for September added 14 cents to $9.33. The TSX energy index added 2.61 points to close at 247.18.
Canadian LNG (liquefied natural gas) continued to make headlines as German Chancellor Olaf Scholz wrapped up his three-day visit to Canada late yesterday. The visit concluded with a signed "declaration of intent" between Mr. Scholz and Prime Minister Justin Trudeau, but unfortunately for LNG advocates, their favourite abbreviation was nowhere to be found. The agreement instead laid out a vague plan to establish a "hydrogen alliance," which would see Canada attempt to start hydrogen energy exports to Germany as early as 2025.
In the days leading up to the visit, LNG advocates were hopeful that Mr. Scholz would push for rapid LNG exports from Canada, as a means of reducing Germany's reliance on Russian gas. This would likely require the building of an LNG export terminal on Canada's East Coast and enough infrastructure to supply the terminal with gas from Western Canada. Mr. Trudeau pooh-poohed this idea during the visit, claiming that there "has never been a strong business case because of the distance." He put the focus on hydrogen instead. Critics pointed out that Canada's export infrastructure is woefully inadequate for either LNG or hydrogen, requiring massive spending no matter what, but evidently Mr. Trudeau finds hydrogen the more palatable commodity.
Naturally, the Prime Minister's remarks prompted bristling in Alberta. "There is a clear business case to increase market access for Canada's LNG off the East Coast, and not acknowledging it is another case of the federal government refusing to act in the best interests of Albertans, Canadians and the world," fumed Alberta's associate natural gas minister, Dale Nally, in a statement today to CBC News. He pointed out that the United States has been building LNG export terminals for years, while Canada has yet to open a single one. This is not for a lack of proposals, nearly two dozen of which have died since 2014, suffocated in red tape or starved from a lack of financing. "Canada already missed the first LNG wave," said Mr. Nally. "We cannot afford to miss the second."
One Canadian junior looked for a less belligerent way to change Mr. Trudeau's mind, zeroing in on his apparent concern about the distance to gas fields. Michael Binnion's Questerre Energy Corp. (QEC) added 3.5 cents to 27 cents on 126,300 shares, after making the case for LNG exports from Quebec. "Quebec is ideally located to supply LNG to Germany," claimed Mr. Binnion, president and chief executive officer. He said Questerre could help with feedstock from its "proven [gas] discovery," located "less than 10 kilometres from LNG export project with permits at Becancour and tidewater access to Europe." He concluded triumphantly, "The business case is established."
An experienced promoter, Mr. Binnion had no problem coming up with grand proclamations, but he will be well aware of their glaring problems. For one thing, Questerre's discovery is just that: a discovery, not a producing asset. For another, the Becancour terminal is merely a proposal, has shown virtually no signs of life in seven years and is looking for new owners. Lastly, there is a roadblock the size of Quebec itself, with the provincial government having passed a law to ban oil and gas development and revoke existing licences -- including Questerre's -- earlier this year. Even Mr. Binnion had to acknowledge that last little hurdle, though he kept his chin up and said Questerre is challenging the law as "illegal and unconstitutional." Over all, as much as he no doubt enjoyed today's daydreaming, he is surely not holding his breath for Mr. Trudeau to come galloping in.
Further afield, Jeff Chisholm's Pan Orient Energy Corp. (POE) lost three cents to $1.21 on 392,400 shares. It has received shareholder approval to carry out its previously announced sale and spinout arrangement. Over 99 per cent of the shareholders at the meeting cast their votes in favour.
The arrangement, as announced in June, will see Pan Orient sell itself and its core assets in Thailand to Malaysia's Dialog Group for 78.8 U.S. cents a share. Shareholders will also receive one share of a spinout company, which will immediately look for new assets in Asia. Mr. Chisholm, Pan Orient's president and CEO, will be in charge of the spinout, which he has already named CanAsia. His choice of region comes as no surprise: He has spent the majority of his career in Asia, including the last 17 years at Pan Orient. Under his tenure, the stock has been as high as $15.85 in 2008 and as low as 41 cents in 2020. It closed today at $1.21. Based on current exchange rates, this implies a value for the spinout of about 20 cents a share, leaving it -- as Mr. Chisholm must hope -- almost nowhere to go but up.
Another international junior, the Colombia-focused Arrow Exploration Ltd. (AXL) -- a sizable investment of fellow Colombian producer Canacol Energy Ltd. (CNE: $2.48) -- lost three cents to 26 cents on 491,000 shares. It had no luck impressing investors with its midyear reserve report. CEO Marshall Abbott did his best, cheering that Arrow's "increase in volumes and values in all reserve categories ... reinforces the significant value" of its assets. Yet some of the increases had as much to do with oil prices than with Arrow's actual activities. For example, its 2P (proved and probable) reserves rose to 7.86 million barrels as of June 30 from 7.42 million barrels as of Dec. 31, with more than half of the gain coming from "economic factors."
Higher oil prices aside, Arrow has been actively drilling this year, which according to Mr. Abbott has boosted production to roughly 1,500 barrels a day in August (compared with 1,100 in the first quarter). Mr. Abbott added that the company plans to start a five-well program next quarter. As its wells cost about $3.5-million each, Arrow will be working its way quickly through the $15-million it raised at 10 cents last October. Subscribers have more than doubled their investment. Mr. Abbott is now hoping to double production to 3,000 barrels a day by next spring.
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