Stockwatch Energy today
Energy Summary for Sept. 15, 2022
2022-09-15 20:16 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for October delivery lost $3.38 to $85.10 on the New York Merc, while Brent for November lost $3.26 to $90.84 (all figures in this para U.S.). Western Canadian Select traded at a discount of $20.38 to WTI, unchanged. Natural gas for October lost 79 cents to $8.32. The TSX energy index added 7.13 points to close at 244.35.
Oil prices tumbled as fears faded of a large-scale U.S. rail strike. Rail workers shook hands on a tentative labour agreement, averting a potentially major disruption in commodity deliveries. Process also got a boost from a higher U.S. dollar ahead of what many expect will be a sizable interest rate hike when policymakers meet next week. (A higher greenback tends to hurt oil demand by making oil more expensive in other currencies, hence the generally inverse relationship.)
Here in Canada, oil stocks fell with prices, despite a charm offensive by several companies working the conference circuit. Executives made their way to Toronto for the 26th annual Peter's & Co. Energy Conference running from Sept. 13 to 15. One presenter was Stephen Loukas, interim president and chief executive officer of Obsidian Energy Ltd. (OBE), down 39 cents to $10.81 on 446,500 shares. He talked up the company's recent debt refinancing in July and its "very active" drill program in Alberta.
Although Obsidian's core play in Alberta is the Cardium, Mr. Loukas gave a special mention to a splashy new play, namely the Clearwater. The early-stage Clearwater has grabbed rising attention in the industry over the last few years amid some increasingly large acquisitions, most recently Tamarack Valley Energy Ltd.'s (TVE: $3.95) $1.4-billion proposal to buy Deltastream Energy earlier this week. Mr. Loukas noted that Obsidian has quietly amassed nearly 500 sections in the Clearwater, making it one of the larger landholders. It plans to drill its first two wells there this year. Toward year-end and early next year, promised Mr. Loukas, "you'll hear a lot more from us on that front."
Further afield, Randy Neely's Egypt-focused TransGlobe Energy Corp. (TGL) lost four cents to $4.07 on 134,600 shares, as it continued its battle for the hearts and minds of shareholders. It is now two weeks away from a Sept. 29 shareholder vote on its proposed all-share merger with Vaalco Energy. After a dissident shareholder, Horizon Partners, published an open letter this week urging rejection of the "extremely unattractive" deal, TransGlobe put up a defence yesterday afternoon by pointing to an endorsement from proxy advisory firm ISS. Horizon promptly fired back with a claim of "overwhelming" support from shareholders.
"Overwhelming" may be overselling. Horizon estimated that its level of support from shareholders is around 20 per cent, and it does not specify how many of the shares it owns itself. Managing partner Juan Argento largely used the press release as an opportunity to rehash his criticisms of the "value-destroying transactions" and to promote his own "action plan" instead. This would see TransGlobe sell its non-Egyptian assets (located in Alberta), distribute most of the proceeds to shareholders, and then focus on its core assets in Egypt and "other potential transactions identified in the future."
TransGlobe, for its part, has steadfastly maintained that the deal will create a "world-class African-focused E&P [explorer and producer] supporting sustainable shareholder returns and growth." It even plans for the merged company to introduce a dividend. Many investors seemed unpersuaded, or at least distracted by the decline in the suitor's share price. Vaalco's NYSE-listed shares have fallen to $4.65 (U.S.) from $6.23 (U.S.) since making its offer two months ago. Based on the proposed ratio of about two-thirds of a Vaalco share for every TransGlobe share, this has dragged the implied value of TransGlobe's shares toward $4 from over $5.50.
Back in Canada, another presenter at the Peters conference was president and CEO Dale Shwed of B.C. Montney player Crew Energy Inc. (CR), down 18 cents to $5.74 on 582,500 shares. Mr. Shwed expressed pride in what he viewed "the most important thing that we've been able to achieve this year," specifically a sizable debt reduction. Debt has fallen to about $150-million from $405-million since the start of the year. A little over half of the reduction came from a $130-million asset sale in August, but the rest, emphasized Mr. Shwed, is thanks to good old free cash flow.
Mr. Shwed added that Crew continues to enjoy "momentum in a strong natural gas market." Under its previously announced two-year production plan, the company is aiming for production of 32,000 to 33,000 barrels a day this year, up sharply from just 22,000 barrels a day in 2020. Mr. Shwed said he still expects to achieve this year's target despite a summer stumbling block. Notably, he estimated that Crew had to shut in about 2,000 barrels a day for roughly three weeks because of weak gas prices. (Crew is not the only one -- both Tourmaline Oil Corp. (TOU: $81.98) and Kelt Exploration Ltd. (KEL: $6.35) also announced recent price-related shut-ins -- but prices have since begun to rebound.) All in all, the mood at Crew is "very good," "very happy" and "really proud." Mr. Shwed plans to release an updated two-year plan by year-end.
© 2022 Canjex Publishing Ltd. All rights reserved.