Stockwatch Energy today
Energy Summary for Dec. 1, 2022
2022-12-01 20:43 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for January delivery added 67 cents to $81.22 on the New York Merc, while Brent for February lost nine cents to $86.88 (all figures in this para U.S.). Western Canadian Select traded at a discount of $29.07 to WTI, unchanged. Natural gas for January lost 19 cents to $6.74. The TSX energy index lost 3.17 points to close at 256.41.
Oil prices had another volatile day. In a year-ahead outlook, the head of global commodities research at Bank of America's BofA Securities, Francisco Blanch, predicted a drop in prices if the world enters a recession -- but also noted that China could trigger a "substantial" rise in demand by loosening its COVID restrictions, thus supporting prices. Meanwhile, traders continued to marvel at yesterday's bullish U.S. inventory report (which showed that crude inventories plunged by 12.6 million barrels last week, sharply exceeding analysts' predictions of a drop of 3.1 million barrels). Eyes are also on Sunday's OPEC+ meeting and Monday's deadline for the European Union to agree on a price cap for Russian oil.
Here in Canada, Ronald Poelzer and Keith MacPhail's Montney-focused NuVista Energy Ltd. (NVA) lost 31 cents to $13.49 on 693,400 shares. It had no news that it felt the need to announce, but a new regulatory filing showed that its bankers have completed their semi-annual review and left NuVista's credit facility unchanged at $440-million. The facility was only $9-million drawn as of Sept. 30, and NuVista had told investors on Nov. 9 that it did not expect any surprises.
While it was referring to surprises in the form of a revised credit facility, the Nov. 9 announcement did contain other updates that gave investors pause, ultimately prompting them to send the stock to $13.15 from $14.24 in a single day. At $13.49, the stock is still working on regaining that ground. Most of the displeasure centred on the company's revised guidance for 2022 and 2023. For 2022, NuVista hiked its budget all the way to $415-million (from $365-million) while only nudging its production guidance up to 68,500 barrels a day (from 68,000). For 2023, NuVista plans to spend $450-million and produce around 81,000 barrels a day, compared with earlier, preliminary estimates of just $365-million and up to 90,000 barrels a day. Management blamed inflation.
NuVista will have a new chief financial officer overseeing its spending in 2023. Its current CFO and vice-president of finance, Ross Andreachuk, announced in August that he is retiring at the end of the year. Succeeding him on Jan. 1 will be Ivan Condic. Mr. Condic joined NuVista as controller in 2014, jumping ship from Palliser Oil, a struggling Alberta junior that entered receivership in 2015. Before that, he was an accountant at KPMG.
Further afield, Gabriel de Alba's Frontera Energy Corp. (FEC) added 29 cents to $11.00 on 77,800 shares, while Dr. Suresh Narine's CGX Energy Inc. (OYL) added five cents to $1.02 on 34,900 shares. They have completed a previously announced amendment to their joint venture at the offshore Corentyne block in Guyana. The amendment will make Frontera the majority owner of the block instead of CGX, in exchange for considerable financial relief from the former to the latter. This relief includes about $50-million (U.S.) in effective debt forgiveness and a carrying commitment for up to $130-million (U.S.) of the costs of the next exploration well. Frontera now owns 68 per cent of the block, to CGX's 32 per cent.
Investors seemed relieved. CGX and Frontera announced this amendment nearly five months ago and were originally hoping to complete it two months ago. Yet it turned out that there was no need to rush after all. As discussed Monday, even though the companies were contractually obligated to spud an exploration well by Nov. 30, the rig failed to arrive on time (it is still busy in Trinidad) and the Guyanese government agreed to extend the drilling deadline into January. Today's update included the news that the joint venturers have officially declared force majeure on the block. They quickly reassured investors that this is merely a "procedural step" to keep the contract in good standing, and that the government has no intention of ending the contract over the missed deadline.
Keen to redirect focus from the delays and procedural wranglings, management of both companies kept up a steady stream of hype about the "tremendous" and "transformational" potential of "one of the most exciting exploration areas in the world." CGX's management was equally enthusiastic about its lightened financial burden. As of Sept. 30, CGX had over $50-million (U.S.) in near-term debt and no way of paying its share of an expensive offshore well. Today it took delight in describing its balance sheet with that all-too-rare adjective (for CGX), "clean."
Elsewhere in South America, Serafino Iacono and Frank Giustra's Colombian gas producer, NG Energy International Inc. (GASX), added nine cents to $1.07 on 5.07 million shares. It has closed a previously announced $35-million private placement of debentures (plus warrant sweeteners). The proceeds will go toward a gassy drill program at the company's exploration-stage SN-9 block.
Insiders participated in the offering for $5.35-million. Most of that was the $2.75-million and $2-million in subscriptions, respectively, by CEO Mr. Iacono and long-time associate Mr. Giustra. They have been working together since the 1990s on numerous Latin American resource promotions. One of their highest-profile ventures was Pacific Rubiales, a Colombian oil darling whose stock soared from $2 in 2008 to a high of $35 in 2010. It had an unhappy ending, however, when it spiralled into bankruptcy in 2016. How kindly investors think of the promoters tends to line up with where they fell in that timeline.
Another former Pacific Rubiales man is now popping up at NG Energy. Jorge Fonseca, who worked at the Colombian promotion as head of corporate finance and new business development, is joining NG Energy as CFO. Mr. Fonseca was one of the executives who kept his job throughout Pacific Rubiales's bankruptcy, restructuring and re-emergence as the above-mentioned Frontera Energy Corp. (FEC: $11.00). He left Frontera in 2019 and since then has served as structured trade finance director at BP. Now he will rejoin some of his old colleagues at NG Energy, succeeding former CFO Marianella Bernal, who is becoming senior vice-president of finance.
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