Stockwatch Energy today
Energy Summary for Feb. 9, 2022
2022-02-09 20:27 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for March delivery added 30 cents to $89.66 on the New York Merc, while Brent for April added 77 cents to $91.55 (all figures in this para U.S.). Western Canadian Select traded at a discount of $13.72 to WTI, up from a discount of $13.79. Natural gas for March lost 24 cents to $4.01. The TSX energy index added 3.43 points to close at 195.06.
More than a year after U.S. President Joe Biden symbolically killed the pipeline, the saga that is TC Energy Corp.'s (TRP: $65.85) Keystone XL continues to take new twists and turns. The government of Alberta announced today that it is initiating a legacy NAFTA claim against the U.S. government to recover its $1.3-billion investment in the cancelled pipeline. This comes just two days after NLE, a self-described "sovereign organization," said it may also seek compensation for the cancelled pipeline under NAFTA's successor, the USMCA.
Some decoding is necessary. The USMCA (U.S.-Mexico-Canada Agreement) replaced NAFTA (the North American Free Trade Agreement) in July, 2020, It included a mechanism whereby legacy NAFTA claims could be filed until 2023 over investments made while NAFTA was in effect. The Alberta government agreed to invest in Keystone in March, 2020, and is thus pursuing a legacy NAFTA claim. By contrast, NLE (which stands for Natural Law Energy) says it represents a group of sovereign first nations that signed an agreement to invest in Keystone XL in September, 2020. This was after the USMCA took effect, hence the different kind of claim.
Both the Alberta government and NLE are following in the footsteps of TC Energy itself. After Mr. Biden revoked Keystone XL's permits in January, 2021 -- also known as 14 frustrating years after TC Energy first proposed it -- the company initiated a legacy NAFTA claim in July, 2021, seeking $15-billion (U.S.) in compensation. Its view is that the U.S. government breached its free-trade obligations. The Alberta government and NLE presumably share this view. They all face a formidable opponent in the U.S. government, which has never lost a NAFTA claim, legacy or otherwise.
NLE may face a particularly uphill battle. The group, which says it represents "great nations which have been sovereign on Turtle Island [North America] since time immemorial" -- though whether an arbitrator would agree is not entirely clear -- acknowledges that it did not actually invest in Keystone XL. Its plans to do so died when Mr. Biden killed the permit. Now the group says it feels deprived of participation in a project that would have represented "a meaningful step towards economic reconciliation." Beyond referencing anticipated returns "in excess of $1-billion," it did not specify a desired compensation amount. It vowed to challenge the cancellation of the pipeline either under the USMCA or through its "treaty and other rights as original sovereign people."
Within the sector, Dale Shwed's Crew Energy Inc. (CR) added 11 cents to $3.45 on 1.89 million shares. The B.C. Montney gas producer released an upbeat year-end reserve report this morning. "Record reserves additions, a successful capital program and a meaningfully improved commodity price environment have strategically positioned the company to achieve the goals set out in our two-year plan," cheered Mr. Shwed, Crew's president and chief executive officer.
Mr. Shwed was referring to a two-year plan that was released in 2020 and calls for Crew to produce 31,000 to 33,000 barrels a day in 2022, up from 22,000 in 2020. He toasted "excellent" and "successful" reserve-related results for the first year of the plan, being 2021. At year-end 2021, Crew's proved developed producing reserves (the highest level of certainty) were 82.0 million barrels. Mr. Shwed pointed out no fewer than four times that this was a record 22-per-cent increase from 67.1 million barrels a year earlier. (He understandably drew far less attention to the more closely watched measurement of proved and probable reserves, which took a slight year-over-year dip to 404.6 million barrels from 409.9 million.)
Over in Alberta, fellow gas player Pine Cliff Energy Ltd. (PNE) added two cents to 74 cents on 1.02 million shares, after it too published its year-end reserves. Its proved and probable reserves rose to 62.8 million barrels as of Dec. 31, 2021, from 54.8 million a year earlier. The gains came mostly from an acquisition and "economic factors." (The latter occurs when commodity prices head up or down, allowing previously uneconomic barrels to get a promotion to reserves, or vice versa.)
Pine Cliff also released an operational update and its 2022 budget. Average production in 2021 came to 18,445 barrels a day, "at the high end of the company's [guidance]," cheered president and CEO Phil Hodge. He had been aiming for 18,000 to 18,500 barrels a day. In 2022, the company plans to boost production to a range of 20,000 to 21,000 barrels a day, on a budget of $25.5-million. Like the reserve report, the increase partly reflects an acquisition that Pine Cliff completed late last year. Mr. Hodge said Pine Cliff might pursue further acquisitions this year. It will also "consider other opportunities to enhance shareholders' long-term value," he added, making sure to dangle the vague but increasingly trendy carrot known as "shareholder returns."
If he is referring to a dividend, that would be lovely news for Pine Cliff's major shareholders. The largest is Vancouver broker Robert Disbrow, who currently owns 38.2 million of the company's 339 million shares (including 50,000 that he bought yesterday, according to SEDI). Pine Cliff's executive chairman, George Fink (who is also the founder, CEO and chairman of Bonterra Energy Corp. (BNE: $7.97), holds another 25.2 million. Mr. Hodge holds eight million.
One last gassy junior, Rob Zakresky's B.C. Montney-focused Leucrotta Exploration Inc. (LXE), edged down one cent to 86 cents on 158,400 shares. Unlike its competitor Crew Energy, Leucrotta's stock has not responded as noticeably to the rally in gas prices. Crew's stock has nearly quadrupled to $3.45 from 89 cents over the last year. Leucrotta's stock traded at 77 cents this time last year and is now sitting at 86 cents. The yawns came in spite of Leucrotta's recent efforts to hype its year-end 2021 production of 5,000 barrels a day, roughly double its rate at the start of the year. Its long-term goal is to hit 30,000 barrels a day within five years.
One insider is taking the yawns as a buying opportunity. According to recent SEDI filings, director John Brussa bought 625,000 shares over the past 3-1/2 weeks, spending a total of $565,150. He now owns 1.51 million of Leucrotta's 200 million shares. Mr. Brussa is a lawyer and the chairman of the Calgary-based energy law firm of Burnet, Duckworth and Palmer. He joined Leucrotta's board in March of last year, and also sits on the boards of the above Crew Energy (where he is chairman) and Alberta oil producer Cardinal Energy Ltd. (CJ: $5.19).
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