Stockwatch Energy for yesterday
Energy Summary for March 9, 2022
2022-03-09 21:08 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for April delivery tumbled $15.00 to $108.70 on the New York Merc, while Brent for May lost $16.85 to $111.14 (all figures in this para U.S.). Western Canadian Select traded at a discount of $12.21 to WTI, down from a discount of $12.19. Natural gas for April lost 19 cents to $4.83. The TSX energy index lost 7.74 points to close at 216.31.
Oil prices retreated amid rising hopes that OPEC+ will change its mind and pursue more aggressive production boosts. For months, the group has resisted pressure to depart from the production pact it reached last summer, blaming the subsequent overheating in oil markets on failed Western energy policies and geopolitical tensions, which it deemed not in its purview. Now one member of OPEC+ is calling for the group to open the taps anyway. "We favour production increases and will be encouraging OPEC to consider higher production levels," Yousef al-Otaiba, the United Arab Emirates' ambassador to Washington, told media outlets such as the Financial Times and CNN.
The UAE is the first OPEC+ member to take this stance in public. In private, however, it may be following the crowd. "The UEA cracked. They were one of the last holdouts," Robert Yawger, vice-president of energy futures at Mizuho Securities, told CNN. "Now that they said it, you can expect the Saudis will say the same thing."
At issue, of course, is what Russia will say, as one of the dominant members of OPEC+. Another niggle with the open-the-taps arguments is that some members simply cannot. The group as a whole has regularly fallen short of its monthly quotas since agreeing to gradual production hikes last summer. In January, the International Energy Agency said the gap between the group's target and its actual output had widened to about 900,000 barrels a day. Some countries, such as Saudi Arabia and UAE, can undoubtedly close that gap, while others, mostly in Africa, lack the capacity to carry out any proposed production hikes. Those will be issues for OPEC+ to discuss at (if not before) its next scheduled meeting on March 31.
Here in Canada, oil stocks fell with oil prices. Oil sands giant Canadian Natural Resources Ltd. (CNQ) lost $2.77 to $74.21 on 9.9 million shares, despite announcing a sizable share buyback program. It has received TSX approval to buy back up to 101 million shares. This is 10 per cent of its public float, a more ambitious figure than Canadian Natural picked for last year's buyback program, when it went for 5 per cent (or a maximum of 59.2 million shares). It ended up buying 45.1 million shares under last year's program for a total of $2.33-billion (averaging $51.76 a share). For context, the company turned a net profit in 2021 of $7.6-billion.
Speaking of 2021 financial results, more of them rolled in today from producers such as NuVista Energy Corp. (NVA), down 65 cents to $10.60 on 4.05 million shares, Spartan Delta Corp. (SDE), down 28 cents to $8.74 on 997,000 shares, and Crew Energy Inc. (CR), down 29 cents to $3.70 on 2.94 million shares. All three of them, without exception, touted "record" numbers. All three of their numbers were generally right in line with analysts' predictions.
For the fourth quarter, NuVista's Montney-focused production averaged 60,900 barrels a day, while cash flow came to 67 cents a share (relative to analysts' predictions of 60,000 barrels a day and 64 cents a share). The company turned an overall profit for the quarter of $113-million. President and chief executive officer Jonathan Wright cheered NuVista's "strength and increasing momentum." He stayed largely away from the current trend of dangling dividends, but could not avoid the rampaging return-of-capital bandwagon altogether, and settled for hinting at a potential share buyback later this year. He also reiterated an ambitious plan to boost production to as much as 90,000 barrels a day within about two years.
Crew Energy, another Montney producer, also turned in results that largely matched analysts' predictions. President and CEO Dale Shwed said he is "excited" about Crew's progress on its own ambitious two-year plan. This is the final year of that plan, which Mr. Shwed first announced in late 2020, when Crew's production was about 21,500 barrels a day. He vowed to boost this to 32,000 barrels a day in 2022. Strictly speaking, Crew has already achieved that goal -- its production in January averaged 32,500 barrels a day -- but the real test will be staying there, as a full-year average. Mr. Shwed reiterated guidance to this effect. He dodged all mention of returns of capital, but investors likely expected that, given that Crew remains one of the more indebted players in the sector. Its net debt actually increased during 2021 to $405-million from $357-million.
Lastly, Spartan Energy released financials that contained few surprises, as it had previously released an operational update in mid-February. It still took the opportunity to pat itself on the back for its "efficient and highly economic organic development ... [as well as] almost $1-billion of targeted acquisitions" during the year. These helped boost production to 72,400 barrels a day in the fourth quarter of 2021 from 26,000 barrels a day one year earlier.
One of Spartan's acquisitions during the year was Inception Exploration, a private Montney producer that Spartan bought through an all-share deal last March. As a result of that deal, Inception's former backer is now Spartan's largest shareholder, with 30 million of its 153 million shares. That backer has come under rising scrutiny lately. It is ARETI Energy, part of the ARETI International Group led by billionaire Russian oligarch Igor Makarov -- not the most comfortable connection in today's environment. To be clear, Mr. Makarov was not among the 58 Russian individuals and entities that were hit with sanctions last month as part of Canada's retaliation for Russia's invasion of Ukraine, and (despite his being named the U.S. government's 2018 "Putin List," containing 210 individuals with suspected ties to the Kremlin) his spokesmen have denied any close relationship between Mr. Makarov and Russian President Vladimir Putin.
Spartan did its best to navigate tricky waters. Without mentioning its Russian connection, but undoubtedly aware of the negative on-line comments about it, Spartan made the opening paragraph of its press release an unequivocal statement of "support for Ukraine as its people continue to defend their democratic rights and freedoms from Russian aggression." It urged Russia and its army to "stop their inhumane military operations against civilians and ... end the war."
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