Stockwatch Energy today
Energy Summary for March 10, 2022
2022-03-10 20:04 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for April delivery lost $2.68 to $106.02 on the New York Merc, while Brent for May lost $1.81 to $109.33 (all figures in this para U.S.). Western Canadian Select traded at a discount of $12.36 to WTI, down from a discount of $12.21. Natural gas for April added 10 cents to $4.63. The TSX energy index added 3.59 points to close at 219.90.
As Russia's invasion of Ukraine entered its third week, oil prices had another choppy trading session, but took a breather from the wild swings of the last few days. "I think some of the 'war angst' is coming out of the market. ... People are beginning to ask if there really is too much of a supply problem," opined John Kilduff, a partner at New York's Again Capital, to Reuters. Others disagreed and attributed today's drop to profit-taking. Even with the drop, oil prices are up 15 per cent since Russia launched the invasion.
Here in Canada, producers strove to impress investors with their year-end financials. One that had some success was George Fink's Alberta Cardium-focused Bonterra Energy Corp. (BNE), up 17 cents to $10.87 on 168,700 shares. It swung to a full-year profit of $179-million in 2021 from a loss of $306-million in 2020.
The 2021 figure is high relative to Bonterra's oil and gas sales of $225-million. The company benefited from $203-million in impairment reversals, which were more than enough to offset $18.3-million in hedging losses. Such losses -- essentially wrong-way bets on oil prices, which rose by more than the industry expected in 2021 -- have been relatively common over the last few quarters. As a result, some companies have taken to boasting that they do not use hedges (such as Birchcliff Energy Ltd. (BIR: $7.07)) or have previously used hedges but will be going hedge-free in 2022 (such as MEG Energy Corp. (MEG: $18.57)).
Bonterra is not among them. It disclosed in its financials that it has hedged about one-third of this year's production, with the goal of firming up its cash flow while it hacks away at its debt. Net debt fell to $267-million as of Dec. 31 from $315-million a year earlier. The company's founder and chief executive officer, Mr. Fink, has hinted for the last year that once Bonterra reaches a more comfortable debt level, it will reinstate its dividend (previously suspended in early 2020). Today he reiterated his commitment to "an eventual return of capital to shareholders." He did not say when, merely sticking to vague promises of "forg[ing] an exciting path forward."
Elsewhere in Alberta, Darren Gee's gassy Peyto Exploration & Development Corp. (PEY) edged down 11 cents to $11.14 on 1.43 million shares. Last night, it released financials that were largely as expected, given that it previously provided a year-end operational update in mid-February. CEO Mr. Gee toasted the year as "the 23rd year of successful operations ... [with] a significant turnaround in production, price realizations and profitability."
He was even cheerier during a conference call this morning. "Cash flow is way up, earnings are way up and our margins are much better. ... We are doing a fantastic job," proclaimed Mr. Gee. He sees more fantastic milestones on the way in 2022 and 2023. By the end of this year, he expects Peyto to have "the strongest balance sheet [it has] ever had in its history," ideally paving the way for an investment-grade debt rating in 2023. Mr. Gee hinted that 2023 could also bring another sizable dividend boost. Peyto previously hiked its one-cent quarterly dividend to a five-cent monthly dividend in November, for a current yield of 5.4 per cent.
Taking a break from year-end financials, Doug Bailey and Frank Muller's Razor Energy Corp. (RZE) edged down three cents to $3.61 on 367,000 shares, after finally releasing news that seemed to start leaking days ago. The stock has more than doubled from $1.60 over the past week. Yesterday after the close, Razor revealed that its Swan Hills geothermal project is now fully financed. It hopes to have the project in service by the end of September.
Razor started hyping this "first-of-its-kind" project last year. It is unlike traditional geothermal projects, which drill deep into the ground for hot brine. Instead, Razor touts the benefits of co-production, using standard (relatively shallow) oil and gas wells and recovering the hot fluids that flow to the surface with the hydrocarbons. The hydrocarbons can be sold as usual, and the hot fluids (traditionally ignored as "waste heat") can be harnessed for "green geothermal electricity," or so claims Razor. The proposed plant has a design capacity of 21 megawatts. (As a rule of thumb, one megawatt can power 1,000 homes for one year.)
When Razor began discussing the project last year, the proposed budget was $30-million, and although the company mentioned getting some level of provincial and federal funding, it did not specify how much. Now the company appears to have resolved the lingering financial questions. It cheered yesterday that it has roughly doubled its term loan from the New York-based Arena Investors to $25.7-million (U.S.). At current exchange rates, that is about $35-million -- enough to cover the original price tag, though as it happens, Razor has quietly hiked the budget to $37-million (reflecting delays and inflation). Presumably it is counting on government grants to fill the gap.
Ending back in the world of year-end financials, David Wilson's Kelt Exploration Ltd. (KEL) lost four cents to $5.63 on 1.15 million shares, after releasing a report that was largely as expected (the company having previously issued an operational update last month). A busy fourth quarter drill program took production up past 25,000 barrels a day from about 19,000 in the third quarter. Kelt turned an overall profit for the year of $135-million (including a sizable contribution from a $70-million impairment reversal).
President and CEO Mr. Wilson forecast "continued production growth" in the coming years. With that in mind, he boosted Kelt's production target this year to 31,000 barrels a day (up from the prior guidance of 30,000) on a budget of $250-million (up from $205-million). "The company's financial position continues to remain strong ... giving the company the ability to act on additional opportunities as they arise," he added. Unlike other executives who are all too happy to rattle off lists of potential opportunities -- dangling dividends, share buybacks, bond buybacks, acquisitions and more -- Mr. Wilson left it at that.
© 2022 Canjex Publishing Ltd. All rights reserved.