Energy Summary for Oct. 26, 2021
2021-10-26 20:14 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for December delivery added 89 cents to $84.65 on the New York Merc, while Brent for December added 41 cents to $86.40 (all figures in this para U.S.). Western Canadian Select traded at a discount of $15.75 to WTI, down from a discount of $15.70. Natural gas for November lost two cents to $5.88. The TSX energy index lost a fraction to close at 159.96.
Barely a week after Calgary elected a mayor who immediately told the city to "move past" oil and gas production, the oil patch got another wonderful new friend in politics, this time at the federal level. Prime Minister Justin Trudeau has appointed Steven Guilbeault as the new Minister of Environment and Climate Change. Mr. Guilbeault is a former director and campaign manager for Greenpeace and a founding member of the Quebec green group Equiterre. Now he will oversee a ministry charged in part with approving major projects such as pipelines, the very things he has spent decades agitating against, the above green groups being known to describe them as (and these are just some of the more printable terms) "dirty snakes" carrying "the dirtiest oil on the planet." Rejoice, pipeline operators and shippers, your moment is now.
Naturally, the appointment of Mr. Guilbeault -- who is perhaps most famous for illegally scaling the CN Tower in 2001 to unfurl a banner that called Canada a "Climate Killer" -- was not particularly well received in Alberta. Premier Jason Kenney immediately griped that it sends a "very problematic" signal to his province. "I certainly hope that the new minister ... [will work] constructively on practical solutions that don't end up killing hundreds of jobs. But his own personal background and track record on these issues suggests somebody who is more of an absolutist than a pragmatist," Mr. Kenney told reporters today in Edmonton. Mr. Trudeau defended the appointment in Ottawa, saying the entire federal government remains "committed to working with Albertans [and] to working with people in the energy sector across the country."
Despite the political blow, oil bulls remained in an optimistic mood, buoyed by a new forecast from the world's largest money manager. Larry Fink, chairman and chief executive officer of BlackRock Inc., told a Saudi investment conference today that he sees a "high probability" of oil prices hitting $100 (U.S.) a barrel. "Short-term policy related to environmentalism, in terms of restricting supply of hydrocarbons, has created energy inflation," he told the conference in Riyadh (quoted in Bloomberg). He added, "We are going to be living with that for some time." Mr. Fink did not say when he thinks prices might return to triple digits for the first time since 2014. Most financial institutions see prices staying higher for longer, amid a fitful recovery in global demand. The concern aired by Mr. Fink (and increasingly others) is that concerns about climate change will hinder investment in new supply.
Here in Canada, Grant Fagerheim's Whitecap Resources Inc. (WCP) lost 12 cents to $7.84 on 6.19 million shares. It has closed a $188-million royalty sale to Topaz Energy Corp. (TPZ), up five cents to $17.84 on 950,800 shares. The sale covers a 5-per-cent royalty interest on Whitecap's 65-per-cent interest in the Weyburn oil project in Saskatchewan. The project is unusual in that its owners (led by Whitecap) pump carbon dioxide into the field to help coax oil out, effectively turning it into a dual oil project and carbon capture facility. Whitecap likes to boast that Weyburn more than offsets the emissions from all of its other assets, meaning that the company is not only carbon neutral, but "carbon negative."
Now Whitecap can boast of $188-million in fresh cash lining its pockets. It has not said specifically how it will use this money, although on Oct. 14 -- about a week after announcing the Topaz deal -- Whitecap said it would increase its fourth quarter budget by $65-million (to about $430-million from about $365-million). The bigger news in that announcement was an increase in Whitecap's monthly dividend to 2.25 cents from 1.625 cents, for a yield of 3.4 per cent. Whitecap claimed that it could cover both the higher dividend and its higher 2022 budget (about $420-million) even if oil prices halved to $40 (U.S.). Investors seemed pleased. The stock, which was worth about $5 two months ago, is now approaching $8 for the first time since 2018. (It still has quite a bit further to climb to reach its 2014 high of nearly $19.)
Further afield, Dr. Suresh Narine's Guyana-focused CGX Energy Inc. (OYL) added two cents to $1.38 on 535,600 shares. It has hired a new vice-president of development, Anadarko executive Todd Durkee, a former executive of Kerr-McGee and Anadarko Petroleum. CGX swooned over his "unparalleled experience and expertise" in offshore drilling. The appointment comes as CGX and its joint venturer (and majority shareholder), Frontera Energy Corp. (FEC: $8.92), are conducting an offshore drill program at the Corentyne block in the Guyana-Suriname basin. The two of them spudded their first well there in August and expect to reach total depth in December.
Midway through a drill program may seem an odd time to hire a new vice-president of development, but Mr. Durkee already knows the ropes at CGX. The company mentioned his name in an August roundup of its "highly qualified and experienced team for the drilling campaign." At the time, he was listed as a senior drilling adviser. He got second billing on the list -- quite a compliment -- coming in ahead of executives such as Frontera's drilling director (Juan Pinzon) and CGX's vice-president of operations (Michael Stockinger, who, like Mr. Durkee, is a former Kerr-McKee/ man). First billing went to Kevin Lacy, who is CGX's drilling director and a former executive at Chevron (which clearly trumps Anadarko).
In any case, now CGX has brought in Mr. Durkee full-time. In connection with this appointment, and with an earlier appointment to CGX's board of directors in June (namely Veronique Giry; she is a Frontera director and the chief operating officer of Calgary's ISH Energy), the company has granted options to buy a total of 1.8 million shares. The options expire in five years and are exercisable at $1.36. The stock closed today at $1.38.
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