Energy Summary for Jan. 19, 2022
2022-01-19 21:12 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for February delivery added $1.53 to $86.96 on the New York Merc, while Brent for March added 93 cents to $88.41 (all figures in this para U.S.). Western Canadian Select traded at a discount of $12.53 to WTI, unchanged. Natural gas for February lost 25 cents to $4.03. The TSX energy index lost a fraction to close at 191.62.
Oil sands giant Imperial Oil Corp. (IMO) added 49 cents to $51.52 on 1.62 million shares, after trumpeting its latest planned reductions in greenhouse gas emissions. "We are making significant step changes ... [to] help support Canada's ambition for net zero emissions by 2050," declared chairman and chief executive officer Brad Corson. Imperial already committed to the net-zero-by-2050 cause by co-founding the Oil Sands Pathways to Net Zero Alliance last year. Now it has made a stand-alone vow to cut its emissions intensity by 30 per cent by 2030 (relative to 2016).
The vow comes as producers and infrastructure companies alike jockey for position in the burgeoning industry for carbon capture (viewed as the only practical way to achieve deep emission cuts in industrial sectors). Just last week, Alberta Energy Minister Sonya Savage told Reuters that "CCUS [carbon capture, utilization and storage] is probably my No. 1 priority file at the moment." Federal Natural Resources Jonathan Wilkinson hinted this week that Ottawa will roll out tax credits to support CCUS investments. Internationally, Fatih Birol, the head of the International Energy Agency (IEA), has said he sees CCUS as one of the most critical "decarbonization" technologies in the world, out of around 800 examined by the IEA.
Mr. Birol's comment came last Thursday at a press conference to unveil the IEA's first policy review of Canada since 2015. "Canada's bold policies and support for innovation can underpin a successful energy transition," the report found. Mr. Birol added that the same qualities position Canada as a preferred global oil producer now and in the future. "We will still need oil and gas for years to come," he said. "... I prefer that oil is produced by countries ... like Canada who want to reduce the emissions."
In this context, it is no mystery that producers such as Imperial are keen to buff up their green credentials. The above-noted Oil Sands Pathways to Net Zero Alliance, or just Pathways -- comprising Imperial, Canadian Natural Resources Ltd. (CNQ: $66.26), Suncor Energy Inc. (SU: $35.55), Cenovus Energy Inc. (CVE: $18.58), MEG Energy Corp. (MEG: $14.32) and ConocoPhillips Canada -- is currently working on a CCUS network to connect more than 20 oil sands facilities to a proposed storage hub near Cold Lake. "We've done a lot of work already and we have a project that is ready, pretty much ready to go," Pathways director Al Reid told the Calgary Herald earlier today. He is likely referring to feasibility studies or pre-engineering. Paying for the project is another matter, and Pathways has long made clear that it sees a significant role for government funding. Imperial may hope that its new emission-busting targets will help chivvy those talks along.
Outside the oil sands, the Riddell family's Rubellite Energy Inc. (RBY) added 25 cents to $2.85 on 451,200 shares, pleasing investors with an update from the Clearwater oil play. The company cheered "strong preliminary performance" from new wells. Production in the fourth quarter averaged 647 barrels of oil a day, roughly what management said it was expecting, and has since risen to over 1,100 barrels a day. The company plans to continue its "robust organic growth plan" to produce a full-year average of at least 2,000 barrels a day in 2022.
The fourth quarter of 2021 was Rubellite's first full quarter of operations, following its spinout in early September from another Riddell promotion, Perpetual Energy Inc. (PMT: $0.69). Perpetual took advantage of a Clearwater craze that started in late 2020 and is still going strong. As a result of the spinout, Perpetual's balance sheet became significantly healthier (without $59-million in debt instead of $110-million), and assets that had been long ignored at Perpetual took centre stage at Rubellite.
The assets are still largely run by the same people. At the top is Susan Riddell Rose, the president and CEO of both Perpetual and Rubellite (which in fact have exactly the same senior management, just different boards of directors). She happens to be the sister of Jim Riddell, who runs Paramount Resources Ltd. (POU: $26.10), and the wife of Mike Rose, who leads Tourmaline Oil Corp. (TOU: $47.65).
Further afield, Gabriel de Alba's Colombian oil producer, Frontera Energy Corp. (FEC), lost eight cents to $9.35 on 111,600 shares. Today's update was not from Colombia but from exploration-stage assets in Ecuador. The company's Jandaya-1 exploration well on the Perico block, a joint venture with GeoPark Ltd. (U.GPRK: $14.10), has found 78 feet of "potential hydrocarbon-bearing reservoir" over three zones. One of the zones flowed 925 barrels of oil equivalent a day over a 24-hour initial test period.
The test result is preliminary, so much so that GeoPark, which is generally much chattier than its various joint venturers in South America, did not even mention it in the press release that it put out this morning. GeoPark merely noted that "testing activities [are] currently under way" (referring to long-term tests) and that another exploration well on the block will be drilled in February. Frontera's press release, however, made much of the fact that this was its (and GeoPark's) very first well in Ecuador. "We're optimistic that the Jandaya-1 well represents the first of many near-field opportunities," cheered CEO Orlando Cabrales. Investors yawned. Proper test results will take at least six months.
Getting back to GeoPark's release, the company also touched briefly on its Colombian joint venture with Parex Resources Ltd. (PXT), down 40 cents to $25.09 on 1.03 million shares. GeoPark noted that their jointly owned LLA-34 block surpassed 60,000 gross barrels of oil a day at the end of 2021. Parex's share of this production would be 33,000 barrels a day, a nice little bump from the average of 30,700 in the third quarter. Although Parex's stock showed little reaction to GeoPark's update, the stock has already climbed past $25 from about $20 over the past month, so a slowdown is no surprise.
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