Energy Summary for Jan. 24, 2022
2022-01-24 20:23 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for March delivery lost $1.83 to $83.31 on the New York Merc, while Brent for March lost $1.62 to $86.27 (all figures in this para U.S.). Western Canadian Select traded at a discount of $13.70 to WTI, unchanged. Natural gas for February added three cents to $4.03. The TSX energy index lost 2.83 points to close at 180.53.
Stephen Loukas's Obsidian Energy Ltd. (OBE) added two cents to $7.42 on 1.3 million shares. It has unveiled this year's guidance for its assets in the Alberta Cardium and Peace River. "We are in a great position for the future," cheered Mr. Loukas, Obsidian's interim president and chief executive officer (still "interim" nearly 2-1/2 years after taking the job in September, 2019). He set a $143-million to $149-million budget with a full-year production target of 29,100 to 30,100 barrels of oil equivalent a day, up sharply from 24,600 barrels a day in 2021. (The jump partly reflects a 2,400-barrel-a-day asset acquisition late last year.)
During a conference call this morning, Mr. Loukas noted that the guidance is somewhat preliminary and there is "a lot of fluidity as to what our future will be." As far as the budget goes, Obsidian is planning to spend roughly two-thirds in the first quarter and then adjust after spring breakup. The other near-term question mark is the outcome of a debt refinancing that Mr. Loukas wants to complete by midyear. (Net debt was $428-million as of Sept. 30.) Once Obsidian is more comfortable with its debt, Mr. Loukas said he sees various potential paths, from "very disciplined" acquisitions to dividends and share buybacks. Obsidian has not paid a dividend since 2015. "I think it is in the cards," said Mr. Loukas when asked whether he would bring it back, "... [but] I'm not going to qualify when."
Elsewhere in Alberta, Alfred Sorensen's gassy Pieridae Energy Ltd. (PEA) lost 3.5 cents to 37 cents on 215,700 shares, after stepping down from the auction block. No, it has not found a buyer. It is simply ending its "strategic alternatives" review, having concluded that "the various alternatives presented were not compelling relative to the company's stand-alone prospects." Pieridae CEO Mr. Sorensen vowed to "pro-actively move the company forward ... [to] enhance shareholder value."
Today's drop in the stock suggested that investors did not quite share Mr. Sorensen's enthusiasm. He defended the company's decision by noting that on Jan. 4, Pieridae restructured its credit agreement, putting itself on somewhat sounder financial footing. The company patted itself on the back at the time for amending a loan agreement with its senior lender and thereby narrowly averting a $50-million loan fee that was due on Jan. 4. The fee became part of an overall $206-million loan due in 2023.
That is still a hefty amount -- Pieridae's market cap is a mere $58-million -- and moreover, Mr. Sorensen offered no update on the project that sparked the review in the first place. That would be Goldboro, a proposed $10-billion (U.S.) liquefied natural gas (LNG) terminal in Nova Scotia that Mr. Sorensen has been trying to get off the ground for a decade. This is his second time trying to build an LNG terminal. He was previously in charge of the Kitimat LNG project in British Columbia. This remains unbuilt, but it was something of a personal success for Mr. Sorensen, who pocketed $30-million when he sold the project for $300-million in 2010. Alas, his attempts to champion an LNG industry on the opposite coast have fallen flat. Pieridae is long, long past its original goal of making a final investment decision (FID) in 2014. It had a firmer FID deadline of June 30, 2021, and when that came and went with no success, Pieridae set off in search of "strategic alternatives."
Now the search is called off, without a satisfying outcome. Mr. Sorensen has been saying for months that he is looking for joint venturers, financiers or other methods to "make an LNG project more compatible with the current environment." All he would say today is that he is still "analyzing options."
South of the border, Ian Dundas's North Dakota Bakken-focused Enerplus Corp. (ERF) edged up four cents to $13.80 on 2.8 million shares. It got a lovely mention this morning from RBC analyst Greg Pardy. He claimed to have been in recent discussions with president and CEO Mr. Dundas, and to have walked away feeling positive about the company's "consistently solid execution, balance sheet strength and bolstered scale in North Dakota post its two acquisitions in 2021."
The two acquisitions that he was referring to were the $465-million (U.S.) takeover of Bruin E&P last March and the $312-million (U.S.) acquisition of Hess's Bakken assets last April. The company now has "comfortable scale" in the Bakken, said Mr. Pardy, but will "opportunistically drive should further assets surface." The analyst also hinted that Enerplus is mulling a dividend increase or even a special dividend. (The company most recently hiked its quarterly dividend to 4.1 cents from 3.8 cents in November, for a current yield of 1.2 per cent.)
Mr. Pardy also nodded his vigorous approval of Enerplus's "capable leadership team and strong balance sheet." He reiterated his "outperform" rating on the stock and hiked his price target to $17 from $14. Attentive investors may recall that RBC and Enerplus have done business together in the past, most recently when RBC co-led a $132-million bought deal of Enerplus shares last February to help it close the Bruin acquisition. This financing saw Enerplus issue 33 million shares at $4. Participants have done well out of this investment; the stock closed today at $13.80.
Back in Canada, two different oil juniors patted themselves on the back for appearing on the latest version of the OTCQX Best 50, an annual ranking of the top-performing stocks traded on the OTCQX Best Market in the previous year. Doug Bartole's InPlay Oil Corp. (IPO) boasted this morning that it came in third place. The stock nonetheless slipped seven cents to $2.79 (still an excellent rise from 23 cents at the start of 2021). Similarly, Don Gray's Petrus Resources Ltd. (PRQ) touted its No. 14 spot out of 50, only to see its stock fall nine cents to $1.19 (again, a considerable rise from 21 cents at the outset of 2021).
There were two other local oil producers on the list that seemed to take the hint and not mention the Best 50 at all. One was Alex Verge's Journey Energy Inc. (JOY), which came in fifth place, did not release any news today and still added eight cents to $3.54. The other was the above-noted Obsidian Energy, which came in 10th place but restricted today's announcement to its guidance. Interim CEO Mr. Loukas did, however, remind investors during today's conference call that Obsidian is seeking to uplist to the NYSE American (as announced Jan. 13). He did not predict the timing of this listing, but said he hopes it will be "somewhat imminent."
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