Thanks TD12 took 2 more pints out of petty cash tough week, just watching the world unfold-Enjoy!
Energy Summary for Jan. 28, 2022
2022-01-28 19:55 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for March delivery added 21 cents to $86.82 on the New York Merc, while Brent for March added 69 cents to $90.03, closing above $90 for the first time since 2014 (all figures in this para U.S.). Western Canadian Select traded at a discount of $12.65 to WTI, unchanged. Natural gas for March added 36 cents to $4.64. The TSX energy index added 1.11 points to close at 191.26.
The first shoots of the energy sector's year-end reporting season are sprouting on Wall Street. Chevron kicked things off this morning, reporting a fourth quarter profit of $5.1-billion (U.S.), or $2.65 (U.S.) a share. This was up sharply from its loss of 33 U.S. cents a share in the same period last year, but fell short of analysts' calls for a profit of $3.12 (U.S.) a share. "A weak performance across the board," criticized the analysts at Jefferies.
While this was a rocky start in the context of oil prices that are hovering at seven-year highs, the season is only beginning. Exxon will unveil its financials next Tuesday and Shell next Thursday. Not long after that, the Canadians will join the parade, starting with PrairieSky Holdings Corp. (PSK: $15.93) on Feb. 7.
Within Canada, oil sands producer Cenovus Energy Corp. (CVE) edged down five cents to $18.41 on 13.6 million shares. It will release its year-end financials on Feb. 8. One analyst seems to be trying to stir up some excitement ahead of the financials. In a research note this morning, RBC's Greg Pardy said he recently met with Cenovus's chief operating officer, Jon McKenzie, and came away impressed with the company's "operating momentum, capital discipline, rapid balance sheet deleveraging and rising shareholder returns on the horizon."
In particular, Mr. Pardy noted that Cenovus's management "affirmed that it has plenty of room to boost its [quarterly] dividend," which it already doubled to 3.5 cents from 1.75 cents in November. The yield is a relatively uncompetitive 0.8 per cent. Mr. Pardy seems to be expecting a larger increase once the company gets its net debt below $8-billion (which Cenovus has said to expect by midyear). As well, said Mr. Pardy, management is "exploring alternative structures for shareholder returns, including special/variable dividends." He did not hazard a guess on amounts or timing.
His crystal ball was more co-operative when it came to Cenovus's operations. Noting that Cenovus has announced $1.9-billion in asset sales over the last year, Mr. Pardy predicted that the company may suddenly shift and arrange acquisitions. "From where we sit, one potential path for Cenovus to pursue would be to acquire BP's 50-per-cent operated interest in its 160,000-[gross-barrel-a-day] Toledo, Ohio, refinery, along with BP's 50-per-cent non-operated interest in the Sunrise oil sands project which Cenovus operates," he said. There may also be other "fruitful opportunities" to consider.
It is safe to assume that Mr. Pardy's employer, RBC, would be delighted to serve as a financial adviser or agent in connection with any asset deals or related financings. RBC has underwritten numerous past financings for Cenovus and was also an adviser in its takeover last year of Husky Energy. In today's research note, Mr. Pardy kept things nice and friendly by reiterating his "outperform" rating and hiking his price target to $24 from $20 (relative to today's close of $18.41).
Meanwhile, the management of another company presented its message more directly. Alfred Sorensen of Pieridae Energy Ltd. (PEA), up 2.5 cents to 37.5 cents on 121,200 shares, headed to BNN this morning to talk about a dream he is still keeping afloat -- perhaps soon to be literally afloat. That would be the Goldboro LNG (liquefied natural gas) proposal in Nova Scotia. As discussed in Monday's Energy Summary, Mr. Sorensen has been trying to build Goldboro for the last decade. In July of last year, having missed the deadline for Goldboro's final investment decision, he launched a "strategic alternatives" review of the project and of Pieridae itself (code for putting them up for sale). He called off the review on Monday.
"We were trying to find a way to keep our dreams alive, I suppose," Mr. Sorensen explained to BNN this morning. Now he thinks he has found a potential way. It will involve drastically reducing Goldboro's capacity and moving it offshore. Floating LNG projects, or FLNG projects, are generally smaller and faster to build than their onshore counterparts (though they face myriad technical challenges and are hard to scale -- not something Mr. Sorensen drew attention to in today's interview). As originally envisioned, the onshore Goldboro would have cost $10-billion (U.S.) and handled 10 metric tonnes a year. The FLNG version would handle one-fifth to one-quarter of that capacity, said Mr. Sorensen, and would cost "probably closer to $2-billion (U.S.), all in."
That is still a daunting price tag for Pieridae and its market cap of $59-million. Yet Mr. Sorensen saw reason for optimism. "There's no doubt that the economics are significantly improved," he said, pointing to rocketing gas prices in Europe (where Goldboro's main customers would be). Another advantage of a smaller Goldboro is feedstock; Pieridae could supply half of the project using its own gas assets in Alberta, meaning it would not need to find as many other suppliers to close the gap. There is still the question of getting the gas from Alberta to Goldboro. Mr. Sorensen acknowledged that pipelines are a perennial headache in Canada, but said Pieridae is "speaking with different parties about how we may be able to do that." He did not estimate the timing of these discussions -- or indeed anything related to a floating Goldboro - but investors seemed mildly more hopeful.
Ending on another hopeful note, Dr. Art Halleran's Trillion Energy International Inc. (TCF), up half a cent to 17.5 cents on 96,200 shares, claims to be getting ever closer to a financing for its core gas field in Turkey. It is hoping that it will soon spud the first wells at this field in more than a decade.
The field, known simply as SASB, is a past producer that peaked at 30 million cubic feet a day in 2011, but since then has dwindled to nearly nothing. A reserve report in December found that it could contain over 20 billion cubic feet in net proved and probable reserves. December was also the month that Trillion was supposed to achieve production at the field. Dr. Halleran, the long-time CEO (and a long-ago founder of Colombian gas producer Canacol Energy Ltd. (CNE: $3.24)), made this vow shortly after signing a letter of intent in April, 2021, for $17.5-million (U.S.) loan from a U.S. investment fund. The financing "will be done for sure" by October and "first production will be December," declared Dr. Halleran at a conference last July. None of that happened. The loan is incomplete, presumed dead. Trillion is now trying to arrange a financing with a Canadian institution instead.
With that in mind, Trillion announced this week that it has repatriated to Canada (British Columbia) from the United States (Delaware). The redomiciling will be "pivotal to securing a brokered financing with a Canadian investment bank," declared Dr. Halleran. He vowed to do so "expeditiously." This is nothing shareholders have not heard before, of course, but with any luck, his predictions will be correct this time and the company will get the drill bit turning in mid-2022.
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