Energy Summary for March 8, 2022
2022-03-08 20:55 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for April delivery added $4.30 to $123.70 on the New York Merc, while Brent for May added $4.77 to $127.98, getting ever closer to their joint all-time high of $147 set in July, 2008 (all figures in this para U.S.). Western Canadian Select traded at a discount of $12.19 to WTI, down from a discount of $12.08. Natural gas for April lost 19 cents to $4.83. The TSX energy index added a fraction to close at 224.05.
Oil prices set a fresh 14-year high as the U.S. government moved against Russian oil in retaliation for Russia's invasion of Ukraine. "We're banning all imports of Russian oil and gas energy ... [which] will deal another powerful blow to [Russian President Vladimir] Putin's war machine," U.S. President Joe Biden told reporters today at the White House.
He acknowledged that it may also be a blow to U.S. consumers' wallets. The United States imported over 20 million barrels of Russian crude and refined products each month in 2021, representing about 8 per cent of U.S. liquid fuel imports, according to the U.S. Energy Information Administration (EIA). Mr. Biden predicted that fuel prices would continue to rise as a result of "Putin's war," but vowed to take steps to minimize the economic damage for Americans.
The top oil exporter to the United States is its northern neighbour, Canada. Canadian energy exports to the U.S. are already near record levels. Industry executives say Canada has the ability to increase exports, but fast increases will not be large, and large increases will not be fast. The entire industry could perhaps add "a few hundred thousand barrels [a day]" in 2022, said Mark Little, chief executive officer of Suncor Energy Inc. (SU: $41.51), speaking today at the CERAWeek energy conference in Houston. Hal Kvisle, chairman of ARC Resources Ltd. (ARX: $15.60) and former CEO of TC Energy Corp. (TRP: $72.03), told BNN today that Canada "could add three or four million barrels a day" (nearly doubling production), but it would take "more than five years lead time." He clarified that it would take five years just to get to the first million and then longer for the rest.
Mr. Kvisle went on to add that the oil patch would have been better prepared to crank up production now if governments had been more supportive in the past. "It's the tragedy of North American energy policy over the last 10 or 15 years," he lamented, pointing to everything from pipelines to oil sands mines that have been "badly impeded by what I consider misguided energy policy." When asked whether he thinks the war in Europe will lead to better policy, he expressed skepticism, noting that "the 'Off Oil' forces are pretty strong and pretty determined." He is at best hopeful that the war will be "a bit of an eye-opener" and "maybe that'll lead to more thoughtful energy policy going forward."
Within the sector, "thoughtful" is perhaps not the word to describe some of the meteoric rises in some lucky juniors' share prices. Notably, Doug Bailey and Frank Muller's Alberta-focused Razor Energy Corp. (RZE) shot up 73 cents to $3.74 on 2.04 million shares today, on top of the 90 cents it added yesterday and the 50 cents it added on Friday. It has had no news to explain the jump. It has, however, developed something of a fan club in some corners of the Internet, eagerly awaiting its year-end financials later this month. Razor was most recently discussed in the Energy Summary for Feb. 28, the day the company released its year-end reserve report. The stock was then trading at $1.43.
Further afield, Randy Neely's Egypt- and Alberta-focused TransGlobe Energy Corp.(TGL) lost 26 cents to $4.99 on 197,500 shares, giving back most of the 16 cents it added yesterday after releasing its own year-end reserve report. Total proved and probable reserves rose to 46.0 million barrels as of Dec. 31 from 38.8 million barrels a year earlier. "Our team has done a tremendous job," declared president and CEO Mr. Neely. He then pointed once again at a carrot he has been dangling for about a year now, namely that he is looking into reviving TransGlobe's dividend (which was suspended in early 2020). This time he said he "intend to address our distribution policy in the coming weeks."
Even with today's drop, TransGlobe's stock has added about $1 in the last month alone. One of its most faithful cheerleaders, Canaccord Genuity analyst Charlie Sharp, issued another boosterish research note in the wake of yesterday's year-end reserve report, which he deemed "excellent." He particularly applauded the company for its "game-changing licence amendments in Egypt." (TransGlobe revised and extended its contract over its core assets in the Eastern Desert in late 2021. Thanks to the longer time frame, it was able to book millions of barrels of reserve additions under the "technical revisions" category.) Mr. Sharp has a "buy" rating on the stock and a price target of $6.30. A disclaimer at the bottom of his note indicates that his employer, Canaccord, is "market maker or liquidity provider" for TransGlobe and receives compensation for investment banking services.
Back in Canada, Tony Berthelet's Prairie Provident Resources Inc. (PPR) added five cents to 27 cents on 3.53 million shares. It has hired Jason Dranchuk as its vice-president of finance and chief financial officer. The company marvelled at his two decades of experience in senior finance roles, plying his "specialist skills in a variety of publicly traded organizations." While it did not name any of the organizations, this is likely the same Mr. Dranchuk who was previously the CFO and vice-president of finance at Chinook Energy, which Tourmaline Oil Corp. (TOU: $52.02) bought for 6.75 cents a share in April, 2020. (This was not necessarily a happy ending, considering that Chinook traded at a high of $2.85 in 2014.) Before Chinook, Mr. Dranchuk was CFO and vice-president of finance at Zargon Oil. (Zargon ultimately had an even worse ending, going bankrupt in 2020.)
Mr. Dranchuk will replace Mimi Lai, who announced last month that she would be leaving to "pursue new opportunities." She had been with Prairie Provident since 2015. In 2021, she served briefly as interim CEO, following the resignation of Tony van Winkoop. The above-mentioned Mr. Berthelet came in as permanent CEO in mid-2021. His past experience includes an 18-month stint as CEO of Strategic Oil, a Northern Alberta junior that went under in early 2020 (though Mr. Berthelet jumped ship just in time in late 2019, joining the Colombia-focused Gran Tierra Energy Inc. (GTE: $2.33) as chief operating officer).
Both Mr. Berthelet and Mr. Dranchuk have their work cut out for them at their new promotion, Prairie Provident. The company recently released 2022 guidance that will see it aim for production of 4,350 to 4,600 barrels a day on a budget of $18-million. It is also marketing non-core assets, likely with an eye on reducing its debt, which was a lofty $121-million as of Sept. 30. The current market cap is $34-million.
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