Dakota Access pipeline 3550 barrels oil a day for EnerplusAccording to this Enerplus was shipping 3550 barrels of oil a day on the Dakota Access pipeline.
If you ask me Enerplus has been treated unfair in the shareprice department.
Energy Summary for July 6, 2020
2020-07-06 20:27 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for August delivery added 31 cents to $40.63 on the New York Merc, while Brent for September added 30 cents to $43.10 (all figures in this para U.S.). Western Canadian Select traded at a discount of $8.88 to WTI, unchanged. Natural gas for August added eight cents to $1.83. The TSX energy index lost a fraction to close at 77.25.
The oil patch had a weekend of ups and downs. This should have been the first weekend of the 2020 Calgary Stampede, kicking off Friday with a parade featuring floats, marching bands and cowboys on horseback waving to thousands of parade-goers. The COVID-19 pandemic put an end to the parade -- and the rodeo, the exhibition and the various other plans of the 100,000 daily visitors to this annual event -- and forced the cancellation of the Stampede for the first time in its 100-year history. Calgarians did their best to stay in the spirit of things, holding fireworks on Friday night, daily drive-through pancake breakfasts and other socially distanced events to fill the gap. "You can't cancel Stampede spirit," Dana Peers, president and chairman of the Calgary Stampede Board, bravely told The Canadian Press. It was still the quietest July opening weekend in Stampede Park in a century.
Alberta Premier Jason Kenney tried to give the oil patch something to cheer about, announcing on Friday that construction has officially begun on the Alberta segment of TC Energy Corp.'s (TRP: $57.48) Keystone XL pipeline. "After many years of stringent environmental review ... and a dogged determination to never say die, this project -- essential to our economic recovery -- is well under way," said Mr. Kenney in a statement. He marked the occasion with a press conference at a TC Energy yard site in Oyen, Alta.
TC Energy decided to move ahead with Keystone XL in March, following a financial commitment from the Alberta government, but the Alberta-to-Texas pipeline still faces steep opposition south of the border -- not least from U.S. presidential hopeful Joe Biden. Mr. Biden said in May that if elected he would immediately rip up the current presidential permits for Keystone XL. During the press conference, Mr. Kenney acknowledged that starting construction now is a "conscious risk," but said he is confident that Mr. Biden can be brought around. He emphasized the importance of the pipeline to North American energy independence and added that a cancellation would be a "terrible blow" to the Canadian-U.S. trading relationship.
Some companies have just suffered a pipeline blow of their own. North Dakota Bakken producer Enerplus Corp. (ERF) plunged 47 cents to $3.45 on 8.69 million shares -- its highest volume since March -- while in the same region, the smaller PetroShale Inc. (PSH) lost 2.5 cents to 14 cents on a relatively heavy 297,300 shares. Neither released any news to explain the drop, but investors were likely dismayed by a U.S. court ruling today that ordered the shutdown of the controversial Dakota Access pipeline. This 570,000-barrel-a-day pipeline moves oil from the Bakken to the U.S. Midwest and the Gulf Coast. It is considered a vital artery for oil producers, which have credited it for significantly improving transportation capacity (and thus oil prices) in a region that used to be heavily reliant on rail.
The numbers may appear relatively small -- for example, Enerplus's firm capacity on Dakota Access is just 3,550 barrels of crude a day, relative to its first quarter output of 98,200 barrels of oil equivalent a day -- but the effect on costs can be significant. Longer-term investors may recall that when the pipeline was completed in 2017 (following months of protests that sometimes turned violent), Enerplus's president and chief executive officer, Ian Dundas, was positively buoyant about lower shipping costs. "It's going to be a pretty powerful advantage that we haven't had for the past six or seven years," he told the Financial Post. Moving crude by rail costs about $10 (U.S.) to $14 (U.S.) a barrel, compared with about $5 (U.S.) to $6 (U.S.) on Dakota Access. "These are pretty dramatic moves," opined Mr. Dundas, "when you talk about the lower margins that everyone is struggling with in a $50 (U.S.) oil world."
What was true in a $50 (U.S.) oil world is even more so in a $40 (U.S.) one. That has not stopped a full shutdown order for Dakota Access. Interestingly, this possibility was alive even when Mr. Dundas was giving his above Financial Post interview in 2017. A federal judge at the time was questioning the validity of the pipeline's approval and wanted the U.S. Army Corps to do a more comprehensive environmental review. Even so, the perception was that the project would not be shut down. "I think that would be very, very unlikely. I can't think of a situation [where a pipeline] has come on-line, started flowing and then had to cease operations," said AltaCorp analyst Patrick O'Rourke in the same Financial Post article.
Three years later and that is exactly what has happened. The same federal judge as above has shut down the pipeline for additional environmental review, ruling that the "seriousness of the Corps' deficiencies outweighs the negative effects of halting the oil flow for the 13 months" that the review is estimated to take. The pipeline's developer, Energy Transfer, criticized the "ill-thought-out" ruling from a judge who "exceeded his authority." It said it will file a motion to stay the decision as well as seek an expedited appeal.
Another U.S.-focused producer, Ovintiv Inc. (OVV), edged down 16 cents to $13.64 on 2.36 million shares. Having made headlines a couple of weeks ago by laying off a full quarter of its work force -- dropping down to 2,100 employees and contractors -- the company now looks to be seeking some positive attention, with mixed results. First came an article published by The Canadian Press and carried in The Globe and Mail over the weekend, highlighting Ovintiv's increasing presence in U.S. equity indexes. This was one of the main reasons for the company's decision to move its headquarters to Denver from Calgary. Before the move, shares of Ovintiv (then EnCana) had roughly 7-per-cent passive ownership, largely thanks to the S&P/TSX Composite, the S&P/TSX 60 and the MSCI Global Canada indexes. Those indexes deleted Ovintiv once it stopped being a Canadian company. In recent weeks, however, Ovintiv has started receiving invitations to U.S. indexes, including the MSCI's U.S. index and the FTSE Russell 2000. Between those two alone, Ovintiv's passive ownership is now at 11 per cent, boasted spokesman Cindy Hassler. She added that further hoped-for additions could boost that figure to 20 per cent.
What Ms. Hassler did not mention, but The Canadian Press reporter saw fit to mention for her, is that the U.S. indexes in which Ovintiv now finds itself were not its original targets. It was expecting, for example, to land an invitation to the S&P MidCap 400. At this point, neither that index nor even the S&P SmallCap 600 has shown interest. The big prize, of course, would be the vaunted S&P 500. The Canadian Press reporter noted that Ovintiv would need to quadruple in value before meeting this index's minimum market cap requirements. (It would have met those requirements as recently as 2018 -- except for the fact that it was still Canadian then -- but the stock has since tumbled toward all-time lows, particularly after the unpopular takeover of Newfield Exploration in early 2019.)
Ovintiv sought friendlier faces among analysts. Its management talked to Scotia Capital analyst Jason Bouvier, who provided his thoughts in a research note this morning. Mr. Bouvier described the chat as "positive," noting that most of the company's shut-in production volumes were back on-line as of June. He thus hiked his 2020 production forecast to 533,000 barrels of oil equivalent a day from 520,000. Oil and condensate are contributing about 200,000 barrels a day (with the rest being other liquids and gas), and Mr. Bouvier noted approvingly that Ovintiv has hedged 94 per cent of its oil and condensate production through 2020, bolstering its cash flow. It will use any extra cash to reduce its net debt of over $3-billion (U.S.). Despite the many kind things that Mr. Bouvier had to say about Ovintiv, he nonetheless concluded that its debt remains relatively high and its free cash flow yield is relatively low. He kept his price target at just $4 (U.S.), well below today's close of $10.06 (U.S.).
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