Stockwatch Energy today
Energy Summary for Jan. 6, 2021
2021-01-06 21:03 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for February delivery added 59 cents to $50.52 on the New York Merc, closing above $50 for the first time in 11 months, while Brent for March added 70 cents to $54.30 (all figures in this para U.S.). Western Canadian Select traded at a discount of $15.08 to WTI, down from a discount of $14.99. Natural gas for February added one cent to $2.72. The TSX energy index added 1.08 points to close at 99.87.
"Energy names hit their highest rankings since 2014." That was one of the takeaways of the analysts at Scotia Capital this morning as they released their top 30 Canadian stock picks for 2021. Five oil and gas producers made the list (up from just two last year), reflecting a changing mix of what the analysts referred to as value, growth, momentum and quality. This year's key theme is value, which has been "broadening its strength" and "has rarely scored as high [against] other factors," marvelled the analysts. They added three energy stocks to their list, namely Whitecap Resources Inc. (WCP: $5.24), Parex Resources Inc. (PXT: $19.14) and Crescent Point Energy Corp. (CPG: $3.39). Rounding out the top five were Seven Generations Energy Ltd. (VII: $6.84) and Tourmaline Oil Corp. (TOU: $18.30).
In Alberta, Rick McHardy's Spartan Delta Corp. (SDE) shot up 44 cents to $3.60 on 1.09 million shares, after hiking its 2021 guidance and announcing three "strategic acquisitions in its target development areas." This is the first investors have heard of any acquisitions since June, when Spartan closed its $87-million purchase of the Alberta gas assets of the insolvent Bellatrix Exploration. That was also the first acquisition since Spartan was reorganized out of what had been a quiet little company called Return Energy. The new Spartan name continued a long-running theme for Mr. McHardy and his people, who have previously sold three Spartan-branded companies since 2011 for an average return of about 370 per cent. The Bellatrix assets gave Spartan a production base of over 25,000 barrels of oil equivalent a day in the Spirit River and Cardium plays. Even after this deal, Spartan said it would "continue acquiring undervalued diversified assets" in the Alberta Deep basin. Now it has kept its word, doing three deals to scoop up about $7-million worth of assets in the Montney.
The new assets are producing around 105 barrels a day. While that on its own would generally not warrant a guidance boost, Spartan said its other Alberta assets are doing better than forecast, reflecting the "continued success of the company's production optimization activities." It has thus boosted its 2021 production guidance to a range of 29,000 to 31,000 barrels a day from a range of 27,000 to 29,000. As well, it lowered its operating cost guidance, nearly doubled its forecast free cash flow and predicted that it will end the year with $34.5-million in surplus cash, up from its prior estimate of $8.5-million. Investors seemed pleased, and likely confident that Spartan has even more acquisitions on the way. The above-noted comment about wanting to "continue acquiring undervalued diversified assets" appeared again, nearly word for word, at the bottom of today's press release.
Further afield, Craig Steinke and David Elliott's Reconnaissance Energy Africa Ltd. (RECO) stayed unchanged at $2.19 on 705,300 shares, holding on to the 14 cents it added yesterday after trying to soothe some ruffled feathers. The company came under criticism recently from the UNESCO World Heritage Centre over its licensed petroleum exploration area, which covers 8.75 million acres of the unexplored Kavango basin of Namibia and Botswana, including the Tsodilo Hills UNESCO World Heritage site. UNESCO said in a statement last month that it is "following with attention and concern" Reconnaissance's exploration plans in this area. Reconnaissance seemed to directly address this attention and concern yesterday, announcing that it has agreed with the government of Botswana to reduce the 2.45-million-acre chunk of land to 2.21 million acres, directly excluding the Tsodilo Hills. Reconnaissance added that it "never had plans for operations" there anyway.
Reconnaissance is no doubt hopeful that this will keep some of the bad press at bay. Meanwhile, investors are hoping for news on the actual start of the drill program. Reconnaissance was aiming to start it last October, but had to keep pushing back the drill date amid COVID-19 and travel delays. Its most recent drilling update came two weeks ago and said the first well of a three-well program would be spudded in "the first part of January" -- so, any day now.
Back in Canada, another company with near-term drilling intentions -- although these were probably not the cause of today's excitement -- is little Hillcrest Petroleum Ltd. (HRH), up one cent to 7.5 cents on 30.4 million shares. It had no news to explain the heavy volume. In fact, it has not released news since November. It did, however, publish a new presentation on its website in mid-December, where it noted that it has received the required permit for a new development well, with plans to start drilling in January. This well will be drilled at its West Hazel oil field in Saskatchewan. The field currently has three wells on production, with total output 120 barrels a day, but Hillcrest is hoping to boost that number past 300 or 400 once it drills two more developments wells. The first is to be drilled in January and the second in the summer.
Such drilling is unlikely to have roused the level of interest shown in the stock today. The explanation for that likely lies with Extreme Vehicle Battery Technologies Corp. (ACDC). EV Battery is a battery technology company that today added 3.5 cents to eight cents on a busy 39 million shares, after announcing the imminent launch of IoniX Pro Home Smart Wall (its answer to Tesla's Powerwall, a home battery designed to store electricity from solar panels or the grid). None of this would have anything to do with a tiny oil producer in Saskatchewan, if not for the fact that Hillcrest and EV Battery signed a letter of intent a few months ago to form a joint venture. This joint venture will develop "robust, leading-edge clean energy propositions," according to Hillcrest, which boasted of being able to "deliver exceptional shareholder value by transitioning from fossil fuel production to clean energy technology." If only someone could build a battery that runs on hype and buzzwords. In any case, it seems today that EV Battery's investors were excited by the product launch and Hillcrest was simply along for the ride. The two companies do not appear to have finalized their joint venture yet, but are hoping to do so soon.
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