Stockwatch Energy today
Energy Summary for Jan. 7, 2021
2021-01-07 20:34 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for February delivery added 31 cents to $50.94 on the New York Merc, while Brent for March added 16 cents to $54.46 (all figures in this para U.S.). Western Canadian Select traded at a discount of $15.11 to WTI, down from a discount of $15.08. Natural gas for February lost five cents to $2.57. The TSX energy index added 1.52 points to close at 101.39, finally re-emerging above 100 after going below that threshold 10 months ago for the first time ever.
Oil markets shrugged off yesterday's violent storming of the U.S. Capitol, focusing instead on bullish U.S. petroleum data (such as a fresh drawdown of weekly crude inventories), but the surreal and deadly events of what some are now calling "Insurrection Day" were not so easily ignored by oil executives. Even Canadian oil companies, which rarely weigh in on any political matters, let alone foreign ones, seemed compelled to comment. "I was shocked and saddened to see the violent events that unfolded at the United States Capitol and across the U.S. yesterday," the president and chief executive officer of Suncor Energy Inc. (SU: $23.78), Mark Little, wrote in a statement that he posted on Suncor's Twitter account. Al Monaco, president and CEO of Enbridge Inc. (ENB: $42.75), had even stronger words, stating, "The violence and rioting we witnessed at the U.S. Capitol are unacceptable, repugnant and a threat to the democratic principles that all of us value." He wished incoming President Joe Biden well and vowed to work with him to "strengthen confidence in U.S. institutions that serve the interests of the people."
One company has long had one of its key projects inextricably bound up in U.S. politics. That would be TC Energy Corp. (TRP: $54.34), which is moving ahead with building its Keystone XL pipeline from Alberta to the Gulf Coast, despite the above-noted Mr. Biden's vow to rip up the line's permits. TC Energy has launched an open season to invite additional bids on capacity. "We're very confident in our project and we're continuing to proceed with our planned activities to be in service in 2023," TC Energy spokesman Terry Cunha told The Canadian Press. Separately, Alberta Premier Jason Kenney -- whose government agreed last year to invest $1.5-billion in Keystone XL and provide a further $6-billion in loan guarantees -- told the Calgary Herald that he still believes the line will get built. He added that Alberta has legal options it can pursue if Mr. Biden retroactively strips the line of its permits.
Elsewhere in Alberta, Andy Mah's Montney gas producer, Advantage Oil & Gas Ltd. (AAV), edged up five cents to $1.79 on 2.85 million shares, after talking up its "exceptional execution" in 2020. It pegged its full-year production at 44,900 barrels of oil equivalent a day. This was mostly flat with the 2019 level of 44,300 barrels a day. Within those figures, however, Advantage increased its proportion of high-margin liquids to 4,400 barrels a day from just 2,700. This partly reflects good results at the liquids-rich Progress asset, where Advantage said its output "continues to exceed expectations." It did not go into specifics in the press release, but in a new presentation on its website, Advantage marvelled that one recent well at Progress produced over 1,200 barrels a day, including roughly 450 barrels a day of liquids, in its first seven months. Advantage spent the rest of the presentation rehashing its plans for 2021. It is aiming to spend $125-million to $150-million -- noticeably less than the $147-million to $162-million budget for 2020 -- while boosting production to a range of 47,000 to 49,000 barrels a day.
Further afield, the Argentina-focused Crown Point Energy Inc. (CWV) shot up 10.5 cents to 25.5 cents on 122,600 shares, after announcing a merger with fellow Argentine oil junior Centaurus Energy Inc. (CTA), up 1.5 cents to 5.5 cents on 3.22 million shares. The all-share deal will create a 60-40 combination in favour of Crown Point.
Today it created a flurry of interest in both stocks, neither of which is used to much attention. Crown Point is a particularly thin trader, sometimes going days without any volume at all. Over 43.3 million of its 72.9 million shares are controlled by an Argentine holding company called Liminar Energia, which has been investing in Crown Point since 2014 and has spent over $33-million to amass its position. Its investment is worth just $11-million today. Centaurus's main shareholder, the New York hedge fund Maglan Capital, can undoubtedly sympathize. Maglan revealed itself as a shareholder in 2014 and over the years has doubled its position to 106 million of Centaurus's 544 million shares. The entirety of what it paid is not clear, but its SEDI filings show that it spent $14-million buying 53 million of the shares, whereas the entire 106-million-share position is currently worth just $5.8-million. Maglan has at least gained a greater share of the day-to-day decision-making power at Centaurus. David Tawil, president and co-founder of Maglan, became Centaurus's CEO last March.
Mr. Tawil will stay on as one of two co-CEOs of the combined version of Centaurus and Crown Point. The other co-CEO was not named, but will be a nominee of Crown Point, whose own CEO, Dr. Brian Moss, did not signal interest in the job one way or the other. He did, however, shower compliments on Centaurus, particularly its "world-class" CASE block in the Vaca Muerta shale. It is really the Vaca Muerta that can be considered world-class, holding the world's second-largest reserves of shale gas and the fourth-largest reserves of shale oil. Centaurus is trying to tap these reserves by way of its 35-per-cent interest in the CASE block. Alongside joint venturer Pan American Energy, it recently finished the fifth well of a five-well program. As for Crown Point, it mostly focuses on conventional production in the Austral basin. Both companies are clear that CASE is the "marquee" asset of the merger.
If Centaurus is bringing the most desirable asset, Crown Point is contributing a balance sheet that, if not marquee, is at least slightly less dented than Centaurus's. Centaurus had over $30-million (U.S.) in debt and a $20.9-million (U.S.) working capital deficit as of Sept. 30, and was recently accused of defaulting on its $40-million (U.S.) loan arrangement with its above-mentioned joint venturer, Pan American Energy. The companies were still trying to resolve the situation as of November. Meanwhile, Crown Point owed just $1.6-million (U.S.) and had a working capital balance of $714,000 (U.S.) as of Sept. 30 -- nothing phenomenal, but a surplus. The companies are optimistic that once they merge, they will have the "operational, managerial and financial capacity to be an important player in the Argentina upstream market."
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