Stockwatch Energy today
Energy Summary for March 11, 2021
2021-03-11 20:16 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for April delivery added $1.62 to $66.06 on the New York Merc, while Brent for May added $1.78 to $69.68 (all figures in this para U.S.). Western Canadian Select traded at a discount of $11.21 to WTI, up from a discount of $11.24. Natural gas for April lost two cents to $2.67. The TSX energy index added 1.18 points to close at 126.38.
Canada's largest gas producer, Mike Rose's Tourmaline Oil Corp. (TOU), added $1.51 to $26.24 on 6.22 million shares, after releasing its year-end financials and becoming the latest energy company to hike its dividend. Like Canadian Natural Resources Ltd. (CNQ: $40.24) and Freehold Royalties Ltd. (FRU: $7.70) a week ago, Tourmaline attributed the rising dividend to stronger cash flow in light of higher commodity prices. It will now pay a 16-cent quarterly dividend, up from 14 cents previously, for a new yield of 2.4 per cent.
This is Tourmaline's second dividend hike in five months: It previously had a 12-cent quarterly payout, before announcing an increase in November to go along with its $526-million combined takeovers of Modern Resources and Jupiter Resources, boosting its total production to around 400,000 barrels of oil equivalent a day. These were two of the four acquisitions that Tourmaline completed in 2020. A $621-million gain on acquisitions helped the company turn a full-year net profit of $618-million.
Naturally, analysts were falling over themselves today to sing Tourmaline's praises. This stock "screens as the most compelling investment opportunity in the sector," trumpeted Scotia Capital analyst Cameron Bean, hiking his price target to $38 from $35. Raymond James analyst Chris Cox agreed, saying he sees Tourmaline "at the top of our pecking order among Canadian producers," though he cautiously hiked his target to just $28 from $27. Other analysts chasing their targets higher (but never going on precisely the same chase) included TD Securities' Aaron Bilkoski, who nudged his target up to $28 from $24; RBC's Michael Harvey, who boosted his to $33 from $30; and iA Capital Markets' Michael Charlton, who went to $34 from $28.
A couple of smaller gas producers also had financials worth a mention. The B.C. Montney-focused Birchcliff Energy Ltd. (BIR) added 11 cents to $3.26 on 2.67 million shares, after releasing audited financials that matched the unaudited version released a month ago. President and chief executive officer Jeff Tonken used the new update mostly as an opportunity to hype Birchliff's "strong start to 2021." The company has finished drilling 15 wells out of this year's planned 27-well program. While no production rates were provided, Mr. Tonken dubbed himself "encouraged by the flowback performance" of the wells tied in so far, with more tie-ins scheduled over the coming weeks. Mr. Tonken also emphasized that Birchcliff is completely unhedged and is thus enjoying "very strong" cash flow from the recent rebound in gas prices. Shareholders are enjoying the rebound, too. At $3.26, Birchcliff's stock is up 80 per cent from $1.81 at the start of the year.
Meanwhile, Alberta gas producer Pine Cliff Energy Ltd. (PNE) edged down five cents to 30.5 cents on 2.48 million shares, despite its own efforts to emphasize its "adjusted funds flow growth in a rising natural gas price environment." The company pegged its cash flow for the fourth quarter at $8-million, or two cents a share. President and CEO Phil Hodge pointed out that this was the highest quarterly cash flow that Pine Cliff had generated since the second quarter of 2017. Pine Cliff also resumed some recompletion activities toward the end of 2020, and was able to boost its production to 19,130 barrels a day in the fourth quarter from 18,755 in the third.
Given that Pine Cliff already announced its fourth quarter production in February, the new financials did not particularly surprise or impress the market. They did, however, attract a cheer from a friendly analyst. "Improving natural gas outlook suggests tide is turning for [Pine Cliff]," was the boosterish title that Canaccord Genuity's Anthony Petrucci gave his new research note. He upgraded his rating on the stock to "speculative buy" from "hold" and hiked his price target to 50 cents from 30 cents. A disclaimer in the note revealed that Mr. Petrucci's employer, Canaccord, expects compensation from Pine Cliff for investment banking services in the next three months. While investors may draw their own conclusions from Mr. Petrucci's favourable opinion of the stock, they may find it worth noting that the optimism is shared by Pine Cliff's largest backer, Vancouver broker Robert Disbrow. He has spent over $264,000 buying 1.05 million shares of Pine Cliff since the start of the year, including 200,000 shares bought this week. Currently he owns 44 million of Pine Cliff's 335 million shares.
In other insider buying news, Don Gray's Alberta-focused Petrus Resources Ltd. (PRQ) added five cents to 44 cents on 369,300 shares, after Mr. Gray and two of his brothers agreed to nearly double their collective shareholdings in the company. Don is the chairman and co-founder of Petrus. (He is, however, better known for two other reasons: his past stint as the co-founder and former CEO of Peyto Exploration Ltd. (PEY: $6.47), and his sharp tongue while he was there. A 2010 Globe and Mail profile referred to him as the "energy patch bad boy ... whose judgments have included dismissing other energy executives as 'clowns' and portraying energy analysts as hopelessly compromised by working for investment banks." No comment.)
In any case, Don Gray currently owns 7.31 million of Petrus's 49.4 million shares, while brothers Glen and Stuart own 3.87 million and 2.12 million. Today they agreed to boost their shareholdings to 13.35 million shares for Don, 6.87 million for Glen and 5.12 million for Stuart. This represents a collective family increase of 12 million shares. The deal is being done with an unidentified arm's-length vendor. (After the close, Petrus announced that the fourth Gray brother, Ken, is becoming a member of Petrus's board of directors.)
To be more specific, the deal represents a collective increase of 12,040,300, and there happens to be only one shareholder on SEDI that holds exactly that amount: Wingren, a unit of the U.S. private equity firm NGP Energy Capital Management. NGP has been a long-time backer of Petrus. Its support dates back to 2012, when Petrus was barely a year old and still a private company. From 2012 to 2016, when Petrus went public, NGP paid over $78-million to amass its 12 million shares, through deals that valued the shares anywhere from $1.75 to $7.40. Unfortunately, the investment has not been a winner. Assuming that NGP is the one doing today's deal with the Gray brothers, it will receive just 30 cents for each of its 12 million Petrus shares, reaping a grand total of $3.6-million.
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