Stockwatch Energy today
Energy Summary for March 18, 2021
2021-03-18 20:12 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for April delivery lost 48 cents to $59.52 on the New York Merc, while Brent for May added 17 cents to $62.92 (all figures in this para U.S.). Western Canadian Select traded at a discount of $11.18 to WTI, unchanged. Natural gas for April was unchanged at $2.49. The TSX energy index lost 6.43 points to close at 116.32.
Attorneys-general from 21 U.S. states, led by Ken Paxton of Texas and Austin Knudsen of Montana, have launched a federal lawsuit to overturn President Joe Biden's cancellation of TC Energy Corp.'s (TRP: $56.97) Keystone XL pipeline. The suit was filed in a federal district court in Texas and claims that Mr. Biden overstepped his authority when he revoked the pipeline's permit in January. Because the pipeline would cross multiple U.S. states, the final decision to build it should rest with the Congress, argued the attorneys-general. The lawsuit also mentioned the tens of millions of dollars in state tax revenue that would be forgone if the pipeline's permit is not reinstated, and asserted that pipelines are a safer way to move oil than trains or trucks.
The lawsuit comes about a month after 14 attorneys-general, including Mr. Paxton and Mr. Knudsen, published an open letter to Mr. Biden, warning him that they were "reviewing available legal options" in the wake of his Keystone XL cancellation. "We urge you to reconsider your decision to impose crippling economic injuries on states, communities, families and workers across the country," they wrote. Mr. Biden has shown no intention of reconsidering his decision, but the letter clearly struck a chord with seven more attorneys-general, as the new lawsuit involves 21 states.
The key argument in the suit -- namely that the presidential rejection of the pipeline conflicts with the will of Congress -- is the same argument that TC Energy used in 2016, when it sued Barack Obama's administration over his 2015 denial of the permit. Mr. Obama's successor, Donald Trump, granted the permit in 2017 and TC Energy dropped its lawsuit, without resolution. Now that Mr. Trump's successor has unilaterally revoked the permit, the matter is once again heading to court.
Here in Canada, Scott Ratushny's Cardinal Energy Ltd. (CJ) lost 21 cents to $2.04 on 3.4 million shares, giving back most of the 26 cents it added yesterday after releasing its year-end financials. These showed a full-year net loss of $363-million, beaten down by $220-million in impairment charges and a $102-million deferred tax expense. Cardinal tried to keep the attention on its free cash flow. It pointed out that it spent just $3.6-million in the fourth quarter, yet took in cash flow of $13.6-million and increased its quarterly production to 18,600 barrels of oil equivalent a day (up from 17,700 in the third quarter). The extra cash went toward reducing its net debt, which was $246-million as of Dec. 31 (down from $259-million as of Sept. 30).
The highlight of the fourth quarter was the $20-million financing that Cardinal completed in December, with the main participant being N. Murray Edwards, the billionaire chairman of Canadian Natural Resources Ltd. (CNQ: $37.03). Mr. Edwards now holds 17.2 million of Cardinal's 135 million shares. Cardinal's stock was trading at just 65 cents before it announced the financing; today it closed at $2.04. Mr. Edwards is not a member of Cardinal's board of directors. He does have a connection to one such member, John Brussa, who is also the chairman of Burnet, Duckworth & Palmer, the law firm where Mr. Edwards practised law before founding various companies. Mr. Brussa has been on Cardinal's board since its founding in 2012. He apparently has a taste for juniors, serving also on the boards of Crew Energy Inc. (CR: $1.09), Storm Resources Ltd. (SRX: $2.88) and (as of last week) Leucrotta Exploration Inc. (LXE: $0.70).
Another Alberta junior, Doug Bartole's Cardium-focused InPlay Oil Corp. (IPO), stayed unchanged at 58 cents on 985,500 shares. It too released its year-end financials yesterday. Like Cardinal's financials, these showed a heavy full-year net loss ($112-million, weighed down by $96-million in impairments and deferred tax expenses), and like Cardinal, InPlay tried to keep things light and optimistic. "[We are] very excited about the road ahead," it declared. After a quiet 2020, the company is now actively drilling and is aiming for "a record year of production" in 2021. Its full-year 2021 target of 5,100 to 5,400 barrels of oil equivalent a day is well above its 2020 average of 4,000 barrels a day.
The update drew applause from Canaccord Genuity analyst Anthony Petrucci, who wrote this morning that InPlay has "positioned itself for success in 2021." He gave InPlay particular praise for achieving sizable increases in its year-over-year reserves. (As of year-end 2020, InPlay had 1P (proved) reserves of 21.6 million barrels and 2P (proved and probable) reserves of 32.8 million barrels, representing 16- and 20-per-cent increases from year-end 2019.) Mr. Petrucci kept his "speculative buy" rating on the 58-cent stock and doubled his price target to $1 from 50 cents. Investors may wish to note a disclaimer at the bottom of his note, which indicates that Canaccord expects to receive compensation from InPlay within the next three months for unspecified investment banking services.
Down south, Serafino Iacono and Frank Giustra's NG Energy International Corp. (GASX) added 19 cents to $1.64 on 346,000 shares, after releasing resource estimates on its SN-9 and Maria Conchita blocks in Colombia. It gave its best estimate of the SN-9 block's unrisked prospective resources (a low level of certainty) at 836 billion cubic feet. The unrisked prospective resources at Maria Conchita came to 194 billion cubic feet. NG Energy's chief executive officer, Mr. Iacono, cheered that these "exceeded management expectations."
That is typical promoter-speak. What is less typical is that management actually shared some of these expectations, in a news release on Jan. 11. It said at the time that it thought Maria Conchita might host prospective resources of around 200 billion cubic feet (which would suggest that today's figure of 194 billion was in fact slightly below expectations). As for SN-9, Mr. Iacono mused in January that the block "could host up to one trillion cubic feet," although he later had to retract that statement after a regulatory scolding. While today's number of 836 billion is somewhat short of the mark, the block is clearly a big one.
Investors seemed delighted. At $1.64, the stock has more than octupled from 20 cents over the last year. Mr. Iacono aimed to give them more to look forward to as he promised "a full corporate update in the coming weeks as we push towards initial production [from Maria Conchita] ... and receive final environmental approval to commence our fully funded four-well exploration program [at SN-9]."
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