Stockwatch Energy today
Energy Summary for April 12, 2021
2021-04-12 20:19 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for May delivery added 38 cents to $59.70 on the New York Merc, while Brent for June added 33 cents to $63.28 (all figures in this para U.S.). Western Canadian Select traded at a discount of $10.08 to WTI, down from a discount of $10.05. Natural gas for May added three cents to $2.56. The TSX energy index lost a fraction to close at 116.22.
The oil patch continued its shopping spree. Brian Schmidt's Alberta- and Saskatchewan-focused Tamarack Valley Energy Ltd. (TVE) added 11 cents to $2.37 on 4.82 million shares, after agreeing to acquire the private Anegada Oil for $494-million. The price tag comprises $247.5-million cash and debt plus the issuance of 104.3 million shares. (Tamarack currently has 298 million shares outstanding.)
This is Tamarack's fifth acquisition in about four months. In December, Tamarack closed two acquisitions in the Clearwater play of Alberta for a total of $74-million, followed in March by two more acquisitions in the Clearwater and two other plays for $135-million. Now it is doing its largest deal yet. Costing $494-million, Anegada will add 11,800 barrels a day of production in yet another Alberta play, the Charlie Lake. Tamarack hyped the Charlie Lake as "one of the most economic plays in North America." This would seem to be an upgrade from the Clearwater, which Tamarack had dubbed "one of the most economic oil plays in Western Canada." The combined company will focus on both plays. Brandon Swertz, president and chief executive officer of Anegada, stated that Anegada's shareholders "indicated a desire to be part of a larger high-quality entity ... We see the combination of the Clearwater and Charlie Lake oil plays providing Tamarack with top-decile inventory."
Mr. Swertz's name, and Anegada's, may ring a bell for energy investors. He previously sold a different private company called Anegada Energy to Raging River Exploration in 2015. This was an all-share deal and Raging River's shares were worth $8.15 at the time. They got as high as $11.87 in late 2016, giving Anegada Energy's former shareholders plenty of opportunity to sell at a profit, but alas, Raging River subsequently began a steep slide. It was taken over in 2018 by Baytex Energy Corp. (BTE: $1.31) in a deal that valued its stock at $6.93. This time around, as Tamarack buys Anegada Oil, it will have to fork over not just shares but cold, hard cash as well.
To offset the cash part of the price tag, Tamarack has arranged a royalty sale on the Charlie Lake assets with one of its favourite counterparties lately, Topaz Energy Corp. (TPZ: $14.80). Topaz also bought royalties on Tamarack's Clearwater assets as part of those deals in December and March. As for the share portion of Anegada's price tag, Tamarack will have to seek approval from current shareholders to issue the proposed 104.3 million shares. These represent more than one-quarter of its current share count and the deal will thus have to be put to a vote. Tamarack plans to call a meeting to hold the vote in late May and then close the deal in June.
Tamarack is not the only one dipping its toes into the Charlie Lake. In late February, NuVista Energy Ltd. (NVA: $2.28) said it was selling a series of assets -- including an "undeveloped Charlie Lake oil opportunity" -- for a total of $94-million. It did not identify the buyers or price tags for each asset. Yet based on the clues provided (as discussed in the Energy Summary for Feb. 26), the Charlie Lake asset likely fetched $70-million, whereas analysts had been valuing it at around $40-million to $55-million. The unidentified buyer presumably has high hopes for this play. Prominent companies in the Charlie Lake include Anegada, Tourmaline Oil Corp. (TOU: $23.73) and the private Longshore Resources, with Spartan Delta Corp. (SDE: $3.95), Kelt Exploration Ltd. (KEL: $2.50), Whitecap Resources Inc. (WCP: $5.50) and others having a presence as well.
Further afield, Paul Baay's Touchstone Exploration Inc. (TXP) shot up 27 cents to $1.99 on 3.04 million shares, after welcoming some good news from Trinidad. The company's Cascadura Deep-1 well at its Ortoire exploration block has tested at up to 4,567 barrels of oil equivalent a day. Nearly 90 per cent of that output was gas, thus "confirming a liquids-rich natural gas discovery," as Touchstone repeatedly emphasized. The emphasis was understandable given that Touchstone recently watched its stock plunge by more than one-third (to $1.72 from $2.34) on March 31, after it announced unexpectedly oily test results from the Chinook-1 well elsewhere on Ortoire. Oil is less desirable than gas in Trinidad right now because gas is in high demand and is even exempt from the country's supplemental petroleum tax. As well, because Touchstone had previously hyped the perceived "significant natural gas discovery at Chinook," the oily test results cast doubt on its interpretive abilities.
Finding gas at Cascadura represents a much-needed victory for Touchstone. The gas was also present in large amounts, with no undesirable elements in the mix (such as hydrogen sulphide or water). Touchstone said it will work to get the well on production as soon as possible. It still has not said exactly when it will achieve production at Ortoire -- something it has been promising since last year, with no luck yet -- but today, the test results were more than enough to cheer up investors.
Back in Alberta, Don Gray's Petrus Resources Ltd. (PRQ), edged up two cents to 43 cents on 144,900 shares, after replacing its president and CEO. The new holder of those positions will be Ken Gray. Ken Gray has been a director of Petrus since March 11, which happens to be the same day that Don Gray, Glen Gray and Stuart Gray roughly doubled their shareholdings. The last names are no coincidence: Don Gray is the co-founder and chairman of Petrus, and Ken, Glen and Stuart are his brothers. The Grays have apparently decided to tighten the family control in the wake of the exit of NGP Energy Capital Management, which until recently was Petrus's major shareholder. NGP spent over $78-million from 2012 to 2016 to acquire 12 million Petrus shares (out of a trim 49 million shares outstanding). On March 11, however, it sold all but 664,000 of these shares to three of the Gray brothers, reaping a grand total of about $3.6-million, a painful return indeed.
Petrus tried out two CEOs during the NGP era. It started with Kevin Adair, who joined Petrus in 2011, right after selling his Spry Energy promotion to Whitecap Resources Inc. (WCP: $5.50). He failed to repeat his success at Petrus, which replaced him in 2016 with Neil Korchinski, formerly its chief operating officer. Now Mr. Korchinski is stepping down and one of the Grays is stepping up. Ken Gray is an engineer and the president of Hell's Half-Acre Petroleum, a quiet private company in Alberta. He has previously worked in various roles for BP in Alaska and the United Kingdom.
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