Stockwatch EnergyCourtesy of loonietunes. GLTA
Energy Summary for May 3, 2021
2021-05-03 20:44 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for June delivery added 91 cents to $64.49 on the New York Merc, while Brent for July added 80 cents to $67.56 (all figures in this para U.S.). Western Canadian Select traded at a discount of $11.75 to WTI, up from a discount of $11.90. Natural gas for June added four cents to $2.97. The TSX energy index added 3.72 points to close at 121.63.
The first trading day of May was good to oil prices, as optimism about vaccine rollouts and rising fuel demand overshadowed concerns about continuing COVID-19 lockdowns. With peak travel season approaching, analysts have increased their forecasts for Brent oil prices for the fifth month in a row, according to a new poll from Reuters.
Here in Canada, two of the top five most active traders on the TSX were oil juniors. Athabasca Oil Corp. (ATH) came in first place, adding 10 cents to 70 cents on 31 million shares, while Gear Energy Ltd. (GXE) (in fifth place) shot up 16 cents to 68 cents on 14.3 million shares. By contrast, their average trading volume in April was 3.90 million shares and 1.48 million shares, respectively. Neither had any news to explain today's excitement. They may still be enjoying their so-called "BNN bump" from Friday, when Gear and Athabasca -- along with Cardinal Energy Ltd. (CJ), up 28 cents to $2.98 on a heavier-than-usual 4.07 million shares -- were singled out on BNN as the top three picks of energy fund manager Eric Nuttall of Ninepoint Partners.
None of the above stocks had as good a day as Richard Gonzales and Charles Cotter's TSX-V-listed Petro-Victory Energy Corp. (VRY), up a frantic $2.64 to $3.00 on 405,200 shares. Today it released a year-end reserve report on its three oil fields in Brazil. This happened to be the first independently certified reserve report in the company's history -- reserve evaluator GLJ Ltd. did the honours -- and it was quite a debut, with Petro-Victory touting its total 2P (proved plus probable) reserves of 2.82 million barrels of oil. That represents a 2P net asset value of $12.18 a share, based on Petro-Victory's 9.21 million shares outstanding. (The low float no doubt played a role in today's high volatility.)
Mr. Gonzales, Petro-Victory's chief executive officer, cheered the "material shareholder value increase that our team has been building since our arrival in Brazil." Long-time shareholders will remember that the company entered Brazil about four years ago, agreeing to pay $1.6-million (U.S.) for working interests in four oil fields (just three of which are on production) in the summer of 2017. Deals move slowly in Brazil. The acquisition did not receive Brazilian regulatory approval until October, 2019, and Petro-Victory did not notch its first revenue from oil sales until April, 2020. Of the three producing fields, just one is Petro-Victory's to own and operate on a 100-per-cent basis; it holds 50-per-cent non-operated interests on the other two. It took over operations on its wholly owned field (Andorinha) last November. The achievement of revenue and operatorship in 2020 prompted the company to do its first official reserve report, covering the three producing fields.
Mr. Gonzales added that Petro-Victory is hard at work on a 2021 drilling and workover program that should "significantly" increase production and cash flow. One would certainly hope so. Virtually any increase would be significant, seeing as -- although Petro-Victory chose to omit this from the press release -- its fields are currently producing a grand total of 43 barrels a day, according to SEDAR filings dated April 30.
More specifically, the SEDAR filings were Petro-Victory's year-end financials. These showed a $2.9-million (U.S.) working capital deficit as of Dec. 31 and a prominent "going concern" red flag. They also noted that Petro-Victory "will be required to obtain additional debt or equity financing in 2021." The company's most recent equity financing was in August, 2019, when it sold a $700,000 private placement of 35 million shares at two cents. It then rolled back its shares 1 for 40 in January, 2020. Adjusting for the rollback, the financing price was 80 cents, so with today's 700-per-cent jump in the share price -- all the way to $3.00 from 36 cents -- there are finally some gains to record among subscribers, if any of them are left. Sadly, there are unlikely to be many left from Petro-Victory's long-ago IPO. That was done in 2014 at 40 cents, or a rollback-adjusted $16.
Back in North America, the North Dakota Bakken-focused Enerplus Corp. (ERF) added 23 cents to $6.84 on 1.78 million shares, regaining some of the 18 cents it lost on Friday after closing a $312-million (U.S.) asset acquisition from Hess. Deals move a lot faster in the United States than Brazil: Enerplus and Hess announced this deal on April 8 and completed it barely three weeks later. It marks Enerplus's second major Bakken deal this year. In March, Enerplus acquired its neighbour, Bruin E&P, for $465-million (U.S.). The deals have added about 30,000 barrels of oil equivalent a day to Enerplus's production (which, for context, averaged 86,200 barrels a day in the fourth quarter of 2020).
Meanwhile, Enerplus is carefully watching the legal developments surrounding the contentious Dakota Access pipeline, or DAPL (rhymes with apple). DAPL is the main pipeline used by Bakken oil producers. Without it, they would have to use expensive rail transportation, which is why they were less than thrilled when a federal judge ordered DAPL to be shut down last year for a lengthy environmental review. A higher court allowed the pipeline to keep operating while the review is in progress. The White House could have intervened and handed down its own shutdown order for DAPL (a worrisome possibility under President Joe Biden, who, after all, killed TC Energy Corp.'s (TRP: $61.18) Keystone XL pipeline on his first day in office) but it decided last month to take no action. Eco-activists were crushed. They turned their attention to May 3 -- today -- which is when the U.S. Army Corps of Engineers was required to file a status report in court, laying out what would essentially be the U.S. government's official position.
Happily for Enerplus and the other Bakken producers, the status report filed by the Corps set out the position that DAPL can (and by implication should) remain open while the environmental review is in the progress. It estimated that the review will be finished next March. The matter is now once again before the judge, who can decide whether to bow to the expertise of the Corps and leave the pipeline open, or bow to eco-activists' demands for an injunction.
© 2021 Canjex Publishing Ltd. All rights reserved.