Stockwatch Energy today
Energy Summary for June 16, 2021
2021-06-16 20:05 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for July delivery edged up three cents to $72.15 on the New York Merc, while Brent for August added 40 cents to $74.39 (all figures in this para U.S.). Western Canadian Select traded at a discount of $13.88 to WTI, unchanged. Natural gas for July added one cent to $3.25. The TSX energy index lost 1.98 points to close at 142.40.
Nerves are fraying in the offshore Newfoundland oil industry, with yesterday's deadline having come and gone with no word on the fate of Suncor Energy Inc.'s (SU: $30.83) Terra Nova project. Suncor is the operator of Terra Nova and owns a 38-per-cent interest. As discussed in the June 7 Energy Summary, the offshore Terra Nova oil field was on production from 2002 to 2019, at which point Suncor halted production to pursue an asset-life-extension (ALE) program (to stretch out the useful life of the field by a decade). Suncor has since said it is having trouble persuading the field's co-owners to support the program. "It's far easier to go into abandonment than it is to get ALE [approved]," admitted CEO Mark Little during a quarterly conference call last month. He then told BNN that Terra Nova faces a "brick wall" deadline of June 15 before the decision must be made on whether to pursue the ALE or take the "heart-breaking" step of decommissioning.
So much for the brick wall. June 15 was yesterday, and there was no word from Suncor on whether Terra Nova can stay afloat. The only update came from one of the project's co-owners. Alas, it was not favourable. Norway's Equinor, which owns a 15-per-cent interest in Terra Nova, stated yesterday that it will "exit" the project. This may explain the suddenly rubbery bricks.
Hours after the close today, Suncor announced that it has reached an "agreement in principle" to restructure the ownership of Terra Nova and secure short-term financing, "with the intent to move to a sanction decision [on the ALE] in the fall." Details were scant and guarantees were fully absent, but Suncor revealed that it is boosting its 38-per-cent interest in Terra Nova to 48 per cent, which presumably means it is acquiring two-thirds of Equinor's 15-per-cent chunk. It promised to provide more details on when the agreement is finalized.
The mood was more upbeat on the opposite coast. There, to promote the B.C. LNG (liquefied natural gas) industry, the Fort St. John Chamber of Commerce has been hosting the "Northern Resources Conference -- Creating Energy." The two-day virtual conference ended today and featured several cheerleaders for the LNG industry. These included Susannah Pierce, an executive at the Shell-backed LNG Canada, which is building a $40-billion eponymous project in Kitimat. She said the project is investing in "generation 4 plant technology which will essentially eliminate methane emissions." Other speakers included Bruce Ralston, the B.C. Minister of Energy, Mines and Petroleum Resources, who said he has been "working hard to brand British Columbia as a low-carbon country of choice for countries looking to buy LNG."
Meanwhile, the company with its name splashed all over the conference was Tourmaline Oil Corp. (TOU: $33.10), the "presenter" of the conference (whatever that might mean). Tourmaline is Canada's largest gas producer and the dominant player in the B.C. North Montney play. It undoubtedly has high hopes for the nascent LNG industry. In a press release last week announcing its $1.1-billion takeover offer for Black Swan Energy (a private B.C. Montney player), chairman and chief executive officer Mike Rose specifically mentioned that he sees the North Montney as "the key subbasin for supplying Canadian LNG ... [and] the primary growth driver in the entire Western Canadian sedimentary basin for the next decade."
Two other Montney players delivered their own versions of promotional pitches. Rob Zakresky's Leucrotta Exploration Inc. (LXE), up one cent to 81 cents on 176,100 shares, trumpeted the imminent start of "phase 1 development" at its Mica project in the B.C. Montney. Leucrotta drew up an ambitious five-plan for Mica in March. That was when it sold a non-core asset for $30-million (to Tourmaline, as it happens) and raised another $33-million through an equity financing. The goal of the plan, said Leucrotta, will be to boost Mica's production to 30,000 barrels of oil equivalent a day within five years, relative to the current level of 2,200 barrels a day. Leucrotta already said in May that it would kick off this five-year program in mid-July. In its new press release, it could not resist a reminder of this near-term start -- perhaps to take some of the sting out of what came at the very end of the announcement. This held the news that Leucrotta is conducting another equity financing. It will issue $1.36-million of units at $1. This price is higher than today's close of 81 cents, because each unit will comprise one tax-advantaged share and one warrant.
Separately, Jeff Tonken's Alberta Montney-focused Birchcliff Energy Ltd. (BIR) lost seven cents to $4.17 on 2.98 million shares. Birchcliff already announced its grand five-year production ambitions in January. Today's update revolved around earthier matters -- the Earth itself. The company has released the 2020 version of its annual sustainability report. It cheered itself as "a leader in all aspects of ESG" (environmental, social and governance) and estimated that its greenhouse gas emissions are 44 per cent lower than the average of its competitors. Birchcliff gave itself ample pats on the back for its performance. That was not enough, so Birchcliff then invented and awarded itself a brand new designation, LEIP, which stands for Low Emissions Intensity Producer.
South of the border, North Dakota Bakken producer Enerplus Corp. (ERF) added seven cents to $8.83 on 2.43 million shares. It had no news releases, but it did have a SEDAR filing, specifically a shelf prospectus that qualifies up to $2-billion in equity or debt financings over the next 25 months. The prospectus allows but does not obligate Enerplus to raise this money. More broadly, the prospectus represents a bit of housekeeping, as it replaces the very similar one that Enerplus filed on May 16, 2019. That one also covered $2-billion in financings over a 25-month period, which just so happened to expire today.
The last time Enerplus made use of the 2019 prospectus was in February, 2021, when it raised $132-million to help pay for the takeover of fellow Bakken producer Bruin E&P. Enerplus then completed another big Bakken buy in April. Investors have generally approved of the acquisitions. Thanks to Enerplus's increasing production, an environment of increasing oil prices and -- as of last month -- an increased quarterly dividend (which is now 3.3 cents, for a yield of 1.5 per cent), Enerplus's stock has risen steadily to today's close of $8.83. That is more than double the February financing price of $4.
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