RE:RE:Stockwatch Energy for yesterdaySorry missed that one.
Energy Summary for July 2, 2021
2021-07-02 20:48 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for August delivery edged down seven cents to $75.16 on the New York Merc, while Brent for September added 33 cents to $76.17 (all figures in this para U.S.). Western Canadian Select traded at a discount of $13.95 to WTI, down from a discount of $14.05. Natural gas for August added four cents to $3.70. The TSX energy index added a fraction to close at 140.08.
Oil prices barely moved as traders chewed over the results -- or lack thereof -- from two days of OPEC+ meetings. The meetings began yesterday and saw the group seemingly converge on an agreement to raise production by 400,000 barrels a day from August to December. At the last minute, the United Arab Emirates reportedly balked and demanded a higher production quota, derailing yesterday's negotiations and prompting more today. These too ended with no consensus. Talks will resume Monday after what Bloomberg is predicting to be "a weekend of furious diplomacy."
Here in Canada, the big news in the energy sector did not arrive until after the close. TC Energy Corp. (TRP: $61.64) is relaunching its NAFTA claim for damages over the cancellation of the Keystone XL pipeline. The company filed a similar claim in 2016, seeking $15-billion (U.S.) in damages, after a former U.S. president vetoed the pipeline. The claims were not tested because a successor president revived the pipeline in 2017 and TC Energy dropped the suit. In January, 2021, however, current President Joe Biden rescinded Keystone XL's permit. TC Energy said it would review its options. Now it has opted to fight.
As before, TC Energy is seeking over $15-billion (U.S.) in damages -- and as before, the path to victory is unclear. The company previously based its claim on the argument that the U.S. government breached NAFTA obligations relating to non-discrimination, minimum standard of treatment, and expropriation and compensation. Assuming it pursues a similar line in the new claim, it will face the difficult task of proving that it was treated differently because it is Canadian. The U.S. government is a formidable opponent that has never once lost a NAFTA battle. Observers have put TC Energy's odds anywhere from zero to 50-50.
Meanwhile, sandwiched in that awkward one-day period between a holiday and a weekend, one company had an appropriately awkward announcement. Alfred Sorensen's Pieridae Energy Ltd. (PEA) tumbled 13 cents to 40 cents on 2.68 million shares, after missing the June 30 deadline to make a final investment decision (FID) on its Goldboro liquefied natural gas (LNG) project in Nova Scotia. Moreover, it has launched a "strategic alternatives" review of Goldboro. This is the euphemism typically used when putting a project (or a company) up for sale.
Chief executive officer Mr. Sorensen, who has been promoting Goldboro for nearly a decade and has no intention of stopping now, launched the review as only a promoter can, billing it as a "decision to move Goldboro LNG in a new direction." He acknowledged that "cost pressures and time constraints due to COVID-19 have made building the current version of [Goldboro] impractical." Yet in his view, the "fundamentals remain strong" and the project just needs a bit of help becoming "more compatible with the current environment."
Investors have heard it all before. Mr. Sorensen set his sights on Goldboro in 2012, shortly after selling his interest in a different LNG project in 2011 (this project was on the opposite coast, in Kitimat, B.C., and it has not been built either). The goal at the time was to start construction in Goldboro in 2014 and have it up and running in 2018. Pieridae has extended those timelines at least five times. It had a list of excuses, from the 2014 commodity price collapse, to problems with the contractors that were supposed to come up with pricing estimates, to the ever-vague and ever-useful "market conditions." Now it will add COVID-19 to the list.
At the heart of the problem is money. Pieridae does not have $10-billion (U.S.) to build an LNG plant. At best, it can boast of $4.5-billion (U.S.) in loan guarantees offered by the German government in 2018, although these are non-binding and the German government is under rising pressure from green groups to withdraw them. Pieridae has also asked Ottawa for help, but that is even less certain. The efforts of investment bankers (formerly at Societe Generale, and more recently at UGF Financial Group) have not produced success either.
Today's announcement did not specify what "strategic alternatives" are under consideration. In a BNN interview, Mr. Sorensen said the review will "really kind of come down to getting a cost structure that's more financeable." The preferred option would be to bring in an industry partner. Mr. Sorensen explained that Pieridae's Alberta gas assets will provide only half of Goldboro's proposed feedstock, with the rest likely coming from the East Coast. The company has therefore been talking to large producers in the North Atlantic region. "We really do see one of those guys as potentially a partner, and we'll try to see how that might work for us in the next coming weeks," said Mr. Sorensen. A promoter through and through, he emphasized, "We're not cancelling," and declared that "the time is good and the pricing environment is very good" to "make the project a go."
We end with a bit of people news. U.S. shale producer Ovintiv Inc. (OVV), up 60 cents to $39.67 on 569,600 shares, has added George Pita to its board of directors. Mr. Pita is the executive vice-president and chief financial officer of MasTec, a NYSE-listed engineering and construction company. He is Ovintiv's fifth new director in 2-1/2 years. Separately, Canadian Montney producer Kelt Exploration Ltd. (KEL) edged down seven cents to $3.46 on 508,800 shares, after announcing one board addition and one departure. The addition is Janet Vellutini. She is an engineer by background, and was most recently a marketing consultant at what Kelt vaguely described as a "Calgary-based private energy company." (This is likely the gas marketing firm CanWest.)
Ms. Vellutini will succeed Kelt's lead director, Bob Dales. Mr. Dales has served on Kelt's board since its inception in 2012. Before that, he had a string of hit-and-miss shells, generally with the name Desco. One of them, Desco Resources, listed at 23 cents in the late 1990s and is still around as Peyto Exploration & Development Corp. (PEY: $8.38). Others became Arcan Resources (which was taken out at just 11 cents a share in 2015) and Manitok Resources (which went bankrupt in 2018). One of the standouts was Desco Exploration, which became Celtic Exploration. Investors who participated in Desco Exploration's 25-cent IPO in 2002 would have made 98 times their investment when Celtic was bought by ExxonMobil for $24.50 a share in 2012. The Exxon deal also included equity in a spinout company: Kelt. Mr. Dales was already a director of Celtic and snagged himself a spot on Kelt's board too. He does not seem to have been active on the shell front since 2010, and is now retiring from Kelt's board at age 73.
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