Stockwatch Energy today
Energy Summary for July 9, 2021
2021-07-09 20:26 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for August delivery added $1.62 to $74.56 on the New York Merc, while Brent for September added $1.43 to $75.55 (all figures in this para U.S.). Western Canadian Select traded at a discount of $13.32 to WTI, up from a discount of $13.44. Natural gas for August lost two cents to $3.67. The TSX energy index added 1.09 points to close at 136.34.
It was a typically slow Friday for news in the energy sector, but in the sector's de facto capital city, spirits got a lift from the opening parade of the Calgary Stampede. The 10-day celebration kicked off this morning after a one-year absence. Normally an annual event, the self-billed Greatest Outdoor Show On Earth was cancelled last year for the first time in its 109-year history, amid the COVID-19 pandemic. Now it is back (although attendees must adhere to strict safety measures). The Stampede has long-standing ties to the oil and gas industry, a key source of advertising, sponsorships and parties. It is good to see it back.
Within the sector, oil sands producer Cenovus Energy Inc. (CVE) edged up 12 cents to $11.37 on seven million shares. It worked the crowd today by sponsoring "Cenovus Family Day" at the Stampede, inviting guests to "kick off your summer family memories" with a free pancake breakfast. Separately, it buffed up its green credentials. Calgary-based clean tech company Acceleware announced this morning that Cenovus has joined the financing group for Acceleware's RF XL pilot at the Marwayne site in the oil sands. The idea is to use radio frequency energy to heat bitumen and heavy oil, coaxing the sludgy stuff into the wellbore so it can be pumped to surface. The industry has traditionally relied on steam-based processes to do this (particularly SAGD, steam-assisted gravity drainage). Acceleware says its technology is cleaner and cheaper.
Acceleware (which trades on the TSX-V under the ticker AXE, closing today at 34.5 cents) has been working on its RF XL technology since 2010. In May, 2020, the private Broadview Energy agreed that its Marwayne oil sands project could be the pilot site for commercial-scale testing of the technology. This piqued the interest of oil sands major Suncor Energy Inc. (SU: $28.97), which agreed in December to contribute up to $2-million to the pilot. Now Cenovus has made the same financial pledge. In return for their investment, Suncor and Cenovus will be able to provide feedback on the pilot's design and test specifications, and they will get an early peek at the resulting data.
It is not quite clear when the data will be available. Acceleware was aiming to finish construction at Marwayne in January, 2021, then start the heating process in March, 2021, and keep it going for about six months, although it cautioned that the schedule "may be extended to allow Acceleware to capture additional information." It has since gone off schedule entirely. The Marwayne site was successfully cleared in early 2021, but construction is still in progress and likely will not wrap up until the third quarter, said Acceleware today. Power-up and heating will follow "shortly thereafter."
One of Acceleware's directors is Dennis Nerland. He also sits on the boards of two non-oil-sands producers: the Cardium-focused InPlay Oil Corp. (IPO), up five cents to $1.39 on 204,800 shares, and the Montney-focused Crew Energy Inc. (CR), up one cent to $2.36 on 1.45 million shares. Both enjoyed encouraging developments this week. On Tuesday, InPlay estimated that its production in the second quarter averaged 5,325 barrels of oil equivalent a day, a new record for the company (whose pre-COVID production was just 5,000 barrels a day). President and chief executive officer Doug Bartole cheered the "exceptionally strong" and "tremendous" performance of InPlay's new Cardium wells. In particular, he marvelled at the three wells that InPlay drilled at its new assets in the Pembina area, acquired in December. He said these wells exceeded InPlay's models by 45 per cent and the company will be focusing on Pembina for the rest of the year.
Meanwhile, Crew had no press releases this week, but it got a lovely mention yesterday from DBRS. The ratings agency changed all trends on Crew's credit ratings to positive from negative. "The company's key credit metrics are expected to improve materially through 2022 and 2023," predicted DBRS, citing rising oil and gas prices and "a projected notable increase in [Crew's] production volumes." (Crew is aiming to boost production to 32,000 barrels of oil equivalent a day by late 2022. That compares with just 21,500 barrels a day when Crew announced the plan in late 2020. Its most recent update pegged its average production in the first quarter of 2021 at 26,300 barrels a day, a good first step.)
Although DBRS was willing to change its trends on Crew, it was not yet willing to change its overall credit rating -- and that rating is deep in junk territory, at B (low). DBRS noted that Crew expects to spend beyond its means this year to pay for its lofty production ambitions. In the coming years, Crew will start to focus more on free cash flow and debt repayment, and DBRS said it will consider upgrades.
Another Montney producer, Andy Mah's Advantage Energy Ltd. (AAV), added 22 cents to $5.13 2.62 million shares, its first time closing above $5 in 3-1/2 years. It got a boost this week from BNN. Mr. Mah, Advantage's CEO, headed to BNN on Wednesday for a typically friendly interview. The interviewer spoke glowingly of many oil and gas companies -- Advantage among them, of course -- that are "swimming in free cash flow and maybe not getting the valuation bump" that they presumably deserve. Mr. Mah agreed that Advantage is reaping the benefits of rising gas prices. The company was previously forecasting $70-million in free cash flow this year, but now expects to be "much in excess of that," said Mr. Mah. It is using the money to reduce debt and improve its balance sheet. (Net debt was $214-million as of March 31.)
No interview these days would be complete with delving into environmental credentials, and this subject took up about around half of Mr. Mah's eight-minute slot. He contentedly chatted about Advantage's recent spinout of a clean tech subsidiary. The subsidiary is called Entropy and focuses on carbon capture technology, which Advantage is aiming to launch at its Glacier Montney project by March, 2022. So committed is the company to its clean new lifestyle that it even went ahead and rebranded two months ago. In May, it said goodbye to the old fossil-fuel-heavy name of Advantage Oil & Gas, and hello to bright and lively Advantage Energy. This signified, in Mr. Mah's words, that "energy is part of the fabric and the supply that we bring to the table."
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