Stockwatch Energy today
Energy Summary for July 16, 2021
2021-07-16 20:00 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for August delivery edged up 16 cents to $71.81 on the New York Merc, while Brent for September added 12 cents to $73.59 (all figures in this para U.S.) -- a modest recovery to end the week, but it was still the worst week for both benchmarks since March. Western Canadian Select traded at a discount of $13.20 to WTI, unchanged. Natural gas for August added six cents to $3.67. The TSX energy index lost 4.17 points to close at 125.68.
Even gas producers felt today's malaise. Canada's largest gas producer, Mike Rose's Tourmaline Oil Corp. (TOU), lost 39 cents to $33.57 on 2.24 million shares, even as it cheered no fewer than five transactions. The largest was the closing of its $1.1-billion takeover of Black Swan Energy. Tourmaline announced this takeover a little over a month ago, seeking to expand its position in the North Montney. In the same general area, Paramount Resources Inc. (POU: $15.80) announced in May that it would sell its Birch asset for $77-million. Tourmaline has now revealed itself as the buyer and closed the deal. These two purchases mark the end of Tourmaline's "two-year consolidation initiative," said Mr. Rose, Tourmaline's founder, chairman and chief executive officer. It was quite the shopping spree while it lasted. Over those two years, Tourmaline spent around $2-billion and boosted its production to 475,000 barrels of oil equivalent a day from 290,000.
Black Swan and Birch were just two of the five transactions that Tourmaline discussed today. The next two both involved Topaz Energy Corp. (TPZ: $16.37), the royalty and infrastructure subsidiary that Tourmaline spun out in 2019. Tourmaline previously agreed to sell Topaz $245-million worth of royalty assets in May. That deal has now closed, and a new, similar one has been announced, this time for $145-million.
As for the fifth and final deal, it underscored why Mr. Rose has been so keen for Tourmaline to expand in the North Montney. While announcing the Black Swan takeover in May, Mr. Rose opined that he views the North Montney as "the key subbasin for supplying Canadian LNG [liquefied natural gas]." Now Tourmaline has entered a 15-year supply deal with Cheniere, the largest LNG company in the United States. The agreement will take effect in 2023 and see Tourmaline supply about 24,000 barrels a day of raw gas to Cheniere's Corpus Christi liquefaction terminal in Texas.
The Tourmaline CEO was not the only busy member of the Rose household today. Mr. Rose happens to be married to Susan Riddell Rose, who is a CEO in her own right, at Alberta oil and gas producer Perpetual Energy Inc. (PMT). Today, Perpetual added five cents to 37 cents on 235,500 shares, after announcing the creation of a "high-growth, pure-play" spinout. The spinout will acquire all Perpetual's assets in the Clearwater play of Alberta for $60-million. The deal also includes a little wink from Ms. Riddell Rose to her husband: The name of the spinout is Rubellite Energy; the rubellite is a rare type of tourmaline. Indeed, gemstone experts say the rubellite is the tourmaline family's most prized and expensive member, long admired for its magnificent colour range from tender pinks and purples to dramatic reds and violets.
Almost as sparkly as a rubellite will be Perpetual's balance sheet once the deed is done. Perpetual has been scrambling to stay ahead of its debt woes for nearly six years now, going all the way back to November, 2015. Long-term investors -- if any of them are still around -- will remember the sweeping recapitalization that Perpetual announced that month, complete with a rights offering, a shares-for-debt swap, and all kinds of extensions and amendments. That closed in 2016, as did a painful 1-for-20 rollback that Perpetual conducted shortly afterward. Then came heaps of asset sales. Notably, Perpetual's assets included millions of shares of Tourmaline that had been acquired through an earlier asset sale; these shares proved useful on several occasions. By March 31, 2021, Perpetual's net debt was $107-million. Yet its current market cap is just $23-million, and the 37-cent stock remains a long, long way down from its rollback-adjusted 2014 high of $47.
Ms. Riddell Rose cheered today that the Rubellite Energy arrangement will go a long way toward mopping up the remaining debt. Of the $60-million price tag, $58-million is cold, hard cash, which will head straight to the balance sheet. The rest represents a five-year option to buy four million shares of Rubellite. In this way, Perpetual will maintain an indirect interest in the Clearwater play. This is enjoying quite the moment in the spotlight. Companies such as Headwater Exploration Inc. (HWX: $3.74) and Tamarack Valley Energy Ltd. (TVE: $2.28) have been pouring into the Clearwater since late 2020. For context, Headwater's deal saw it pay $100-million for assets producing 2,800 barrels a day, for a per-barrel value of $35,000. Perpetual will now receive $60-million for assets producing 350 barrels a day -- a per-barrel value of $171,000. This undoubtedly takes some of the sting out of the fact that Perpetual has been wanting to develop the Clearwater for years, but finances held it back. It will now watch Rubellite while working on its Edson and Mannville assets elsewhere in Alberta.
Further afield, Serafino Iacono's Colombian gas explorer, NG Energy International Corp. (GASX), edged down one cent to 90 cents on 354,000 shares. It is losing one board member and gaining two. The departing director is Frank Giustra, a shell promoter and long-time associate of Mr. Iacono. Both of them started working on the NG Energy promotion in 2017. At the time, Mr. Iacono had just left his previous job leading Pacific Rubiales Energy, a Colombian oil producer whose stock got as high as $35 and then collapsed into bankruptcy. It underwent a restructuring -- without Mr. Iacono -- and has since re-emerged as Frontera Energy Corp. (FEC: $6.90). Mr. Iacono, meanwhile, turned his attention to a different Colombian company and took it public in 2017 through one of Mr. Giustra's old shell graduates. That company is NG Energy and is hoping to achieve production at its gas assets later this year. It will have to do so without Mr. Giustra on its board. He still holds 19.5 million of its 105 million shares, however, so he should continue to pop up in insider disclosure reports.
Two newcomers will replace him on the board. The first is Jeffrey Harder, a former lead partner at Deloitte Canada until his retirement in 2019. He has been in the financial advisory business for over 40 years. The other new director is Calderon Berti, who brings political connections. He is the former head of Venezuela's Ministry of Energy and Mines -- in which capacity he served as president of OPEC in the 1980s -- and is also the former president of PDVSA (Venezuela's state-owned petroleum company). Ron Pantin, NG Energy's executive chairman, is also a former PDVSA executive.
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