Stockwatch Energy for yesterday
Energy Summary for Aug. 6, 2021
2021-08-06 20:54 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for September delivery lost 81 cents to $68.28 on the New York Merc, while Brent for October lost 59 cents to $70.62 (all figures in this para U.S.). Western Canadian Select traded at a discount of $13.87 to WTI, up from a discount of $14.25. Natural gas for September stayed unchanged at $4.14. The TSX energy index added 1.24 points to close at 122.80.
North Dakota Bakken producer Enerplus Corp. (ERF) added 15 cents to $7.42 on 2.46 million shares, after releasing its second quarter financials, which it took as an opportunity to hike its dividend for the second time this year. The new quarterly dividend is 3.8 cents, for a yield of 2.0 per cent. Enerplus was previously paying a quarterly dividend of 3.3 cents. It paid that dividend only once, in fact, as up until May, it was paying a monthly dividend of one cent.
Today's dividend hike came on the back of mixed financials. Enerplus recorded a net loss of $59.6-million, but it hastened to emphasize that its "adjusted" income was actually $67.9-million, if one agrees to ignore any pesky hedging losses (a common gadfly this earnings season). Production was a record 115,400 barrels of oil equivalent a day. This was up from 91,700 barrels a day in the first quarter, thanks to the takeover of Bruin E&P in mid-March, followed by the acquisition of Hess's Bakken assets in April. President and chief executive officer Ian Dundas said the new assets are contributing to a "significant increase in free cash flow generation." Not only will this cash flow support the higher dividend, said Mr. Dundas, but Enerplus is also preparing to resume share buybacks. The last time the company bought back shares was 2019.
Enerplus was not the only international producer contributing to the parade of quarterly financials. Colombian gas producer Canacol Energy Ltd. (CNE) added one cent to $3.15 on 388,500 shares, after turning a profit of $2.4-million (U.S.). Its habit of releasing monthly sales updates ensured that there were few surprises in the financials. Investors may have been taken aback to see a steep drop in Canacol's cash balance to $34.8-million (U.S.) as of June 30 from $71.5-million (U.S.) as of March 31. Canacol explained that during the second quarter, it made a semi-annual interest payment on its debt, paid its remaining income taxes from 2020 and prepaid its income taxes for 2021. It expects the government to return some of its earlier prepaid taxes in the coming weeks, which should give its working capital a boost.
Meanwhile, Egyptian oil producer TransGlobe Energy Corp. (TGL) added 10 cents to $2.09 on 92,800 shares, pleasing investors with its second quarter profit of $7.7-million (U.S.). The company boasted that "improved well optimization activities" helped boost its production to 13,100 barrels of oil equivalent a day in the quarter, up from the first quarter level of 12,200 barrels a day. It then enjoyed another climb to 13,400 barrels a day for the month of July.
Investors seemed pleased, although they were likely hoping for a firmer update on TransGlobe's nine-month-old agreement with the Egyptian government regarding its core licences in the Eastern Desert. The government agreed last December to merge and extend the licences while granting better financial terms. In the week following this announcement, TransGlobe's shares roughly doubled to $1.20 from 67 cents. A rally in Brent oil prices kept the stock rising to around $2, but it has been going sideways at that level since April, which is when the Eastern Desert agreement was supposed to be ratified by the Egyptian parliament. Today TransGlobe blamed the delay on the slow wheels of government. President and CEO Randy Neely remained optimistic that ratification will occur by the end of the year.
We now go back to Enerplus. In its financials, its CEO, Mr. Dundas, provided a blink-and-you'll-miss-it update on the controversial Dakota Access pipeline, otherwise known as DAPL (rhymes with apple). This is the main pipeline for North Dakota's Bakken oil producers. It became the centre of a high-stakes legal battle in July of last year, when a district judge ordered it to be shut down for an environmental review. A higher court overturned the order, and the federal reviewer said it could do the review while the line continued to run. Anti-pipeline activists attempted to get the White House to intervene, but this too was unsuccessful. The pipeline has therefore not lost a single day of operations. Now its confident operator, Energy Transfer, has decided to make the line even larger. Energy Transfer announced this week it has expanded DAPL to 750,000 barrels a day from 570,000. Enerplus, which has firm capacity on the line, briefly noted the expansion in its financials. Meanwhile, a lawyer for the activists grumbled to The Associated Press today that the expansion is "outrageous."
One of DAPL's co-owners is Canada's Enbridge Inc. (ENB: $49.67), which is no stranger to pipeline outrage. Just this week, activists found an unusual ally in their fight to stop Enbridge's Line 3 project in Minnesota. The local Star Tribune reported yesterday that "manoomin" is listed as the first plaintiff in a new lawsuit filed against the Minnesota Department of Natural Resources. Manoomin is the Ojibwe word for wild rice.
The grain, being unable to navigate the ins and outs of the legal system on its own, included the local White Earth band and various tribal and green activists as fellow plaintiffs. The lawsuit will attempt to advance the legal theory that wild rice (and nature in general) has "inherent rights to exist, flourish, regenerate and evolve." It also demands that the state immediately revoke Line 3's water permits and stop police from arresting protesters who trespass along Line 3's route.
As legal manoeuvres go, this is a novel one. While activists often latch onto wildlife in their pipeline battles -- they claimed that everything from the whooping cranes to the pallid sturgeon to the burying beetle was opposed to TC Energy Corp.'s (TRP: $61.25) Keystone XL pipeline -- the usual arguments revolve around alleged violations of the Endangered Species Act or other laws, not the intrinsic rights of the species themselves. (One wonders about all those species that do not mind their rights to exist being snuffed out by tribal hunters and gatherers.)
It is not clear how far the wild rice lawsuit will proceed. The suit is currently filed in a tribal court, a very different beast from other U.S. courts. The activists will probably get the judgment they seek. A state court could either enforce the tribal court's judgment, or (more likely) it could find that the tribal court lacked jurisdiction. In that case, the matter could fizzle out or (more likely) it could be taken to federal court. Either way, one thing is clear: The voice of the wild rice will be ignored no longer.
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