Stockwatch Energy today
Energy Summary for Aug. 25, 2021
2021-08-25 20:20 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for October delivery added 82 cents to $68.36 on the New York Merc, while Brent for October added $1.20 to $72.25 (all figures in this para U.S.). Western Canadian Select traded at a discount of $12.90 to WTI, unchanged. Natural gas for September stayed unchanged at $3.90. The TSX energy index added a fraction to close at 119.68.
Alberta oil sands producer Imperial Oil Ltd. (IMO) added 24 cents to $33.13 on 1.86 million shares. It made national headlines this morning after proposing to build a "world-class" (is there any other kind?) renewable diesel complex at its Strathcona refinery near Edmonton. "Imperial is excited to announce our plan to build the largest renewable diesel manufacturing facility in Canada," declared president and chief executive officer Brad Corson. He marvelled that the complex could produce over one billion litres of green diesel annually.
Renewable diesel fuel, or green diesel, is a biofuel that is chemically the same as petroleum diesel fuel -- allowing it to be used in traditional pipelines, storage tanks and diesel engines -- yet is derived from biomass such as canola, soybeans, other crops, wood and even sawdust. This gives it a lower carbon intensity. This in turn makes it an "advantaged fuel" under Canada's new Clean Fuel Standard, which will take effect next year and require fuel suppliers to reduce the carbon intensity of their products by over 10 per cent by 2030. Imperial will add a touch of "blue" to the green diesel by using so-called blue hydrogen, derived from fossil fuels, to help process the crops into diesel. (Hydrogen as an energy source was discussed in the Energy Summary for May 11, 2021, when Suncor Energy Inc. (SU: $23.54) and Atco proposed building a facility near Edmonton to help "establish Canada as a global leader in clean hydrogen.")
Imperial's vice-president, Jon Wetmore, told The Globe and Mail today that the renewable diesel complex would create the equivalent of three million tonnes per year of emissions reductions. Customers are "really interested and keen on this," he said. Assuming that Imperial can rack up enough interest -- and enough government funding, which Mr. Wetmore acknowledged the company to be seeking -- Imperial wants to make a final investment decision next year and start producing the diesel in 2024.
Imperial did not reveal a price tag for the complex. A comparison may be found in neighbouring Saskatchewan, where Federal Co-operatives Ltd. (FCL) wants to build a renewable diesel plant near Regina, with the goal of opening in 2025 and generating one billion litres of diesel annually (roughly the same size and timeline as Imperial). The Western Producer, a regional news outlet, reported in March that the cost of the Regina facility could reach $2.4-billion. FCL could also consider spending less upfront and scaling up over time.
Back in Alberta, Alex Verge's Journey Energy Inc. (JOY) lost seven cents to $1.16 on 283,000 shares. It is dotting and crossing the last few i's and t's of its takeover of the private Briko Energy. The $6.6-million cash-and-share takeover was announced in June and closed last week, with Briko filing a regulatory notice yesterday to confirm that it will cease to be a reporting issuer.
Briko, a private Cardium junior producing about 680 barrels of oil equivalent a day, had been a promotion of Mike Kohut, John van de Pol and Tim de Freitas. They previously sold Ikkuma Resources to Pieridae Energy Ltd. (PEA: $0.285) in 2018. As part of that deal, shareholders of Ikkuma, which was public, received shares in Briko, which stayed private. The lack of a listing made it difficult for Briko shareholders to trade the shares. Now that those shares have been converted into shares of Journey, it seems that many early Briko shareholders are grabbing the chance at liquidity, putting some selling pressure on Journey's stock.
One director has been doing his best to counter the pressure. Over the last week and half, while Journey's stock went from a high of $1.38 to a low of $1.05, director Craig Hansen bought 46,100 shares at an average of $1.21. This more than doubled his position to 81,100 shares (out of 47.5 million outstanding). Mr. Hansen has been a director of Journey since June, 2019, and is also the founder of C.H. Hansen Engineering Ltd., an engineering consulting firm. He also served as president of the once-public Zargon Oil and Gas since 1993. Zargon traded above $24 in 2011 -- or $480 if one adjusts for a 1-for-20 rollback in 2019 -- but succumbed to debt woes in 2020, delisting at 4.5 cents and filing for bankruptcy in September. The private Blue Sky Resources bought it for a song in January.
Mr. Hansen was not the only insider doing some shopping. Mike Rose's Tourmaline Oil Corp. (TOU), up three cents to $31.57 on 2.44 million shares, and Grant Fagerheim's Whitecap Resources Inc. (WCP), up four cents to $5.27 on 2.94 million shares, have both seen some buying lately from their respective CEOs, being Mr. Rose and Mr. Fagerheim. Mr. Rose has spent a cool $637,000 buying 20,000 shares of Tourmaline since the start of the month. Over the same period, Mr. Fagerheim has bought 40,000 shares of Whitecap, spending $213,000. The executives seem confident that their recent acquisitiveness will pay off. Both Tourmaline and Whitecap treated the downturn as an opportunity to scoop up desirable assets, with Tourmaline buying Jupiter Resources, Modern Resources and Black Swan Energy (just to name a few) and Whitecap snatching up NAL Resources, TORC Oil and Kicking Horse.
We end on a victorious note, with Enbridge Inc. (ENB: $42.29) securing a legal win for its Line 3 pipeline. The Minnesota Supreme Court has declined to hear an appeal by anti-pipeline activists trying to halt Line 3's construction. For clarity, the original Line 3, which carries Canadian crude from Alberta to Wisconsin (crossing North Dakota and Minnesota en route), has been in the ground since the 1960s. Enbridge has been trying since 2013 to upgrade and expand the line, and was finally able to start doing so in 2020. Activists headed to court to try to overturn the pipeline's permits. A lower court rebuffed them in June, and now the highest court in the state has done much the same, issuing a single-page document declining to hear the issue.
The court's decision effectively upholds the permits and allows construction, which is already about 90 per cent complete, to head to the finish line (expected by year-end). Yet the activists remain undaunted by their dwindling legal options. Today, they held a series of events outside the state capitol in St. Paul, including a rally to demand that U.S. President Joe Biden step in and kill Line 3 once and for all. They will also surely continue their less legal antics along the pipeline's route, which in the last year have reportedly seen more than 700 protesters receive their eco-merit badges, otherwise known as tickets and arrests.
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