Stockwatch Energy today
Energy Summary for Sept. 13, 2021
2021-09-13 20:50 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for October delivery added 73 cents to $70.45 on the New York Merc, while Brent for November added 59 cents to $3.45 (all figures in this para U.S.). Western Canadian Select traded at a discount of $11.94 to WTI, up from a discount of $11.96. Natural gas for October shot up 29 cents to $5.23. The TSX energy index added 5.28 points to close at 130.13.
Oil prices headed higher, buoyed by a bullish new demand forecast from OPEC and the spectre of ore supply disruptions along the U.S. Gulf Coast. OPEC released the latest version of its closely watched monthly report this morning. Although analysts had spent the last few days fretting about COVID-19 and predicting that OPEC would decrease its 2022 forecast for global oil demand, the group instead increased this forecast to 100.8 million barrels a day. This figure exceeds pre-COVID levels and represents a 900,000-barrel-a-day increase from last month's estimate.
On the supply side, the U.S. Gulf Coast energy industry is bracing for another hurricane hit. Barely two weeks have passed since Hurricane Ida idled over 90 per cent of the region's offshore oil production, with 40 per cent remaining off-line as of today. Now Tropical Storm Nicholas is closing in and may exacerbate Ida's damage. The National Hurricane Center is forecasting landfall in Texas late this evening.
Here in Canada, Craig Bryksa's Crescent Point Energy Corp. (CPG) was in a jolly mood, adding 62 cents to $4.92 on 16.4 million shares. The Alberta- and Saskatchewan-focused producer is raising its dividend for the first time in 13 years. It will now have a quarterly payout of three cents, for a yield of 2.4 per cent.
Previously an energy income trust, Crescent Point began paying a distribution in 2003, getting it as high as 23 cents a month by 2008. It converted to a corporation in 2009 but kept the dividend at the same level -- right up until 2015, when it succumbed to collapsing oil prices and a mountain of debt. The dividend went through four steep slashes before getting to its most recent level, a nominal one-quarter of a cent every quarter (or one cent annualized). The yield was a barely noticeable 0.2 per cent as of Friday's close.
Although Crescent Point's debt is still rather mountainous -- $2.3-billion as of June 30, relative to a current market cap of $2.8-billion -- the company says its copious cash flow is letting it revive a glimmer of the high-yielding days of yore. The annualized dividend is shooting all the way up to 12 cents from just a penny. "We are committed to a model that returns capital to shareholders," declared Crescent Point's president and chief executive officer, Mr. Bryksa (seemingly acknowledging that the prior dividend did almost nothing of the sort). In addition, Mr. Bryksa unveiled Crescent Point's preliminary 2022 guidance. The tentative production goal is 131,000 to 135,000 barrels of oil equivalent a day. While this is a noticeable decrease from its average output of 148,600 barrels a day in the second quarter of 2021, investors chose to keep their attention on the rising dividend. Mr. Bryksa even made sure to add that the new dividend, like a new baby or a new potted plant, "has the ability to grow over time."
Further afield, Philip O'Quigley's Australian shale explorer, Falcon Oil & Gas Ltd. (FO), edged down half a cent to 14.5 cents on 848,700 shares. It has appointed Joe Nally as its new chairman and has also hired a London-based PR firm. (As European markets tend to be friendlier than North American ones for far-flung, adventurous juniors, Falcon is listed on both the TSX-V and the London AIM board.) The additions come on the heels of good news from Australia, where, as discussed in the Energy Summary for Sept. 3, a new test of an old well sent Falcon flying up to 16.5 cents from 8.5 cents in a single day. The stock has dipped slightly since then but is hoping that the newcomers will help guide it back up.
Mr. Nally should be a good choice. He has been a familiar face in London's capital markets for 45 years, from the Thatcher era to post-Brexit. In February, 2021, he retired from Cenkos Securities, the prominent U.K. brokerage that he co-founded in 2004. His time at Cenkos saw him involved in raising an estimated total of 21 billion pounds. A City A.M. article on his retirement called him a "prolific raiser of capital for many growth companies over his long career, such as Cove Energy, Western Canadian, Barrick and Majestic Wine, to name but a few." Just the first name, Cove Energy, should ring a bell for Falcon's investors. For a time Falcon was a promotion of John Craven, the one who sold Cove for 240 pence a share in 2012, just three years after it listed at 12 pence in 2009. Both Mr. Craven and the above-noted Mr. O'Quigley joined Falcon in 2012, as chairman and CEO, respectively. The former left in 2016 but the latter is still around. In 2019, Mr. O'Quigley deepened the ties to Mr. Nally by hiring Cenkos as Falcon's sole broker and nominated adviser.
Today, both men declared themselves "delighted" that Mr. Nally is joining Falcon as chairman. He has plenty of incentive to see the stock head higher, having just been granted an option to buy three million shares at 10 pence. The AIM-listed shares closed today at 8.25 pence.
Another international explorer is making some PR moves. Craig Steinke's Reconnaissance Energy Africa Ltd. (RECO), up 61 cents to $6.88 on 1.49 million shares, announced on Friday after the close that it has terminated its contract with IR provider Proconsul Capital. To replace Proconsul, it has hired John Dalton, managing partner of McDonald Dalton Capital Partners.
This too comes at an interesting time for Reconnaissance. It had hired Proconsul in January, 2021, while it was embarking on its very first drill program in the Kavango basin of Namibia. So far it has drilled two test wells and found "evidence" of hydrocarbons in both of them. Although it has not tested either well, enough hype was brewed to send the stock up to nearly $14 in June from about $2.25 in January -- not bad at all, Proconsul must have thought. In late June, however, Reconnaissance caught the eye of a U.S. short-seller, Viceroy Research, which is of the opinion that Reconnaissance is nothing but a pump-and-dump. Its non-stop barrage of negative commentary has likely played a role in the stock's decline to today's level of $6.88.
With fresh seismic data expected next month and another round of drilling scheduled to begin by year-end, Reconnaissance is trying to lure back investors. It thanked Proconsul today for its "excellent service," but said it will now give the IR consulting work to the above-noted Mr. Dalton. Presumably it is looking to take advantage of his connections in the U.S. energy industry. (Before heading into investment banking, Mr. Dalton was chairman of ATAG Energy, an oil and gas service provider.) Reconnaissance will compensate him with a five-year option to buy 100,000 shares at $6.23.
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