Stockwatch Energy for yesterday
Energy Summary for Sept. 24, 2021
2021-09-24 20:15 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for November delivery added 68 cents to $73.98 on the New York Merc, while Brent for November added 84 cents to $78.09 (all figures in this para U.S.). Western Canadian Select traded at a discount of $11.70 to WTI, down from a discount of $11.65. Natural gas for October added 16 cents to $5.14. The TSX energy index added 1.80 points to close at 133.39.
Canadian oil stocks rose with oil prices. Some got a bit of extra help, such as Grant Fagerheim's Alberta- and Saskatchewan-focused Whitecap Resources Inc. (WCP), up 55 cents to $6.44 on a heavier-than-usual 12.4 million shares. Whitecap got a lovely mention from Raymond James analyst Jeremy McCrea. He wrote in a research note this morning that Whitecap's finances and drilling prospects are looking better than ever, perhaps setting the stage for a special dividend, share buyback or other "shareholder-friendly catalysts." The analyst hiked his price target on the stock to $10 from $9. His remarks appeared in The Globe and Mail and thus gained broad readership.
(The Globe opted not to mention this, but Mr. McCrea's employer, Raymond James, seeks to do business with the companies that its analysts cover. An "equity research register" that Raymond James published earlier this month included Whitecap on the list of companies from which the institution "expect to receive or intend to seek compensation for investment banking services ... within the next three months.")
Elsewhere in Alberta, the Montney-focused Pipestone Energy Corp. (PIPE) added one cent to $2.60 on 387,700 shares. Its largest shareholder is dissolving and redistributing its interests, some of which will go to other major shareholders. The dissolving shareholder is Canadian Non-Operated Resources (CNOR). CNOR, formed in 2014 with capital from Grafton Asset Management and Riverstone Holdings, has been a significant backer of Pipestone since 2019. It perhaps played a role in Riverstone's own decision to invest in Pipestone in 2020. Until now, CNOR has controlled a 37-per-cent interest in Pipestone, and Riverstone a 23-per-cent interest.
Why CNOR is dissolving was not specified in Pipestone's press release, but the company noted that some of CNOR's shares and entitlements will now flow sideways to Riverstone. This will boost Riverstone's interest to 40.5 per cent. Conveniently, the two shareholders were already so aligned that the same two directors were serving as both the CNOR and the Riverstone representatives on Pipestone's board (Robert Tichio and Jesal Shah). This should save some shuffling. Pipestone will, however, need at least one new director, because some of CNOR's other rights are flowing to a UAE-based investment company. This company will control an 11.2-per-cent interest and have the right to one board nominee.
Separately, Pipestone has added a just-because director. It chose Kim Anderson. Ms. Anderson is the former chief financial officer of Athabasca Oil Corp. (ATH: $0.86), which she left in 2019 (getting out well ahead of the February, 2022, due date for $450-million (U.S.) in debt that Athabasca is currently scrambling to refinance). Her stated reason for leaving was to "pursue an opportunity outside of upstream oil and gas." She headed a bit downstream instead, and is now the CFO of Heartland Generation, a private company that runs power plants in Alberta and British Columbia.
Another Alberta Montney producer -- though that is not its big dream -- is Michael Binnion's Questerre Energy Corp. (QEC) up 1.5 cents to 19.5 cents on a heavier-than-usual 271,800 shares. Questerre is doggedly trying to make something of itself not in Alberta but in Quebec, if only it can achieve the "social licence" that has eluded it for more than a decade. It announced late yesterday that it has applied to the Quebec government to test a reservoir for a potential carbon storage project.
"This will be the first test of its kind in Quebec," cheered Questerre's founder, president and chief executive officer, Mr. Binnion. He noted that Questerre holds exploration rights over one million acres in the province. These should enable participation in what he hopes will be a "giant emerging new green market."
All this talk of Questerre wanting to be the first at something in Quebec, or predicting a major new market, is nothing new to its shareholders. The company has been in the province since 2001. In 2008, it helped discover the Utica shale, a massive formation estimated to hold enough gas to supply the province for a century. The discovery sparked heady talk that Quebec could join the ranks of Canada's producing provinces as early as 2009. Questerre tried its hardest, but amid the hooting and hollering of eco-activists, the province effectively disavowed all development. Questerre suspended most of its work in Quebec in 2010 and halted the rest of it in 2013. (It was also around this time that Questerre hedged its bets and entered the far more hospitable Alberta.)
Mr. Binnion is not giving up on Quebec yet. As chairman of the Quebec Oil and Gas Association, he took it upon himself (and Questerre's patient shareholders) to prove that a so-called "social licence" is somehow achievable. The carbon project is part of this plan; it is designed to eliminate emissions associated with the production of gas. A decade of eco-squawking has ensured that there is not any gas production yet, but maybe, just maybe, Questerre can change that, if it appeases the carbon gods first. Then some of its other thousands of square kilometres of exploration rights could go back to their original intended use.
That is the hope, at any rate. It is also a long shot. "Quebec is preparing to close the books for good on oil and gas production," blared a story in The Globe and Mail just two days ago. The news hook was a lawsuit filed on Aug. 30 by the private Quebec-based Utica Energy. Utica is alleging that the Quebec government illegally denied a permit for one of Utica's projects, Galt, and "annihilated any possibility of exploring, producing and developing hydrocarbon resources." The situation is even messier than it sounds: The Quebec government and Utica are technically partners at Galt, as the government owns 17 per cent of the project, a holdover from a brief flirtation with oil and gas five years ago. The government says it wants to sell this interest but -- shockingly -- it cannot find a buyer.
Questerre wants no part of the mess. It knew of the lawsuit before the Globe reported it, issuing a statement on Sept. 15 to clarify that Questerre is not involved. "All options are on the table for the government of Quebec, and we hope carbon-neutral projects like ours will be allowed to proceed," said a carefully neutral Mr. Binnion. Yet the media spotlight on Quebec may have been a boon for the little stock. Today was Questerre's heaviest trading day in over six months.
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