Stockwatch Energy today
Energy Summary for Oct. 20, 2021
2021-10-20 20:26 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for November delivery added 91 cents to $83.87 on the New York Merc, while Brent for December added 74 cents to $85.82 (all figures in this para U.S.). Western Canadian Select traded at a discount of $13.30 to WTI, unchanged. Natural gas for November added eight cents to $5.17. The TSX energy index added a fraction to close at 157.46.
Any honeymoon period between the oil patch and new Calgary mayor-elect Jyoti Gondek is souring fast. In an interview yesterday, her first since winning Monday's municipal election, Ms. Gondek told Ryan Jespersen of "Real Talk" that her city -- the de facto corporate capital of the Canadian energy sector -- really ought to "move past" oil and gas production. Indeed, she said one of her first priorities for Calgary will be to declare a "climate emergency."
A politician, Ms. Gondek hedged her remarks as quickly as she made them. "I don't believe that talking about a climate emergency and oil and gas are mutually exclusive," she hastened to add. "... We are very good at energy production, and we are also leaders in innovative ways to practise energy production. So let's move past the outputs and start talking about the processes again, and let's put ourselves on the map as the city that is the absolute leader in a transition economy."
The backtracking won her few friends in energy circles. Many were quick to find a contradiction between the interview and a separate speech in 2018, when Ms. Gondek (then a city councillor) declared, "Because I'm a Canadian, and a public servant at the city of Calgary, I support Canada's oil and gas sector ... [as] Canada's oil and gas firms have repeatedly demonstrated leadership on a global stage." Canada Action (a pro-energy non-profit) dug up a video of the speech and posted it on its Twitter page. Meanwhile, former Saskatchewan premier Brad Wall made his own Twitter post, tersely suggesting that energy companies "move past" Calgary and "look to some other, more welcoming cities" for their headquarters. Mr. Wall sits on the board of one such Calgary-headquartered producer, Whitecap Resources Inc. (WCP: $7.66).
Mr. Wall may count himself fortunate that the kerfuffle in Calgary pales next to the quandary in Quebec. There, the government has just vowed to "definitively renounce the extraction of hydrocarbons on its territory," as stated by Premier Francois Legault in a throne speech yesterday. The fraught history of Quebec and its local oil and gas explorers -- the handful that are left, anyway -- was discussed in more detail in the Energy Summary for Sept. 24. The province initially welcomed domestic development and was thrilled when explorers found enough gas resources in 2008 to potentially supply the province for a century. Yet about a decade ago, the province effectively disavowed those explorers, blocking development and kowtowing to eco-activists (who never seem to kick up the same fuss about importing oil from Saudi Arabia, Russia and other countries less caring of the environment -- or of activists, for that matter).
One of the most persistent explorers in Quebec is Questerre Energy Corp. (QEC), unchanged at 20 cents on 21,500 shares. It has been trying its best in the province since 2001. Twenty years on, CEO Michael Binnion released a rather mournful reaction today to the new throne speech, drawing a contrast between now and the good old days. "I will remember forever the feeling [in 2008] of knowing we had actually done it -- we had found energy independence in natural gas for Quebec," he reminisced. The subsequent backlash "flummoxed" him. Over the years, Questerre strove to understand the concerns -- even committing to net zero emissions -- but these efforts went nowhere and the government is now calling for an outright ban, a situation he finds "disappointing."
Inevitably, Mr. Binnion went back to his usual plucky self, predicting that Quebeckers will one day give energy development the required "local acceptability" (presumably a new alternative to the deservedly derided term, social licence). "Our collaborative approach will not change," Mr. Binnion vowed. "... [We believe] we can co-operatively contribute to a positive difference for Quebeckers on environment, energy security and wealth ... and we are committed to working with the government and the people."
(Certainly this was a nicer conclusion than the one reached by a fellow Quebec explorer, the private Utica Resources. Utica issued its own press release, blaring that a ban would be "a historic error that will cost Quebeckers dearly." The company also demanded that the province "act fairly [and] quickly compensate, at fair market value, the expropriated companies that held rights in Quebec." It did not share its thoughts on what the market value might be. From the perspective of shareholders of Questerre -- which fortunately has some Alberta assets to prop up its 20-cent share price -- the value assigned to the Quebec assets is less than nothing.)
Back in Alberta, George Fink's Cardium-focused Bonterra Energy Corp. (BNE) added three cents to $6.92 on 44,300 shares. It has done some rebalancing of its balance sheet. Specifically, it has closed a $32-million private placement of units, with the units comprising debentures and warrants. The money will go toward paying down Bonterra's $265-million bank facility (which was $244-million drawn as of June 30). On that note, Bonterra and the bankers have "agreed to amend" the facility -- a delightfully mutual-sounding phrase that somehow always manages to mean a tightened leash for one side only. Indeed, the bankers are lowering the facility to $220-million. They will keep on lowering it to $200-million over the next five months.
There were a few other bits and pieces in the press release -- such as the conversion of $19.5-million of debt into debt-and-equity units, on the same terms as the private placement -- but the main thing that Bonterra wanted to emphasize was its newfound "enhanced flexibility and liquidity." Co-founder and CEO Mr. Fink showed his confidence by subscribing for $7-million of the $32-million private placement. In his view, "[Bonterra] has established a stronger position from which to execute on its business plan through the balance of 2021 and 2022."
Mr. Fink has previously indicated that Bonterra's near-term business plan is to pay down debt and then reinstate its dividend (which was suspended last year). "We don't feel like we need to grow [our 13,000-barrel-a-day production]. Our shareholders just want to go back to getting a cheque every month, or at least every quarter," he told CBC News in March. He himself will be looking forward to sizable cheques once that happens. Having steadily bought over 200,000 shares of Bonterra over the past year, Mr. Fink now controls 4.6 million shares, out of 33.7 million outstanding.
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