Stockwatch Energy for yesterday
Energy Summary for Oct. 29, 2021
2021-10-29 19:18 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for December delivery added 76 cents to $83.57 on the New York Merc, while Brent for January added six cents to $83.72 (all figures in this para U.S.). Western Canadian Select traded at a discount of $15.25 to WTI, up from a discount of $15.50. Natural gas for December lost 36 cents to $5.43. The TSX energy index added a fraction to close at 162.91.
Oil sands producer Imperial Oil Ltd. (IMO) lost $3.20 to $41.90 on 4.68 million shares, as it failed to meet investors' increasingly high expectations for the third quarter reporting season. To be clear, its production of 435,000 barrels of oil equivalent a day matched analysts' predictions, while its cash flow of $2.14 a share fell only somewhat short (analysts were expecting $2.24). Yet investors were hoping for a repeat of Suncor Energy Inc. (SU: $32.55). Suncor's shares have added more than $4 since it promised on Wednesday to (among other things) double its quarterly dividend to 42 cents. No such promises came from Imperial, which is sticking with its current quarterly dividend of 27 cents. Suncor's yield is now 5.2 per cent, to Imperial's 2.6 per cent.
Even the more-than-doubling of Imperial's net profit -- which soared to $908-million in the third quarter from $366-million in the second quarter -- did not seem to deter shareholders from jumping ship. "No changes to the dividend or share repurchases were announced, which we believe the market wants to see in light of Suncor's move," sighed Eight Capital analyst Phil Skolnick in a research note. Imperial's management hastened to staunch the bleeding during a subsequent conference call. Chief financial officer Daniel Lyons said the company is "actively evaluating options" to get more cash to shareholders, including a potential special dividend.
Elsewhere in Alberta, Andy Mah's Montney-focused Advantage Energy Ltd. (AAV) added one cent to $7.01 on 1.95 million shares, after it too released its third quarter financials. Shareholders had already sent the stock up by about $1 over the last five trading days in anticipation. The financials were indeed solid: Advantage's production of 50,000 barrels of oil equivalent a day was largely in line with analysts' predictions of 49,600 barrels a day, while cash flow of 32 cents a share exceeded analysts' predictions of 29 cents a share. While Advantage does not currently pay a dividend, it sees the writing on the wall clearly enough. It dutifully mentioned a desire to "potentially return capital to shareholders."
It is unclear whether Advantage might leave a dividend (or buyback) to be the swan song of departing chief executive officer Andy Mah, or perhaps an opening salvo of incoming CEO Mike Belenkie. Mr. Mah announced in July that he will be retiring at the end of this year. Mr. Belenkie, who has been with Advantage since 2018 and serves as president and chief operating officer, will take over. He was previously a founding vice-president of the private Modern Resources and stayed there from 2012 to 2018. In 2020, Tourmaline Oil Corp. (TOU: $44.73) bought Modern for $144-million.
On the B.C. side of the Montney, Dale Shwed's Crew Energy Inc. (CR) added 12 cents to $3.05 on 2.4 million shares, on top of the five cents it added yesterday after cheering its "successful transition to [a] pure-play Montney producer." Its enthusiasm is understandable in light of the five long years that this process has taken. As long-term investors are well aware, in addition to its core Montney assets, Crew owned heavy oil properties in the Lloydminster region of Alberta and Saskatchewan. It lost interest in Lloydminster years ago and ran a formal -- and unsuccessful -- marketing process from 2016 to 2018. Afterward, Crew kept them on the auction block on a less formal basis, but still no one bit. Now, with oil prices back at multiyear highs, Crew has finally found a long, long-awaited buyer for these assets. It will get a pleasant little payday of $10.3-million.
To put the price tag in context (although Crew understandably did not), analysts had valued the Lloydminster assets at $70-million to $100-million when they first went up for sale in 2016. Their production was higher then, of course, at around 2,400 barrels a day. Now they are barely producing 1,000 barrels a day. Regardless, CEO Mr. Shwed just seems happy to be rid of them. "Our team is in a stronger position to enhance value as we focus Crew's resources fully to the Montney," he declared. He added that Crew's Montney production had just hit 30,000 barrels a day. This means it is already coming up on its target of hitting 32,000 barrels a day by late 2022.
Another company in a production-boosting mood was Stephen Loukas's Alberta Cardium-focused Obsidian Energy Ltd. (OBE), unchanged at $4.80 on 512,700 shares. It added five cents yesterday as it nudged its full-year production target up to about 24,400 barrels a day from 24,200. The boost reflects the acceleration of three wells from the 2022 program into late 2021, as well as the "continued outperformance of our base production," declared Mr. Loukas.
Investors were likely more interested in the short update that Mr. Loukas provided on himself. He has extended his contract to serve as Obsidian's interim president and CEO until Dec. 31, 2022, a full one-year extension. This is much longer than the three-month extension that he agreed to in September. Of course, having served in this supposedly interim capacity since 2019, Mr. Loukas has not seemed in any hurry to find a replacement. That he came in the first place likely reflected his role as a co-founder and portfolio manager of FrontFour Capital, a U.S. hedge fund that owns about 5 per cent of Obsidian's shares. FrontFour has spent about $40-million amassing this position since 2013. This investment was worth as little as $778,000 during the dark days of 2020 (when Obsidian's stock touched a low of 20 cents), but with the stock now approaching $5, the position is now a more palatable (if still underwater) $20.9-million.
We end across the world with the Thailand-focused Pan Orient Energy Corp. (POE), which added 22 cents to $1.21 yesterday and another three cents to $1.24 today. Investors were cautiously pleased with Pan Orient's announcement yesterday that it wants to pay a 40-cent special dividend in February. This would cost about $19.9-million, within the company's means, given its self-estimated working capital and non-current deposits of $31-million. Pan Orient added that it will further improve its finances with the "initiation of a process to accelerate shareholder value." In other words, it wants to sell all of its assets by mid-2022 and then "pursue international oil and gas opportunities with a substantially scaled-down cost structure."
The latter half of the plan likely explains the lingering leeriness. There is quite a competitive fray building for international energy assets; other companies on the hunt include Tenaz Energy Corp. (TNZ: $0.345), TAG Oil Corp. (TAO: $0.445), Valeura Energy Inc. (VLE: $0.52) and New Stratus Energy Inc. (NSE: $0465). Some have been looking for over a year, with no luck. Time will tell how Pan Orient fares in the race.
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