Stockwatch Energy today
Energy Summary for Jan. 6, 2022
2022-01-06 20:29 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for February delivery added $1.61 to $79.46 on the New York Merc, while Brent for March added $1.19 to $81.99 (all figures in this para U.S.). Western Canadian Select traded at a discount of $12.12 to WTI, up from a discount of $12.15. Natural gas for February lost seven cents to $3.81. The TSX energy index added 5.17 points to close at 175.77.
Oil prices had another buoyant day, with WTI briefly surpassing $80 (U.S.) for the first time since November. Traders have their eye on potential supply disruptions on OPEC+ member Kazakhstan, where a New Year's Day fuel price hike has triggered deadly protests. "The political situation in Kazakhstan is becoming increasingly tense," opined Commerzbank this morning. Meanwhile, Libya is grappling with its own supply issues, with its national oil company announcing today that production is currently just 729,000 barrels a day because of maintenance and shutdowns. (Libyan production reached a high last year of 1.3 million barrels a day. Production in Kazakhstan is around 1.6 million.)
Here in Canada, oil sands giant Suncor Energy Inc. (SU) added 44 cents to $33.85 on 12.1 million shares. The gain reflected higher oil prices and came in spite of a tragedy at one of Suncor's oil sands operations. One worker died and two more were injured after two haul trucks collided this morning at Suncor's base mine, according to The Canadian Press. Suncor confirmed the report on its Twitter account and called itself "deeply saddened [by] today's incident." It did not release names (which are typically kept quiet until the next of kin are notified).
The RCMP and Alberta's Occupational Health and Safety agency are conducting an investigation. Fatalities are generally rare in the oil patch, but this is the third deadly incident at a Suncor project in barely a year. Last January, a worker at the base plant died after a bulldozer he was operating fell through a frozen tailings pond, while in late December, 2020, two workers at Suncor's Fort Hills mine died in a collision between a bulldozer and a truck.
It is not clear whether poor weather was a factor in today's accident. Currently, much of Alberta is under extreme cold warnings, with wind-chill temperatures plunging as low as minus 50 degrees. This has also been playing a role in rising oil prices. Late yesterday, TC Energy Corp. (TRP: $60.63) announced a temporary shutdown of its Keystone pipeline, citing unplanned cold-related maintenance.
Elsewhere in Alberta, Stephen Loukas's Cardium-focused Obsidian Energy Ltd. (OBE) added 28 cents to $6.54 on 876,000 shares. Today it patted itself on the back for getting "all drilling activity completed on schedule" for the second half of 2021. Interim president and CEO Mr. Loukas -- still holding on to that "interim" tag, even though he has been in the roles since December, 2019 -- forecast that Obsidian will achieve its 2021 production guidance of 24,600 to 24,800 barrels of oil equivalent a day. He added that Obsidian will release its 2022 guidance on Jan. 24.
Investors seemed pleased. The stock has risen every day for the last 10 consecutive trading days, climbing to $6.54 from just $4.18 since Dec. 20. This is excellent news for Mr. Loukas and the hedge fund that he co-founded, FrontFour Capital, which owns about 5 per cent of Obsidian's shares. FrontFour spent about $40-million acquiring these shares from 2013 to 2019. At the worst of the downturn in 2020, this position was worth a mere $778,000, but it has since rallied all the way to $25.4-million.
Over in Quebec, Michael Binnion's Questerre Energy Corp. (QEC) edged down two cents to 38 cents on 2.25 million shares. It too has been on a tear lately, more than doubling from 16.5 cents since Christmas Eve. As discussed in Tuesday's Energy Summary, some of the excitement reflects speculation that Questerre will receive significant compensation for its Quebec assets from the Quebec government, which banned oil and gas development in November.
Questerre finally addressed the rumours in an update this morning. An exhaustive update, it was not. While the press release did not mention IIROC, it bore all the hallmarks of a narrow answer to the regulator's typically narrow question about unusual trading activity, with Questerre claiming to be "unaware of any material undisclosed information."
Slightly more usefully to investors, chief financial officer Jason D'Silva acknowledged that "recent comments by the government of Quebec relating to potential compensation for revoking hydrocarbon licences in the province have been a focus." (He omitted the detail that these comments involved providing "as little compensation as possible," as the Quebec premier grumbled last month.) Mr. D'Silva pegged the book costs for Questerre's Quebec assets at over $100-million, while the registered costs could be $175-million or higher. He vowed to provide updated numbers in Questerre's next annual report. This is typically released in late March. In the meantime, said Mr. D'Silva, Questerre will "continue to monitor developments."
Further afield, Jeff Chisholm's Thailand-focused Pan Orient Energy Corp. (POE) added six cents to $1.23 on 3,000 shares. The company cheered today that its net oil sales in Thailand averaged roughly 1,400 barrels a day in the fourth quarter. The annual reserve report is in the works, with completion expected in February, and a rig is on the way for a drill program starting in late March or April.
As discussed in the Energy Summary for Dec. 29, Pan Orient is currently trying to sell its Thai assets (as well as a non-producing bitumen asset in Alberta). It announced in October that it wanted to explore a "new direction" and "pursue international oil and gas opportunities with a substantially scaled-down cost structure." The new plan will also see Pan Orient pay a 40-cent special distribution, subject to shareholder approval at a special meeting on Jan. 18. The distribution is not conditional on the asset sales and Pan Orient is not expecting to finalize them until mid-2022. Then it will be on the hunt for its next "opportunities."
Aside from the word international, Pan Orient has not given any clues as to where it plans to look. Investors are likely expecting it to stay in southeast Asia. This is where president and CEO Mr. Chisholm has spent most of his career, even before he took charge of the company in 2005. Before that, he was the main geoscientist at the once-prominent Niko Resources while it was making sizable gas discoveries off the coast of India.
Alas, Niko is a name that many investors would probably prefer to forget. After a glorious decade where the stock went from about $6 in 2000 to a high of $115 in 2010, Niko suffered a much faster and harder fall from grace. Dwindling production, disputes with joint venturers and various political scandals -- including a guilty plea in 2011 for bribing a government official in Bangladesh -- all had Niko's stock back at the $6 mark by 2013. It continued to decline until it finally delisted in early 2019. It was then trading at exactly one penny.
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