Stockwatch Energy today
Energy Summary for Jan. 12, 2022
2022-01-12 20:47 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for February delivery added $1.42 to $82.64 on the New York Merc, while Brent for March added 95 cents to $84.67 (all figures in this para U.S.). Western Canadian Select traded at a discount of $12.39 to WTI, down from a discount of $12.24. Natural gas for February shot up 61 cents to $4.86. The TSX energy index added 2.58 points to close at 186.04.
The chorus of voices predicting triple-digit oil prices grew ever louder, as yet another portfolio manager made the call. Eric Nuttall of Ninepoint Partners told BNN late yesterday afternoon that prices could hit $100 (U.S.) by the end of the year. "The oil market remains exceptionally tight," said Mr. Nuttall. He added, "I believe we're in a structural bull market -- a multiyear bull market for oil that will end in all-time high oil prices."
Mr. Nuttall's boosterish comments come mere days after an RBC Capital Markets report found that a rising number of traders are betting on $100-(U.S.)-a-barrel crude. "Over the past week, open interest for June, 2022, WTI $100 (U.S.) calls has increased by 10 per cent. Since September, open interest between $105-(U.S.)- to $150-(U.S.)-per-barrel strike prices have increased 14 times," RBC analyst Michael Tran on Sunday. Three weeks prior to that, Goldman Sachs energy analyst Damien Courvalin told CNBC that it is "quite conceivable" that prices could ultimately rise to $100 (U.S.) or even $110 (U.S.).
Such a rise would be excellent news for Mr. Nuttall's Ninepoint Energy Fund, which was one of the hardest hit by oil's collapse in early 2020. At the bottom on March 18, 2020, his fund had just $26-million in assets under management, a 40-per-cent drop intraday and an 80-per-cent drop on the year. That amount rallied to $940-million by the end of 2021. Mr. Nuttall remains bullish on oil, telling his BNN interviewer that his top picks are oil sands player MEG Energy Corp. (MEG: $13.60), Montney producer ARC Resources Ltd. (ARX: $13.49), and Alberta and Saskatchewan oil producer Tamarack Valley Energy Ltd. (TVE: $4.63).
In the Alberta Cardium, Doug Bartole's InPlay Oil Corp. (IPO) added 51 cents to $2.91 on 1.94 million shares, pleasing investors with its 2022 guidance. "InPlay enters 2022 in the strongest position in the company's history," cheered Mr. Bartole, president and chief executive officer. During 2021, InPlay returned to pre-COVID production of 5,000 barrels a day, pushed it higher through drilling and then capped off the year with the takeover of Prairie Storm Resources. As a result, forecast production in 2022 is 8,900 to 9,400 barrels a day, a "top-tier" rise of more than 50 per cent from 2021, gushed Mr. Bartole. He added that "record financial and operational results are anticipated again in 2022."
To hear Mr. Bartole talk, InPlay is set for a glorious 2022, a year that also happens to mark its 10th birthday. It was founded in 2012, shortly after Mr. Bartole merged his previous promotion, Vero Energy, into TORC Oil & Gas (which itself was acquired in 2021 by Whitecap Resources Inc. (WCP: $8.60)). Vero was a gas producer that had only just found its way into the Cardium by the time of the merger. InPlay picked up where Vero left off. It went public in 2016, a difficult time to do so, and the stock fell rapidly from its opening price of around $2. It was below $1 by late 2018 and got as low as five cents once the pandemic hit in early 2020. Patient investors have been rewarded since then with the stock's climb to today's close of $2.91.
Elsewhere in the Cardium, Stephen Loukas's Obsidian Energy Ltd. (OBE) lost 22 cents to $7.28 on 1.04 million shares, after announcing an "adjustment" to its credit facility. It used that word five times in three paragraphs -- hardly a good sign. The end result is that the commitment amount under the facility is now $366-million (U.S.) instead of the prior level of $415-million (U.S.).
Obsidian was unfazed, having previously hinted at this possibility in November. It kept the attention on how aggressively it is trying to reduce debt. The company has been struggling with its balance sheet for years, even temporarily putting itself up for sale in 2019 in hopes that someone else would want to adopt the problem. When no one did, interim president and CEO Mr. Loukas -- still in possession of his "interim" tag, years after taking the job in 2019 -- buckled down and won concessions and extensions from creditors in 2020 and 2021. As things stand now, Obsidian has about $37.7-million (U.S.) in outstanding notes due in November, 2022, and north of $320-million (U.S.) drawn on its credit facility. Mr. Loukas has said he wants to conduct a broad refinancing of the debt in 2022. He may have more to say when Obsidian releases its full-year guidance on Jan. 24.
One shareholder surely watching out for the guidance is FrontFour Capital, the hedge fund where Mr. Loukas is a partner, managing member and portfolio manager. FrontFour began investing in Obsidian nearly a decade ago and spent about $40-million acquiring a 5-per-cent interest from 2013 to 2019. At the bottom of the downturn in 2020, this position was worth a painful $778,000. It has since rallied to $28.3-million -- not above water yet, but certainly breathing easier.