Stockwatch Energy today
Energy Summary for Jan. 13, 2022
2022-01-13 20:46 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for February delivery lost 52 cents to $82.12 on the New York Merc, while Brent for March lost 20 cents to $84.47 (all figures in this para U.S.). Western Canadian Select traded at a discount of $12.46 to WTI, down from a discount of $12.39. Natural gas for February lost 59 cents to $4.27. The TSX energy index lost 1.05 points to close at 184.99.
With oil prices hovering near multiyear highs, some companies are putting out feelers to gauge interest in previously unloved assets. Oil sands giant Imperial Oil Ltd. (IMO) added 38 cents to $49.81 on 1.83 million shares, after announcing that it is marketing its 50-per-cent interest in XTO Energy Canada. XTO produces over 32,000 barrels a day from unconventional plays such as the Montney and Duvernay. Imperial, which took a $1.17-billion impairment charge on its unconventional assets (including XTO) during 2020, is looking to shake them off and focus on the oil sands.
Typically, the first party that one might look at to buy a 50-per-cent interest is the other 50-per-cent owner, which in this case is Imperial's U.S. parent company, ExxonMobil. Yet Exxon says it too is marketing its share. It wants to focus on core assets in the oil sands, the U.S. Permian basin, and offshore South America. During 2020, Exxon logged the biggest writedown in its history -- almost $20-billion (U.S) -- mostly stemming from its ill-fated acquisition of XTO Energy a decade earlier. (Worth noting is that the acquisition and the subsequent writedown mostly involved U.S. gas assets, with the Canadian assets playing a relatively small role, hence the gap between Exxon's writedown and Imperial's. The assets that Exxon is now marketing are just on the Canadian side.)
Neither Imperial nor Exxon gave any clues as to the potential proceeds of a sale. Analysts are pegging the value anywhere from $500-million to $1-billion, though most seem clustered at the high end. In a research note this morning, Eight Capital analyst Phil Skolnick estimated the value at $970-million to $1.13-billion, which would represent $485-million to $565-million net to Imperial. He said Imperial's decision to sell the assets "does not come as a surprise" in light of its comments about its unconventional assets in 2020. (As for Exxon, it has been putting all manner of assets on the block since 2019, when it said it wanted to close $25-billion (U.S.) in asset sales by 2025.)
Elsewhere in Alberta (and Saskatchewan), Brian Schmidt's Tamarack Valley Energy Ltd. (TVE) edged down three cents to $4.60 on 6.71 million shares. The stock spent the last week climbing from $3.99, suggesting that not every aspect of today's announcement was a complete surprise. Mr. Schmidt was "excited" today to unveil Tamarack's 2022 guidance and launch its first dividend.
The guidance was generally as expected, with Mr. Schmidt talking up a "strong 2022 plan" to produce 45,000 to 46,000 barrels a day on a budget of $250-million to $270-million. Two-fifths of that will go to the up-and-coming Clearwater play. Tamarack entered Clearwater in late 2020 and closed four acquisitions there in about a year, boosting its production in the play from nothing to about 12,000 barrels a day. Now it will prioritize drilling, with the play getting 92 of the 126 wells planned this year.
This year will also see Tamarack pay its first dividend, something Mr. Schmidt has been toying with, hinting at and finally outright promising for months. The new monthly dividend of 0.83 cent (or 10 cents annualized) represents a yield of 2.2 per cent.
Further afield, John Wright and Corey Ruttan's Brazilian gas producer, Alvopetro Energy Ltd. (ALV), added 16 cents to $4.76 on 14,300 shares. President and CEO Mr. Ruttan patted the company on the back this morning for "clos[ing] out 2021 with another strong quarter of production performance." Strong is a word only a promoter would use when disclosing that production fell to 2,400 barrels a day in the fourth quarter from 2,500 in the third quarter. The promoter would have to remind investors -- and Mr. Ruttan did -- that production in late 2020 was barely 1,900 barrels a day, making the numbers look much better on a year-over-year basis.
As for the coming year, Mr. Ruttan provided little in the way of guidance, beyond referencing some "exciting" planned developments at the Murucututu/Gomo project. The company previously drilled two wells at this project in 2014, but then got busy with its core producing field, Cabure. The 2020 pandemic threw another delay into the works. Finally, during 2021, Alvopetro was able to declare commerciality at Gomo and make plans for a nine-kilometre pipeline connecting it to Cabure. The pipeline should be finished "in the coming weeks," declared Mr. Ruttan today, "[and should] enable the start of production and the broader development of the field."
So confident is Alvopetro in its future operations that it started paying a quarterly dividend of 6 U.S. cents in October. The yield is a generous 6.3 per cent, but thanks to a trim share count of just 33 million -- achieved through a 1-for-3 rollback in September -- the annualized cost is a manageable $10-million. Today Mr. Ruttan reiterated his commitment to "provide direct returns to shareholders through ongoing quarterly dividends."
Investors seemed pleased. Many are hoping that Alvopetro will be the third successful Ruttan-Wright promotion in South America, following Pacalta Resources (sold for $1-billion in 1999) and Petrominerales (sold for $1.6-billion in 2013). A separate promotion in Canada did not fare quite as well: Lightstream Resources, where Mr. Wright was CEO and Mr. Ruttan was a director, began trading at nearly $36 in 2009, but then fizzled out and was trading at just 11.5 cents by the time it ceased trading in 2016 and sold its assets to a private company. Mr. Wright (though not Mr. Ruttan) was also a director and key backer of Alberta producer Spyglass Resources, which entered receivership in 2015, its stock having fallen to five cents from $2.60 within two years.
Evidently South America provides firmer promotional footing. Adjusting for the 1-for-3 rollback, Alvopetro has spent the last year more than doubling to $4.76 from $2.10.
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