Stockwatch Energy today
Energy Summary for Jan. 14, 2022
2022-01-14 19:44 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for February delivery added $1.70 to $83.82 on the New York Merc, while Brent for March added $1.59 to $86.06 (all figures in this para U.S.). Western Canadian Select traded at a discount of $12.53 to WTI, down from a discount of $12.46. Natural gas for February lost one cent to $4.26. The TSX energy index added 5.32 points to close at 190.31.
Pat Carlson's Kiwetinohk Energy Corp. (KEC) added $2.50 to $12.50 on 95,500 shares, on its first day of trading on the TSX. The company -- whose name begins with a Cree word pronounced like "key-wheat-in-no," though investors understandably tend to use the abbreviation KEC -- is an Alberta Montney producer that also has carbon capture and renewable power projects. It went public this morning without an accompanying financing.
KEC's chief executive officer is 67-year-old Mr. Carlson, a familiar name in energy circles. He started out as a BP engineer in 1975 and got into energy start-ups in 1998. From 1998 to 2007, he co-founded and sold Passage Energy, Krang Energy and North American Oil Sands, all private companies, whose sales brought 65- to 200-per-cent returns for founding investors. Mr. Carlson then founded Seven Generations Energy in 2007 and decided to take it public for a change. After an $18-a-share IPO in 2014, the stock got to nearly $33 in 2016 and was still worth about $25 when Mr. Carlson retired in 2017. It entered a painful slump after that, getting as low as $1.15 in 2020, but was ultimately sold to ARC Resources Ltd. (ARX: $13.61) in April, 2021, in a deal that valued its shares at about $8.20.
Mr. Carlson (whose retirement in 2017 did not last long) went back to private promotions and started KEC in early 2018. The initial focus was the Alberta Duvernay. Then Mr. Carlson wanted to go back to the Montney, and decided to have KEC recapitalize the company formerly known as Delphi Energy. This was a once-public Montney producer that traded as high as $69 in 2014, but succumbed to debt woes in 2020 and left shareholders with nothing. It subsequently (and understandably) changed its name to Distinction Energy. Distinction and KEC merged in mid-2021, with Mr. Carlson remaining in charge of the combined company. The company did not quite meet its goal of listing by the end of 2021, but now here it is, another Carlson promotion in the market.
While KEC did not put out a press release to mark its debut, it did release its 2022 guidance two days ago, with Mr. Carlson vowing to "deliver strong base-line cash flow from the upstream business while advancing power projects toward FID [final investment decision]." This year's budget is $210-million to $240-million. KEC expects to produce just 11,000 to 12,000 barrels per day this quarter, but with a year of drilling, it reckons it can boost this past 20,000 barrels a day in the first quarter of 2023. It also has a "10-year vision" of generating over 1,500 megawatts of electricity from its wind, solar and gas projects. That is equal to about 10 per cent of Alberta's total grid capacity.
In other news about familiar faces returning to the market, PetroShale Inc. (PSH) added 11 cents to 58 cents on 7.14 million shares, after announcing a recapitalization and a management overhaul. The new management will be the group that sold TORC Oil & Gas to Whitecap Resources Corp. (WCP: $8.73) for $565-million last February.
Specifically, Brett Herman will become president and CEO, Marvin Tang will become chief financial officer, and Sandy Brown, Kristine Lavergne and Shane Manchester will be vice-presidents. All of them were previously at TORC. Before that, they built up and sold TriStar Oil & Gas (which listed at around $8 in 2006 and and did a merger at $14.75 in 2009) and Result Energy (which traded at 10 cents when they joined in 2009 and was sold at 42 cents just five months later). The main newcomer to the group is Jason Skehar, who will serve as PetroShale's chief operating officer. Mr. Skehar was most recently the president and CEO of Bonavista Energy, a once-public Alberta gas producer that buckled under crippling debt and completed a recapitalization in 2020, giving investors just five cents a share as a payout. It delisted in August, 2020, but is still around as a private company.
The new management of PetrolShale will participate in a $9.5-million private placement of 40-cent units, with each unit comprising a share and a warrant. PetroShale also plans to complete a separate private placement of $45-million in 40-cent shares. All told, the placements will result in over 136 million shares being issued, on top of the company's already hefty share count of 523 million. The new management did not say whether it is considering a rollback.
Instead, the new executives said the proceeds will go toward "positioning the company to execute on a disciplined corporate strategy," which could include both "strategic acquisitions and internally generated prospects." PetroShale currently focuses on the North Dakota Bakken in the Williston basin. The basin extends into Canada as well, and the new executives are familiar with it, but have tended to focus on the Canadian side. TORC, Result and TriStar were all active in Alberta and Saskatchewan. Whether the new executives expand northward or not, they do seem to want to strip the "shale" from PetroShale's name. They are already proposing a name change to Lucero Energy.
Up in Alberta, Stephen Loukas's Cardium-focused Obsidian Energy Ltd. (OBE) added 50 cents to $7.67 on 1.05 million shares, after applying for a listing on the NYSE American. The company's shares currently trade on the OTCQX. Interim president and CEO Stephen Loukas said shareholders have been requesting a better U.S. listing to improve liquidity. "We are happy that the market has started to recognize our track record of operational success and future prospects, allowing our share price to reach a sustainable level to support this listing," he cheered.
Understandably, Mr. Loukas skirted over the fact that Obsidian once had an even better U.S. listing, on the NYSE proper. It obtained this listing in mid-2006, back when it was Penn West Energy Trust and was trading at what would turn out to be an all-time high. The energy trust model took a beating in late 2006, when Ottawa announced a new tax model, and eventually Penn West converted to a corporation in 2011. The shares were not worth as much then -- also reflecting the global recession a few years earlier -- but Penn West was still large and respected.
It all went downhill after the oil price downturn in 2014. By 2015, Penn West's stock was struggling so badly that the NYSE sent it a possible delisting warning. That happened again in 2016, and then in 2017, and then twice in 2018. In April, 2020, the NYSE finally gave the boot to Obsidian (which had changed its name by then in case a rebranding might help -- it didn't). The stock was then trading at 23 cents. Adjusting for a 1-for-7 rollback in 2019, this was a 99.9-per-cent drop from the 2006 high of $334.
At today's close of $7.67, the stock has rebounded considerably from 2020, but it is safe to assume that few if any shareholders are still hanging on from a decade and a half ago. With any luck, the new, better U.S. listing will bring in some fresh shareholders. The listing remains subject to the approval of the NYSE American. The exchange says on its website that approving an application typically takes one to two weeks, which is a minor miracle in listing speed on any exchange.
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