Stockwatch Energy today
Energy Summary for Jan. 31, 2022
2022-01-31 20:43 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for March delivery added $1.33 to $88.15 on the New York Merc, while Brent for March added $1.18 to $91.21 (all figures in this para U.S.). Western Canadian Select traded at a discount of $13.00 to WTI, down from a discount of $12.65. Natural gas for March added 23 cents to $4.87. The TSX energy index added 1.60 points to close at 192.86.
Oil prices ended January with their biggest monthly gain since February, 2021. Over the weekend, Britain issued a warning that Russia is "highly likely" to be considering an invasion of Ukraine, while the United Arab Emirates claimed to have foiled a missile attack by Yemen's Houthi rebels. The headlines heightened geopolitical tensions and thus the risk of supply disruptions. On the demand side, traders focused on this Wednesday's OPEC+ meeting, where the group is generally expected to stick to its policy of gradual production hikes.
Here in Canada, Dale Shwed's Crew Energy Inc. (CR) added 29 cents to $3.70 on 3.86 million shares, pleasing investors with an update from the B.C. Montney. It patted itself on the back for its "strong Q4 and start to 2022." According to Mr. Shwed, Crew's president and chief executive officer, production averaged 29,100 barrels of oil equivalent a day in the fourth quarter and has since risen to 32,500 barrels a day. "Crew's team is excited about our future, especially with the progress made on the company's two-year asset development plan," cheered Mr. Shwed. He was referring to a two-year plan that was released in 2020 and calls for production of 31,000 to 33,000 barrels a day in 2022 (up from 22,000 in 2020). Crew is effectively already there and must now hold steady.
As to what Crew's future holds after the two-year mark, Mr. Shwed stayed mostly mum. Crew has, however, published a new presentation on its website, talking up its "extensive inventory," its "positive long-term outlook" and its $1.1-billion in available tax pools. The last attribute in particular is often emphasized to catch the eye of a suitor. Three of the largest Canadian takeovers of 2021 were done in the Montney, namely the acquisition of Seven Generations by ARC Resources Ltd. (ARX: $14.89), the acquisition of Black Swan by Tourmaline Oil Corp. (TOU: $45.32) and the acquisition of Storm Resources by Canadian Natural Resources Ltd. (CNQ: $64.61) -- three deals with a combined value of $7.2-billion.
Elsewhere in Alberta (and Saskatchewan), Brian Schmidt's Tamarack Valley Energy Ltd. (TVE) tried its hardest to cross $5 for the first time in four years, but settled for adding 20 cents to $4.93 on 9.93 million shares. Today it too released a year-end operational update. President and CEO Mr. Schmidt hailed the year as "transformational," with numerous acquisitions in new core plays. Full-year production of 34,600 barrels a day exceeded the company's guidance of 34,250 barrels a day.
Tamarack also released its year-end reserve report. Thanks in part to the above-noted acquisitions, Tamarack's total proved and probable reserves rose to 181.9 million barrels as of Dec. 31, 2021, up from 111.1 million barrels a year earlier. Mr. Schmidt noted that the year-end report does not even include all of Tamarack's acquisitions; one of them will not close until next month. He hinted that "further consolidation" is on the way.
An ocean away, the Lundin family's Africa Oil Corp. (AOI) added six cents to $2.08 on one million shares, after cheering an increase to its credit facility. The lenders hiked the available amount to $100-million (U.S.) from $62-million (U.S.). As well, they "waived certain conditions in support of the company's plans to implement a shareholder returns program," according to president and CEO Keith Hill. Mr. Hill began hinting almost a year ago that Africa Oil would "consider implementing dividends in 2021." It may well have done plenty of considering, but the year ended without an official announcement. Perhaps Mr. Hill will have more to say when he unveils the company's 2022 guidance in February.
Another international producer, Jeff Chisholm's Pan Orient Energy Corp. (POE), edged down one cent to $1.31 on 105,300 shares. Today it released the year-end reserve report on its assets in Thailand. Investors were not expecting this report until February, so it is somewhat early, but other than that was not especially surprising. Proved and probable reserves stayed fairly flat at 4.62 million barrels as of Dec. 31, 2021, compared with 4.75 million barrels a year earlier.
Possible reserves (a lower level of certainty) plunged to 1.34 million barrels from 2.09 million, reflecting the aging nature of the assets. President and CEO Mr. Chisholm told investors nearly a year ago that the assets are "at a stage that the company has historically looked to crystallize value for shareholders." He put the assets up for sale in October and is hoping to find a buyer by mid-2022. Another plan for 2022 is to pay a 40-cent special distribution, which received shareholder approval two weeks and is payable next Thursday, Feb. 10. Beyond that, Pan Orient's future plans are unclear, although Mr. Chisholm has made vague noises about finding and buying exploration-stage international assets and starting the whole game again. He has not specified where, but as most of his decades-long career has been spent in southeast Asia, that seems a likely candidate.
Back in North America, Ian Atkinson's U.S. Gulf Coast junior, Southern Energy Corp. (SOU), added two cents to 41 cents on 248,200 shares. The company got a lovely mention this morning from Canaccord Genuity analyst Charlie Sharp. He put out his very first research note on the stock, complimenting its conventional U.S. gas assets and particularly its Gwinville field in Mississippi, where the company began a three-well drill program last week (its first drilling activity since 2017). Southern's production is 2,000 barrels a day and could "increase tenfold over the next five years," was the heady prediction of the analyst. He gave the stock a "speculative buy" rating and a price target of $1.09.
The sudden shower of attention may come as no surprise to some investors. The three-well program at Gwinville will cost an estimated $10-million (U.S.), and to raise that money, Southern conducted a $10-million (U.S.) equity financing in November -- with Mr. Sharp's employer, Canaccord, being one of the agents. The company sold a total of 254 million shares at five Canadian cents. Adjusting for a 1-for-8 share rollback in December, a subscriber who put in $10,000 then would now have $10,250.
With this money, president and CEO Mr. Atkinson will get back to drilling. Some investors may already recognize the name; Mr. Atkinson was previously one of the founders of Athabasca Oil Corp. (ATH: $1.20), or Athabasca Oil Sands Corp. as it was known at the time. He was responsible for finding what would become (for a time) one of Athabasca's most important projects. After tracking down an unopened, long-forgotten core sample from a well drilled in 1959 at the MacKay oil sands deposit, Mr. Atkinson convinced Athabasca to buy MacKay, which it got in 2006 for the bargain price of just $20 to $30 an acre, at a time when nearby leases were selling for as much as $15,000 an acre. Future resource reports at MacKay would go on to show 1.7 billion potential barrels. These in turn helped Athabasca sell its $18-a-share initial public offering in 2010.
Those were the good old days for Athabasca. It ended up exiting MacKay in 2012, and Mr. Atkinson exited Athabasca in 2013. The stock was already in a pronounced slump by then. It remains well below its $18 IPO price, closing today at $1.20.
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