Stockwatch Energy today
Energy Summary for March 15, 2022
2022-03-15 20:45 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for April delivery lost $6.57 to $96.44 on the New York Merc, while Brent for May lost $6.99 to $99.91 (all figures in this para U.S.). Western Canadian Select traded at a discount of $12.52 to WTI, down from a discount of $12.49. Natural gas for April lost nine cents to $4.57. The TSX energy index lost 3.71 points to close at 206.57.
Oil prices took another tumble today, dropping below $100 (U.S.) for the first time since March 1, amid fears of slowing demand as China reported a steep rise in daily COVID infections. New cases reached a two-year high on fresh outbreaks in the country's northeast. Meanwhile, Russia and Ukraine continued their ceasefire talks, easing concerns about supply disruptions. A senior Ukrainian government official told The Associated Press that the negotiations have become "more constructive" and that the Ukrainian delegates feel "moderately optimistic."
Here in Canada, Scott Ratushny's Alberta oil producer, Cardinal Energy Ltd. (CJ), lost 74 cents to $7.04 on 7.37 million shares. Falling oil prices overshadowed year-end financials that were largely unsurprising. Production averaged 20,500 barrels a day, as Cardinal already announced last month, and cash flow of 33 cents a share was only mildly below analysts' predictions of 34 cents a share. The company turned a full-year profit of $284-million (after benefiting significantly from an impairment reversal of $218-million).
Investors may also have been disappointed that Cardinal held off on announcing a dividend. It certainly cranked the hype machine, vowing -- as it has in the past -- that it will unveil a dividend once its net bank debt is below $100-million, likely in mid-2022. "As we move through these tumultuous times, we are cognizant of our goals, which are to reduce our corporate risk and return capital to shareholders," intoned Mr. Ratushny, Cardinal's chief executive officer. He dropped the mannerisms and told investors to expect an announcement on the timing and amount of the dividend when Cardinal releases its first quarter financials on May 12.
The dividend will be four cents a month, predicted RBC analyst Luke Davis in a research note this morning. He also hiked his price target on the stock to $8 from $6. (An obligatory disclaimer noted that RBC "makes a market in the securities of Cardinal" and receives compensation for various products and services.) Given today's close of $7.04, a four-cent monthly dividend would represent a yield of 6.8 per cent.
That would be welcome news for one of Cardinal's major shareholders, the billionaire oil sands financier N. Murray Edwards. He is the founder and executive chairman of Canadian Natural Resources Inc. (CNQ: $73.83) and picked up a sizable interest in Cardinal in late 2020. Currently he owns 17.2 million of its 151 million shares, entitling him to $691,480 a month in theoretical dividend payments. (The above Mr. Ratushny holds 3.08 million shares and would get $123,350 a month, on top of his annual salary of about $300,000.)
South of the border, Brett Herman's North Dakota Bakken-focused PetroShale Inc. (PSH) added two cents to 81 cents on 1.1 million shares, after it too released its year-end financials. While others in the sector are churning out some of their best profits, PetroShale found itself in the rare and unfortunate position of turning a full-year net loss of $868,000. It was weighed down by steep hedging losses as well as a $27.4-million non-cash loss related to converting its preferred shares into common shares. (The non-cash loss represents the difference between the original conversion price of $2.40 per share and the amended price of just 60 cents a share when PetroShale carried out the conversion last April.)
Investors remained upbeat despite the red ink. They are more interested in the events that began after year-end, starting in mid-January, when PetroShale overhauled its management and replaced it with Mr. Herman and his people (who have previously sold three companies over the last 13 years, including TORC Oil & Gas to Whitecap Resources Inc. (WCP: $9.25) last year for $565-million). The newcomers completed $54-million in financings for PetroShale last month. They are in the process of changing its name to Lucero Energy Corp. and have hinted strongly that Lucero will embark on an ambitious shopping spree. Their feeling, and evidently the market's as well, is that the future is far more exciting than the past.
Further afield, Dr. Art Halleran's Turkey-focused Trillion Energy International Inc. (TCF) lost 3.5 cents to 23.5 cents on 2.58 million shares, despite trying to sell investors on its own idea of an exciting future. The company has just arranged a $10-million non-brokered private placement to help carry out a drill program in the Black Sea. It plans to issue 60.6 million units (each comprising a share and a warrant) at 16.5 cents.
Investors seemed taken aback, both at the low offer price -- about half of the 32.5 cents at which the shares were trading at the start of the month -- and the fact that it is an equity financing. Trillion had long hinted at a preference for debt. Last spring, it announced a $17.5-million (U.S.) debt financing with a U.S. lender, although it never managed to close it. In January of this year, it entered a consulting agreement for "advice on institutional debt financing," likely with a Canadian provider. Now it has apparently given up securing debt and opted for dilution instead. (The 60.6 million shares, prior to any warrant exercises, will take Trillion's share count up to 245 million.)
If CEO Dr. Halleran was disappointed by the about-face, he showed no sign of it. He cheered that the placement is already more than $6-million subscribed and will allow Trillion to start its drill program by the scheduled start date of July, 2022. Drilling will take place at the company's 49-per-cent-owned SASB gas field in the Black Sea. The field is a past producer, peaking at 30 million cubic feet of gas a day in 2011, but has not seen any wells drilled in more than a decade. Trillion hired Schlumberger last month to help design a program targeting low-risk gas pools that were discovered years ago but remain undeveloped.
In Dr. Halleran's view, now is an excellent time to develop them, especially with European gas prices trading near record highs. Dr. Halleran has a promoter's take on the geopolitical warfare giving rise to these record prices. Citing the "renewed uncertainty of supply coming from Russia given its invasion of Ukraine," he has been pitching the SASB project as a wonderful idea to "mitigate natural gas supply risk to our region." (Turkey imports about half of its gas from Russia.) The conflict is not expected to affect the SASB field's drilling schedule. If all goes well, the past producer could shed the "past" tag by the end of the summer.
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