Stockwatch Energy today
Energy Summary for April 5, 2022
2022-04-05 19:56 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for May delivery lost $1.32 to $101.96 on the New York Merc, while Brent for June lost 89 cents to $106.64 (all figures in this para U.S.). Western Canadian Select traded at a discount of $12.19 to WTI, down from a discount of $11.69. Natural gas for May added 32 cents to $6.03. The TSX energy index lost 3.78 points to close at 226.38.
Oil sands giant Suncor Energy Inc. (SU) lost 51 cents to $41.22 on 8.36 million shares, after announcing another proposal aimed at "adjusting our portfolio for fit and focus." The company is putting its wind and solar assets up for sale. It still intends to "accelerate progress toward its objective to be a net-zero company by 2050," but will do so by focusing on hydrogen and renewable energy.
This is the third portfolio adjustment that Suncor has announced in the last six months. Last October, it sold its interest in the Golden Eagle fields in the North Sea to EnQuest for $325-million (U.S.). In February, it added that it would start marketing its Rosebank interest in the North Sea, as well as its Norwegian exploration and production assets, all of which it hopes to sell by the end of this year.
Now Suncor is adding the wind and solar assets to its list of projects up for sale. The company (along with pipeline operator Enbridge Inc. (ENB: $58.12)) has been developing wind and solar assets for the last two decades, and currently has eight wind power projects across Saskatchewan, Alberta and Ontario, as well as the proposed Fort Mile solar project in Alberta. It did not assign a dollar value to any of these assets.
The decision to sell them indicates that Suncor has picked its side in the debate over whether oil majors should dabble in wind and solar projects. In general (and partly as a reflection of different laws), European energy companies are more likely than North American ones to make direct investments in wind and solar. There are exceptions, such as U.S. shale producer Occidental Petroleum, which has a large solar farm in Texas and has promised to "add more solar over time." Yet the broader U.S. attitude was memorably summed up by Chevron CEO Michael Wirth, who told CNBC last September that rather than invest in low-margin renewables, Chevron would play to its strengths, make money for shareholders "and let them plant trees." A Reuters report in October found that most U.S. fund managers tend to agree with him: They are pouring more money into companies that are spending less capital on renewables, given that demand (and pricing) for oil remains strong.
Today's announcement showed Suncor trying its best to please everyone, no matter what shade of green they sought. CEO Mark Little said the company is drawing on "competitive advantages ... to drive shareholder returns and value over the long term," while still looking to "be a net-zero company by 2050." He went down a list of low-emission and clean-tech projects in which Suncor is involved. Despite his best efforts, investors mostly yawned.
Outside the oil sands, Grant Fagerheim's Alberta- and Saskatchewan-focused Whitecap Resources Inc. (WCP) edged down six cents to $10.36 on 5.84 million shares. It too attracted little but yawns, even after trumpeting its progress on share buybacks and "new energy." Specifically, Whitecap has bought back 10 million of its own shares for a total of $103.4-million. It has now repurchased 29 million shares since starting the buyback program last year and can still buy 26 million more before the program expires next month. Whitecap plans to renew the program upon expiry. Meanwhile, the "new energy" division is hard at work too. It is "continu[ing] to advance multiple projects focused on carbon sequestration."
In this case, multiple appears to mean two. Whitecap is trying to develop one carbon capture hub in Alberta and another in Saskatchewan. The Alberta proposal was discussed in last Friday's Energy Summary, when the government of Alberta picked six potential projects to advance to the next stage of evaluation. (The above Suncor has a project on the shortlist too.) The Saskatchewan one, a proposal with Federated Co-operatives Ltd., was first announced last October. Both hubs remain at least two to four years away from a potential start-up.
Another Alberta producer, Darren Gee's gassy Peyto Exploration & Development Ltd. (PEY), hit a new four-year high, adding 28 cents to $13.95 on 2.12 million shares. This is the closest the stock has been to $14 since the beginning of 2018. Mr. Gee, Peyto's CEO, looked to keep the excitement going by publishing his latest monthly report on the company's website. "Our Q1 drill program is now done and the results are finally starting to show up at the sales meter," he cheered. Peyto's production in the first quarter averaged 102,000 barrels a day. Just like the share price, this is a four-high year, marking the first time Peyto's quarterly production has hit six digits since the first quarter of 2018.
As usual, Mr. Gee spent the remainder of the letter airing broader musings. He had much to say about the recent "hypocrisy" of the U.S. government in asking Venezuela, Saudi Arabia and other ill-reputed countries for more oil production rather than promoting domestic development. In his view, this is pure politics, aimed at "depriving ... political competitors of their wealth and power."
Mr. Gee explained that most U.S. oil and gas, and most Canadian oil and gas too, can be found in right-leaning states and provinces. Promoting domestic development therefore "enriches and empowers" regions that the left-leaning powers-that-be do not like. That is why they are "strong supporters" of the anti-fossil-fuel movement, at least at home, concluded Mr. Gee. He dismissed any link to the environment. "If the ruling governments really wanted to improve the environment ... they would embrace things like increased LNG [liquefied natural gas] exports, not try to shut them down," he wrote. "Sadly, that's not their true agenda, which is to suppress the industry that funds their competition."
Mr. Gee ended on a brighter note (for investors if not consumers). Based on storage levels, activity levels and pricing forecasts, Mr. Gee said he would not be surprised if the world enters a "longer-term demand-driven market ... that will see rising spot prices for years to come, circa 2002 to 2006." That was a period when benchmark U.S. natural gas prices soared to over $12 (U.S.) from around $2 (U.S.). This was followed by over a decade of persistently weak prices, but Mr. Gee did not delve into that. Current benchmark prices are around $6 (U.S.).
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