Stockwatch Energy today
Energy Summary for June 24, 2022
2022-06-24 19:43 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for August delivery added $3.35 to $107.62 on the New York Merc, while Brent for August added $3.07 to $113.12 (all figures in this para U.S.). Western Canadian Select traded at a discount of $17.55 to WTI, up from a discount of $17.75. Natural gas for July lost two cents to $6.22. The TSX energy index added 7.07 points to close at 221.80.
Despite today's rally in oil prices, they were unable to make up the losses of the past week, closing with their second weekly drop in a row. Oil executives seemed eager to treat the rout as a buying opportunity. Bernard Lee, executive vice-president of finance at Paramount Resources Ltd. (POU: $29.02), disclosed on SEDI today that he spent $929,015 buying 30,000 shares on Wednesday. The same day, three insiders of Baytex Energy Corp. (BTE: $6.08) spent a total of $202,740 buying 36,000 shares. Other companies with insider purchases in the last few days include ARC Resources Ltd. (ARC: $15.00), Crew Energy Inc. (CR: $4.50), Gear Energy Ltd. (GXE: $1.25), Pieridae Energy Ltd. (PEA: $1.11) and Tourmaline Oil Corp. (TOU: $63.88).
In other insider buying news, Wolf Regener and Davis Neuhauser's Oklahoma-focused Kolibri Global Energy Inc. (KEI) added 24 cents to $1.96 on 88,900 shares, after major investor Livermore Partners filed a SEDAR disclosure about two open-market purchases. These collectively came to 14,800 shares at $1.96 each. Such a small amount would not generally warrant a SEDAR report, but Livermore had yet to file one in the wake of a much larger purchase -- 3.76 million shares through a seven-cent-a-share rights offering in January -- so it opted to group them together.
Prior to January, Livermore owned 1.19 million shares of Kolibri, or 5.1 per cent. It now owns 4.95 million shares or 13.9 per cent. The purchases come as Kolibri pursues its first drilling activity in Oklahoma in four years. The first two wells, drilled in January of this year, were both successful and even "transformational," according to the company's president and chief executive officer, the above Mr. Regener. He is aiming to start the next batch of five wells in July. The above Mr. Neuhauser is a director of Kolibri and the founder and managing director of Livermore.
Another U.S. driller, Ian Atkinson's Southern Energy Corp. (SOU), fell 20 cents to 86 cents on 7.4 million shares. While other oil stocks rose with oil prices, Southern's was dragged down by dilution. The company announced late yesterday that it plans to sell $38.9-million worth of shares at 87 cents each -- just seven months after it already raised $12.9-million in November. It announced this morning that it is hiking the proceeds of the new financing to $40.3-million. This means it will issue a total of 46.3 million shares, diluting its current share count of 86 million by more than 50 per cent. (The share count previously went up to 362 million after the November financing, but Southern rolled back 1 for 8 in December.)
The financing came as a surprise to investors, as Southern previously indicated that the November financing would cover the $10-million (U.S.) budget of a planned three-well drill program at the core Gwinville gas field in Mississippi. Similar to Kolibri, this is Southern's first drilling activity since 2017. President and CEO Mr. Atkinson boasted earlier this month that the first well of the program is "exceeding the company's modelled type curve" and making him "extremely excited." Investors seemed pleased as well, sending the stock up to a high of $1.49 on June 10.
Anyone who bought then will be less than thrilled with today's closing price of 86 cents. Mr. Atkinson tried to keep the excitement high, claiming that the proceeds of the financing will go toward "extending and accelerating" the Gwinville drill program, though he did not specify what he had in mind. He also suggested that Southern could use the money to "act nimbly and opportunistically" on potential acquisitions. The stock nonetheless headed to its lowest level in about eight weeks.
Yet another U.S. junior, the new Brett Herman promotion Lucero Energy Corp. (LOU), added six cents to 73 cents on 1.29 million shares. Lucero is the new name of PetroShale Inc., a North Dakota Bakken producer recapitalized earlier this year by Mr. Herman and his people (who previously sold TORC Oil to Whitecap Resources Inc. (WCP: $8.76) last year and prior to that sold Result Energy and TriStar Oil). They changed the company's name to Lucero last month. It has not released any news since then, but today it got a lovely mention from Stifel analyst Cody Kwong, in his first research note on the stock.
Mr. Kwong praised the new management's "track record of adding value through an acquire-and-exploit strategy," as used at TORC, Result and TriStar. He predicted a similar path for Lucero. The company is currently producing 10,500 barrels a day from its Bakken assets in North Dakota. While the new executives have not said whether they will take Lucero beyond North Dakota -- perhaps even into Western Canada, their usual regional focus -- Mr. Kwong is of the opinion that they will not lack for "compelling and accretive acquisition opportunities." Setting a "buy" rating, he gave Lucero a price target of $1.30, well above today's closing price of 76 cents. (Investors may wish to note a disclosure from the analyst's employer, Stifel, which says it expects to receive compensation from Lucero for investment banking services within three months.)
Here in Canada, a private energy company is taking Quebec to court over the province's two-month-old ban on oil and gas development. Utica Resources filed a lawsuit on Wednesday seeking to force Quebec to overturn the ban or pay $18-billion in compensation. It says the ban "constitutes an attack" on property rights enshrined in the Quebec Charter of Rights and Freedoms.
Quebec enacted the ban in April through Bill 21, becoming the first jurisdiction in the world to explicitly prohibit oil and gas development. (Note that this is a different Bill 21 from an older secularism law that bears the same number -- a quirk of Quebec's legislative calendar.) Utica says the bill amounts to "disguised expropriation" of properties that companies explored in good faith for years. While the province has offered $100-million in compensation to these companies, the money comes with many strings attached, falls far short of the $500-million in estimated spending by the companies over the last 15 years, and does not account for the millions or even billions in value that the properties could be worth. Utica estimated that its own properties could generate $67-billion in future profits. Applying the standard discount rate used by the court, that works out to $18-billion in net present value, hence the figure in the lawsuit.
"Bill 21 is completely irresponsible ... [and] would mean that there are no property rights in Quebec and Canada," fumed Utica CEO Mario Levesque in a statement on Wednesday. He stayed on this theme all week, telling the Financial Post today that the bill is "a direct threat to individual property rights, a massive expropriation and a wrong signal to investors around the world." He will make his case to the Superior Court. No doubt the proceedings will be watched closely by other companies with assets in Quebec, such as Questerre Energy Corp. (QEC: $0.21).
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