Stockwatch Energy today
Energy Summary for July 11, 2022
2022-07-11 20:36 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for August delivery lost 70 cents to $104.09 on the New York Merc, while Brent for September added eight cents to $107.10 (all figures in this para U.S.). Western Canadian Select traded at a discount of $20.80 to WTI, unchanged. Natural gas for August added 40 cents to $6.43. The TSX energy index lost 3.10 points to close at 214.64.
Oil sands giant Suncor Energy Inc. (SU), down 91 cents to $41.52 on 12.8 million shares, is looking for a new chief executive officer. As discussed Friday, the company suffered another fatality at one of its oil sands accidents, its second of the year and its fifth in 19 months. The poor record cost CEO Mark Little his job. He announced late Friday that he is stepping down as CEO, president and a director, effective immediately.
Mr. Little first joined Suncor in 2008 as senior vice-president of strategic growth and energy trading. The first bit of "strategic growth" followed quickly with the $15-billion megamerger of Suncor and Petro-Canada in 2009. Over the following years, Mr. Little made his way into senior roles in the company's oil sands and international and offshore operations, eventually becoming chief operating officer in 2017. Former COO Steve Williams had become Suncor's CEO in 2012. In 2019, when Mr. Williams retired, investors were not surprised to see Mr. Little trade in his COO title for the top job.
Unfortunately, the job has looked increasingly tenuous lately. After the death of one worker and the hospitalization of two others this past January, Mr. Little showed signs of feeling the pressure to overcome the repeated safety failures. "As CEO, the accountability for safety and operational excellence is with me. I own this," he said during a conference call in February. He failed to reassure activist investor Elliott Investment Management, which in April published a scathing open letter, taking direct aim at Suncor's safety record and urging it to "ensure the right management is in place." (Elliott has so far declined to comment to the media on Mr. Little's resignation.)
In other circles, while the safety record undoubtedly darkened Mr. Little's tenure, he gained respect for navigating political, regulatory and environmental issues. "He was just such a strong leader. ... He had a visionary approach to getting the oil sands to net zero ... [and] really opened the door to having a realistic, honest conversation about oil and gas," Alberta Energy Minister Sonya Savage told The Globe and Mail this weekend. Deborah Yedlin, CEO of the Calgary Chamber of Commerce, added to the Globe that Mr. Little was "well liked ... He was seen as someone who cared, was forward-looking and [was] really smart."
Now Suncor faces the challenging task of finding a successor. Taking over for now is interim CEO Kris Smith, executive vice-president of downstream operations. Mr. Smith has been with Suncor since 2000. As Suncor has had no COO since promoting Mr. Little in 2019, it spreads the duties among Mr. Smith and numerous other senior executives, none of whom is necessarily the heir apparent. Suncor said on Friday that it is open to an internal promotion, but will also consider external candidates.
The latter may be a better bet, say some analysts. "We don't underestimate the qualification of internal candidates, but we expect an external CEO will be better positioned to reset the culture at Suncor and help right the operational issues that have gone alongside the safety issues," wrote Raymond James analyst Michael Shaw in a new research note. Meanwhile, National Bank analyst Travis Wood opined that Mr. Little may not be the first departure. "There is no easy fix," he wrote, adding, "The size, scale and integrated nature of Suncor's operations ... [leads] us to consider that additional executive changes will likely be required to properly and effectively strike cultural change."
Heading outside the oil sands -- indeed, over to another continent -- Craig Steinke's Namibian wildcatter, Reconnaissance Energy Africa Ltd. (RECO), lost 13 cents to $5.00 on 229,300 shares. It is facing a legal complaint in the High Court of Namibia. Reconnaissance announced late Friday that third party special interest groups are challenging its environmental compliance certificate (ECC) in a bid to halt the four-well drill program that it launched in the Kavango basin last month. The company says it will "vigorously" defend its position.
The press release was light on details, including the identity of the claimants, but the story was picked up this weekend in local news outlet The Namibian. It identified four community forestry and regional conservancy groups -- in other words, an entirely unsurprising litter of litigants. Reconnaissance's exploration in Namibia has caused eco-activist outcry from the beginning. In 2020 (prior even to the first test well being drilled in 2021), no less than the National Geographic began publishing articles lamenting the imminent ecological threat. (The potential socioeconomic benefits for one of the poorest countries in the world merited only dismissive mentions at best.)
The four groups are now suing Reconnaissance, NAMCOR (its local joint venturer) and a swath of government officials (from the Ministry of Environment to the attorney-general) in an effort to delegitimize the company's government-granted ECC. This would put a halt to the drill program that started on June 25. According to The Namibian, the court will consider preliminary points of the case -- not the merits of the case, but issues such as legal standing -- at an initial hearing this Friday.
Another international operator, Paul Baay's Trinidad-focused Touchstone Exploration Inc. (TXP), edged down one cent to 98 cents on 368,900 shares. It is losing one director and adding two more. The departing director is Tom Valentine, a lawyer (and senior partner at Norton Rose Fulbright Canada) who has been on the board since 2015. He is now leaving the board but will remain corporate secretary.
The board expressed the appropriate thank-yous to Mr. Valentine, but spent most of its time to heaping praise upon the two new directors, Dr. Priya Marajh and Jenna Alfandary. Dr. Marajh formerly served in Trinidad's Ministry of Foreign Affairs and is now part of its Energy Chamber, where her title is vice-president of advocacy and member engagement. Her PhD is in international relations. Meanwhile, Ms. Alfandary is the president and CEO of Westario Power, an Ontario-based power distribution company. She also co-chairs an energy advisory committee to the Ontario Energy Board. The board dubbed itself eager to begin "adding their expertise and knowledge ... during this time of transition and growth."
Transition and growth would be a welcome change for Touchstone's investors, who are becoming increasingly frustrated by stagnation (at its operations) and shrinkage (of its share price). The company is more than two years behind its original schedule of getting its Ortoire gas block on production. Notably, the large Cascadura prospect remains mired in regulatory delays, as most recently announced last week (when the environmental application got yet another extension). Amid the uncertainty, the stock has fallen to 98 cents from nearly $1.50 over the last two months (and from a high of over $3 last year). With any luck, the new directors -- particularly Dr. Marajh and her government connections -- will help coax things along.
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