Stockwatch Energy todayEnergy Summary for July 14, 2022 2022-07-14 19:45 ET - Market Summary by Stockwatch Business Reporter West Texas Intermediate crude for August delivery lost 52 cents to $95.78 on the New York Merc, while Brent for September lost 47 cents to $99.10 (all figures in this para U.S.). Western Canadian Select traded at a discount of $20.90 to WTI, unchanged. Natural gas for August lost nine cents to $6.60. The TSX energy index lost 3.54 points to close at 203.28. Oil prices extended their dip below $100 (U.S.), on persistent fears of a global recession. Oil bulls matched this persistence at every step. "Our severe downside scenario still implies prices above current market forwards," wrote Goldman Sachs analysts Damien Courvalin, Callum Bruce, Jeffrey Currie and Romain Langlois in a new report. They have been "stress testing [their] bullish view" to account for "large potential shocks." Even in their worst-case scenarios, they gave Brent a fair value of $105 (U.S.) to $120 (U.S.) for the second half of 2022, "well above market forwards." They concluded that today's wobbly prices are "squarely skewed to the upside." Within the sector, Randy Neely's Egypt- and Alberta-focused TransGlobe Energy Corp. (TGL) added 26 cents to $4.39 on 842,000 shares. It has accepted a $307-million (U.S.) takeover offer from the NYSE-listed Vaalco Energy Inc. (U.EGY), down $1.03 (U.S.) to $5.20 (U.S.) on 6.02 million shares. Vaalco will issue 0.6727 of a share of itself for each share of TransGlobe. This represents a roughly 25-per-cent premium to TransGlobe's recent average. The merged company, which will be owned 54.5 per cent by Vaalco's shareholders and 45.5 per cent by TransGlobe's, is to be a "world-class African-focused E&P [explorer and producer] ... supporting sustainable growth and stockholder returns." Vaalco seems primarily interested in TransGlobe's 10,000-barrel-a-day production in Egypt. Over to the west, Vaalco produces nearly the same amount in Gabon, and has an exploration asset off the coast of Equatorial Guinea. Lately it has not hidden the fact that it is interested in scooping up more African assets. TransGlobe's 2,000-barrel-a-day assets in Alberta are presumably of less interest, although Vaalco graciously allowed that the Canadian employees could have "skill sets that are applicable to the entire combined portfolio." Mr. Neely, TransGlobe's president and chief executive officer, declared himself "very pleased" with the deal. He has good reason to feel pleased, as (according to SEDAR) the change-of-control provisions of his contract mean he should pocket at least $1.23-million (U.S.), not including what he gets for his shares. He will apparently not have a role at the combined company. CEO George Maxwell of Vaalco will stay in charge, while the board will comprise three TransGlobe directors (David Cook, Ed LaFehr and Dr. Tim Marchant) and four Vaalco ones (Mr. Maxwell, Andrew Fawthrop, Fabrice Nze-Bekale and Cathy Stubbs). The deal should close before year-end, subject to shareholder approval at a meeting to be scheduled. Shareholders seem intrigued, although long-term shareholders can be forgiven some caution. This is not the first time that TransGlobe has hyped a major merger. In 2014, it agreed to combine with Gary Guidry's Chad-focused Caracal Energy, in a deal that valued TransGlobe's stock at $9.32 (about double its value now). Alas, within a month, Caracal decided to marry someone else (Glencore), leaving a red-faced TransGlobe at the altar. TransGlobe walked away with a $9.25-million (U.S.) break fee that it used to pay a 10-U.S.-cent special dividend to shareholders. (It probably wished it had held on to the cash once oil prices crashed a few months later.) The above Mr. Guidry, meanwhile, is now in charge of Colombian gas producer Canacol Energy Ltd. (CNE: $2.22). Speaking of Colombian producers, Wayne Foo's Parex Resources Inc. (PXT) added 25 cents to $20.22 on 819,900 shares, after providing a quarterly operational update from Colombia. It pegged its second quarter production at 51,100 barrels a day. This was slightly below its guidance of 52,000 to 53,000 barrels a day, a disappointment that management blamed on "well timing" and "higher-than-expected downtime." It reassured shareholders that production has since risen to 54,000 barrels a day and should get as high as 60,000 by the end of the year. To further cheer up its shareholders -- who have sent the stock down toward $20 from over $30 in the last five weeks, amid stormy oil prices and stormier Colombian politics -- Parex announced that it has "accelerated the pace of share buybacks." The company won approval in January to buy back 11.8 million of its shares over 12 months. Less than seven months in, it has already bought back 7.2 million shares, reducing its share count to 114 million. It said it fully expects to buy back all of the allowable shares. In addition, Parex announced the appointment of a new director, Lynn Azar. She is the senior vice-president and head of finance at PlayStation Studios. A video game executive might strike some investors as a curious choice, but before Mrs. Azar entered that industry in 2020, she spent 18 years in the energy industry, all of it at Shell. Parex dubbed itself "pleased" and "excited" to welcome her to the board. Here in Canada, Stephen Loukas's Alberta Cardium producer, Obsidian Energy Ltd. (OBE), added four cents to $8.76 on 457,400 shares. It too released a second quarter operational update with other tidbits sprinkled in. Mr. Loukas, interim president and CEO -- still holding on to that "interim" tag, more than 2-1/2 years after taking the job -- cheered the company's "strong production gains." Output rose to 31,600 barrels a day in the second quarter from 29,400 barrels a day in the first quarter. The press release lacked one update that investors are particularly keen to see: the announcement of a debt refinancing. Mr. Loukas has said since January that he wants to complete one by midyear. He gave himself some wiggle room in early June, when he said that Obsidian's bankers have extended the review deadline for its credit facility by six weeks to July 15, in order to "accommodate timing associated with the company's refinancing." Apparently, however, more accommodation is needed. Mr. Loukas said today that the bankers have extended the deadline again, for the same reason, to July 29. One of Mr. Loukas's main refinancing priorities is "a longer-term maturity profile." As of March 31, Obsidian had over $368-million in debt coming due within 12 months, next to a cash balance of just $5.6-million. Investors should get their next update on the balance sheet -- and perhaps the long-awaited news of a refinancing, rather than news of another extension -- when the company releases its second quarter financials on July 28. 2022 Canjex Publishing Ltd. All rights reserved.