Stockwatch Energy for yesterday
Energy Summary for July 21, 2022
2022-07-21 20:05 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for August delivery lost $3.53 to $96.53 on the New York Merc, while Brent for September lost $3.06 to $103.86 (all figures in this para U.S.). Western Canadian Select traded at a discount of $20.75 to WTI, down from a discount of $20.50. Natural gas for August lost seven cents to $7.93. The TSX energy index lost 4.76 points to close at 217.00.
Oil prices took a tumble, with WTI heading back below $100 (U.S.), on thin volume that exacerbated the volatility. Stubbornly high COVID cases in China and a steep interest rate hike by the European Central Bank (the first hike in 11 years) stoked demand concerns. On the supply side, Russia resumed pumping gas to Europe -- if at a reduced capacity -- following a 10-day maintenance outage. Libya's National Oil Corp. said it has resumed production at several oil fields after last week's lifting of a force majeure on oil exports.
Here in Canada, it was a quiet news day in the oil patch, as producers kept their attention on the start of quarterly earnings season next week. Companies that will report their second quarter financials next week include Baytex Energy Corp. (BTE: $6.28), Crescent Point Energy Corp. (CPG: $9.27) and Tourmaline Oil Corp. (TOU: $68.57) on Wednesday, Whitecap Resources Inc. (WCP: $8.99), ARC Resources Ltd. (ARX: $15.92) and MEG Energy Corp. (MEG: $16.59) on Thursday, and Imperial Oil Ltd. (IMO: $56.72) on Friday.
For some companies, the main event of the second quarter was their own birth. Such is the case with Rob Zakresky's new B.C. Montney junior, Coelacanth Energy Inc. (CEI), up six cents to 73 cents on 1.46 million shares. Coelacanth (pronounced "see-la-kanth") started trading on June 20. It is a spinout resulting from the takeover of Mr. Zakresky's prior promotion, Leucrotta Exploration, by Vermilion Energy Inc. (VET: $29.13). As part of the arrangement, Vermilion bought 53.3 million shares of Coelacanth at 27 cents.
Recent SEDI filings show that Vermilion has continued to show its support for Coelacanth. Over the past month, Vermilion has bought 3.2 million shares of the junior, including 138,000 bought today. It now holds 56.6 million shares of Coelacanth's 376 million shares. The new purchases have ranged in price from 54 cents to 71 cents a share, boosting the total cost of Vermilion's investment to $16.3-million, next to a market value today of $41.3-million. Interestingly, although Vermilion made a great fuss over announcing a buyback program for its own shares on July 4, SEDI filings show not a single repurchase under that program. All of Vermilion's buying activity has been dedicated to Coelacanth.
Presumably Vermilion has high hopes for Coelacanth's pending drill program in the Montney. The company is hoping to spud a four-well drill pad later this year or early next. Ultimately, its goal is to boost its current production of around 400 barrels a day (its inheritance from Leucrotta) to 25,000 barrels a day within just four years.
Further afield, Frank Giustra and Serafino Iacono's Colombian gas explorer, NG Energy International Corp. (GASX), lost eight cents to 92 cents on 898,300 shares. The stock shot up 33 cents yesterday amid high hopes for the company's Magico-1 exploration well in Colombia. As discussed yesterday, the well found "several prospective gas-bearing zones" last month, with management promising another update within "the coming weeks." The update came this morning. While it did not entirely dull yesterday's excitement, it did not extend it either.
For the most part, today's update reiterated the excitement of Mr. Serafino, chief executive officer, about the "significant" gas found within -- he recycled some phrasing here -- "several prospective gas-bearing zones." The company will test three zones in particular. One will be the targeted Cienago de Oro sandstone, which is a productive if sometimes unpredictable reservoir, producing massive amounts of gas for some producers and merely frustration for others. Mr. Iacono noted today that of the 100 feet of net pay encountered by Magico-1 in June, the Cienago de Oro contains 50 feet. He added that tests are now in progress. In other words, investors will just have to keep waiting.
Another Colombian operator, little Arrow Exploration Corp. (AXL), flitted up half a cent to 23.5 cents on 83,200 shares. It has released the results of a busy shareholder meeting. To the satisfaction of the board, whose five members saw easy re-election with over 99-per-cent voting support, shareholders approved every single one of the resolutions. These included the creation of a control person.
The control person in this case is a company, namely fellow Colombian producer Canacol Energy Ltd. (CNE: $2.44). The relationship between Canacol and Arrow goes back to an asset sale in 2018. The seller, Canacol, received plenty of shares of Arrow as part of the compensation, but distributed most of these shares to its own shareholders, keeping only five million shares back. This presumably lessened (if not quite eliminated) its dismay when Arrow plummeted to just 1.5 cents in 2020 from a high of $1.20 in 2018. A subsequent management overhaul helped the stock haul itself slowly to today's close of 23.5 cents. Through this process, Arrow regained the confidence of Canacol, which bought over 36.7 million shares at 10.6 cents last October. Canacol now has a 19.7-per-cent interest. As it also has warrants that would boost its interest past 20 per cent, making it a control person, Arrow decided to seek shareholder approval this week for exactly this possibility.
Like Vermilion with Coelacanth, Canacol presumably has an interested eye on Arrow's drilling activity. Unlike Coelacanth, Arrow's drilling is already well in progress, with the company having recently drilled the third well at its core Tapir block. It announced last month that the well flowed at over 1,800 barrels a day. As well, the company is working on a full field development plan for submission to the Colombian regulators. "This is an exciting time for Arrow," cheered CEO Marshall Abbott last month. He confidently reiterated the company's goal of more than doubling production to 3,000 barrels a day by next spring.
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