Energy Summary for Aug. 18, 2022
2022-08-18 20:40 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for September delivery added $2.39 to $90.50 on the New York Merc, while Brent for October added $2.94 to $96.59 (all figures in this para U.S.). Western Canadian Select traded at a discount of $20.10 to WTI, unchanged. Natural gas for September lost five cents to $9.19. The TSX energy index added 6.13 points to close at 236.37.
Canadian pipeline operator Enbridge Inc. (ENB: $56.04) has notched another victory in its protracted legal battle with the governor of Michigan over its Line 5 pipeline. A district court judge has ruled, for the second time, that the dispute belongs in federal court. The judge also scolded Michigan's apparent attempt to "gain an unfair advantage through the improper use of judicial machinery."
The dispute goes back to November, 2020, when Governor Gretchen Whitmer ordered a shutdown of Line 5 over her belief that it is unsafe to operate in the Great Lakes. The fact that the pipeline has a seven-decade history of doing just that -- while supplying more than half of the heating needs of Ms. Whitmer's own state, and serving as a crucial supply source to neighbouring states and Canadian provinces -- held no sway with Ms. Whitmer. Happily for residents of those states and provinces, Enbridge defied her and said pipelines are a federal matter. (They can be an international matter too. The Canadian government took the step last year of invoking a treaty that provides for the unimpeded flow of cross-border pipelines, such as Line 5. Those talks remain in progress.)
To force Enbridge to comply, Ms. Whitmer's government took it to court, specifically state court, where it seems to feel it has the best odds of success. It was not happy when Enbridge succeeded in transferring the case to federal court last year. In response, the government abandoned the lawsuit and took up a separate but identical one in, unsurprisingly, state court. Lawyers charging big bucks for briefs that are more or less the same as what they filed mere months ago have been delighted.
The judge is not. In her ruling today, Judge Janet Neff -- who also ruled on the matter last November -- said once again that the case belongs in federal court, and took Michigan to task over its court-hopping (or in the legalese used by the judge, "procedural fencing and forum manipulation"). The government had hoped to win on a technicality that says cases can only be removed to the federal level within 30 days of a complaint being filed. The judge was not having it. Citing the precedent she herself set in November, 2021, when she found that the case belonged in federal court despite well over 30 days having passed, she implied that it would be "absurd" to rule any differently as a result of Michigan's mere "gamesmanship."
Enbridge toasted its victory. "Today's decision is ... consistent with the court's November, 2021, ruling that the state's prior suit against Line 5 belonged in federal court," it said in a statement. It reiterated that federal court is the correct place for "important federal questions" such as pipelines, and made sure to note that there could be "serious ramifications for energy security and foreign affairs if [Michigan] and the U.S. government were to defy an international treaty with Canada." It concluded that it "looks forward to a prompt resolution of this case in federal court."
Within the sector, Dale Shwed's B.C. Montney-focused Crew Energy Inc. (CR) added 30 cents to $6.32 on 1.65 million shares, pleasing investors with news of a non-core asset sale. The company is selling 47,025 acres of Montney rights in the Attachie and Portage areas for $130-million. It did not disclose the buyer. (Around the same time, however, the private Pacific Canbriam announced that it is buying 47,025 acres in the above areas. It opted to disclose neither the seller nor the price tag.)
Crew will use the proceeds to repay a $128-million chunk of its $300-million senior notes due in March, 2024. That is still more than a year and a half away, but the months pass quickly. Mr. Shwed, president and chief executive officer, stated earlier this month that he has been hard at work "advanc[ing] the evaluation of refinancing options ... to further strengthen the balance sheet and position Crew for long-term sustainability." In other words, everyone else is hacking away at their debt and Crew will too.
Mr. Shwed added that Crew plans to release an "updated strategic plan" next quarter, given that it is drawing to the end of a previous two-year plan announced in 2020. Based on today's sale announcement, at the heart of the new plan will be the core Montney assets in the Greater Septimus and Groundbirch areas.
Crew's investors may also have taken heart today from the news that the B.C. Oil & Gas Commission (BCOGC) has issued its first well licences in more than a year. Licensing ground to a halt last July, after the B.C. Supreme Court ruled that the province had breached its treaty obligations to the Blueberry River First Nation and thus "may not continue to authorize activities ... that unjustifiably infringe Blueberry's exercise of its treaty rights." Considering that the Blueberry land claims spanned a 38,000-kilometre swath of the province, including much of its oil and gas heartland in the northeast, this was worrisome news for energy companies. They had to hope that their existing licences (or their assets in other parts of the country, particularly the Alberta Montney) would tide them over until a proper resolution.
While there is still no proper resolution, the government announced last October that the parties had reached an initial agreement, with further talks to follow. Now the BCOGC is spurring hopes that the negotiations are finally drawing to a close and drillers like Crew will no longer be in licensing limbo. The regulator issued a total of 16 licences. None of them went to Crew, but Ovintiv Inc. (OVV: $64.85) got two, ARC Resources Ltd. (ARX: $18.18) got five and Malaysia's Petronas got the rest.
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