Stockwatch Energy today
Energy Summary for Sept. 28, 2022
2022-09-28 20:25 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for November delivery added $3.65 to $82.15 on the New York Merc, while Brent for November added $3.05 to $89.32 (all figures in this para U.S.). Western Canadian Select traded at a discount of $22.00, up from a discount of $22.50. Natural gas for October added 22 cents to $6.87. The TSX energy index added 8.35 points to close at 214.76.
Oil prices headed higher for the second day in a row, amid persistent supply concerns in war-torn Europe and hurricane-prone North America, as well as a new batch of bullish U.S. inventory data. The Energy Information Administration (EIA) reported today that crude inventories fell by 200,000 barrels last week. While this is a modest figure, it is noticeably different from the 4.15-million-barrel increase in inventories estimated yesterday by the American Petroleum Institute (API). (The two of them generally produce similar numbers, but discrepancies can occur, largely because participation in the API's survey is voluntary whereas updates to the EIA are mandatory.)
Here in Canada, Grant Fagerheim's Whitecap Resources Inc. (WCP) added 42 cents to $8.83 on 5.96 million shares, pleasing investors with its formal 2023 guidance. It plans to spend $900-million to $950-million and produce 170,000 to 172,000 barrels a day. This should result in "significant free funds flow for elevated shareholder returns," proclaimed management, adding that it foresees an "anticipated 73-cent-per-share annual base dividend" by around mid-2023. The current annualized dividend is 44 cents (3.67 cents a month), for a yield of 5.0 per cent.
In other words, the guidance is a show of self-confidence in Whitecap's ability to pay down its debt and hike its dividend, even as volatile oil prices capture daily headlines. The budget is only mildly lower than the preliminary version that Whitecap released in June (when it mulled spending $900-million to $1.1-billion in 2023). The production guidance is nearly the same, and will represent a sizable boost over this year's expected output of around 140,000 barrels a day. Much of the boost is coming from last month's acquisition of XTO Energy (formerly owned by Imperial Oil Corp. (IMO: $2.57) and Exxon) for a lofty $1.9-billion. Whitecap's stock has lost about $1 since announcing that deal, but management remained as enthusiastic as ever in today's press release, saying the new assets are "extremely efficient" and the balance remains "in excellent shape."
One member of management seems particularly confident. Mr. Fagerheim, Whitecap's president and chief executive officer, has disclosed on SEDI that he bought 20,000 shares over the last week, spending a total of $171,300. That is around one-third of his base salary of $458,000. Of course, in addition to bonuses and other perks, Mr. Fagerheim also gets a sizable top-up from Whitecap's dividend. He (along with his wife, Penny) now controls 3.4 million shares, bringing in $1.49-million in dividend payments annually.
Another Alberta producer, Doug Bartole's InPlay Oil Corp. (IPO), added 24 cents to $2.71 on 799,800 shares. Today it patted itself on the back for setting a new production record of 9,600 barrels a day. That is higher than its full-year guidance of 9,150 to 9,400 barrels a day, which management viewed as a credit to its "strong" -- nay, "exceptional" -- drilling activities.
The merry mood continued. Management next laid out a four-year forecast from 2022 through 2025, during which time InPlay expects to boost production to as much as 11,900 barrels a day, while paying down debt and building up a hoard of cash. The company will use this cash in part for its "commit[ment] toward providing a return of capital to shareholders," continued management, springing aboard the popular bandwagon. It is already in the early planning stages of a share buyback. Dividends could be on the way, or perhaps other options such as "increased tactical capital investment and accretive strategic acquisitions." (The longer the list -- and apparently the more jargon used, at least in InPlay's view -- the better the odds of appealing to the widest range of investors.)
Lower down, Neill Carson and Graham Heath's i3 Energy PLC (ITE) added two cents to 36.5 cents on 416,600 shares. (As the PLC designation suggests, i3 is British by birth, but has most of its assets in Western Canada. It is dual listed in London and Toronto.) The company is saying goodbye to one of its co-founders. Mr. Heath, who founded i3 with Mr. Carson in 2014 and currently serves as chief financial officer, is resigning to focus on personal health issues. He called his experience with i3 "a highlight of my life," while i3 in turn wished him a successful recuperation and the best of luck with any future endeavours. It will start the search for a new CFO.
This is the second time in recent years that one of i3's co-founders has taken a step back. In 2018, Mr. Carson resigned as the company's CEO, becoming a non-executive director instead. The CEO since then has been former Mobil Oil executive Majid Shafiq. Incidentally, the name i3 came from Mr. Carson's co-founding of two prior companies starting with the letter I, namely Ithaca Energy in 2004 and Iona Energy in 2008. Iona succumbed to insolvency in 2015 after a failed farm-out deal. Ithaca is still around, but as a subsidiary of Israel's Delek Group, from which it accepted a takeover offer in 2017.
Meanwhile, a different Mr. Heath (apparently no relation to the departing Graham Heath) is joining i3's board of directors. That would be Ryan Heath, the former CEO of Toscana Energy, which i3 bought in 2020 as its very first Canadian acquisition. It appointed Mr. Heath as the president of its burgeoning Canadian division. Two years and a few other sizable acquisitions later, production has climbed from Toscana's stand-alone 700 barrels a day to i3's current total of around 22,000 barrels a day. i3 called itself "delighted" to welcome Mr. Heath to the board as it pursues "continued growth in [the Canadian] market."
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