Stockwatch Energy today
Energy Summary for Oct. 11, 2022
2022-10-11 21:08 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for November delivery lost $1.78 to $89.35 on the New York Merc, while Brent for December lost $1.90 to $94.29 (all figures in this para U.S.). Western Canadian Select traded at a discount of $24.40 to WTI, unchanged. Natural gas for November added 16 cents to $6.60. The TSX energy index lost 9.81 points to close at 237.97.
Oil prices headed lower, with WTI slinking back below $90 (U.S.) a barrel, amid a flare-up of global recession fears and Chinese COVID cases. Yesterday brought warnings of economic slowdowns from both the International Monetary Fund and the World Bank. As well, JPMorgan's chief executive officer, Jamie Dimon, told CNBC that Europe is "already in recession" and that the United States is likely to be in a recession in "six to nine months." Meanwhile, COVID infections are climbing in major Chinese cities such as Shanghai and Shenzhen, prompting fears of renewed lockdowns.
Here in Canada, energy headlines were wrapped up in political ones, as the country's two largest oil provinces seemingly stiffened their resistance to federal interference from Ottawa. Today brought the formal swearing-in of new Alberta Premier Danielle Smith, who had vowed last week (after becoming premier-designate) that she would "not have our resources landlocked or our energy phased out of existence by a virtue-signalling prime minister." Her counterpart next door seems to have taken note. This afternoon, Saskatchewan Premier Scott Moe released a white paper on "Defending Saskatchewan's Economic Autonomy" against "destructive" federal climate policies.
"We cannot allow continued federal intrusion into our exclusive constitutional right to develop our natural resources and grow our economy," declared Mr. Moe. He pointed to an analysis by the provincial Ministry of Finance, which estimated that nine federal climate policies will cost Saskatchewan's economy a total of $111-billion from 2023 to 2035. Mr. Moe wants to take "a number of steps" to shore up the province's control over its resources, or in politician-speak to "protect Saskatchewan's families, businesses and jobs." He vowed to provide more details in a throne speech on Oct. 26.
Within the oil patch, stocks fell with commodity prices, even as some companies made a determined effort to lift the gloom. Scott Ratushny's Alberta oil producer, Cardinal Energy Ltd. (CJ), lost 20 cents to $8.20 on 2.19 million shares, despite confirming a dividend hike. It has declared a six-cent dividend for October. This is up from the old monthly dividend of five cents, for a new yield of 8.8 per cent.
Investors shrugged off the increase (or raised eyebrows at the lofty yield), perhaps because Cardinal started predicting a dividend hike in July and settled on a figure of six cents in September. It used both of those announcements in part to pat itself on the back for its rapid debt reduction. Net debt came to $62-million as of June 30, down from $178-million at the start of the year (and from $246-million at the start of last year). As this number approaches $50-million, Cardinal hinted today that it could increase the dividend yet again. Investors should find out more when the company releases its 2023 guidance later this year.
Further afield, Paul Baay's Touchstone Exploration Inc. (TXP) lost 12 cents to $1.21 on 505,800 shares, even as it trumpeted a "very exciting" milestone in Trinidad. Touchstone has already been an oil producer in Trinidad for years; now it is officially a gas producer too. The company has started production from its Coho project at a net rate of about 8.4 million cubic feet of gas a day (the equivalent of about 1,400 barrels of oil equivalent a day). This is the first onshore gas development to come on-line in Trinidad in two decades.
To hear CEO Mr. Baay talk, it may be one of the most exciting bits of news in all his years of energy promotion, spanning three decades. (Investors may remember his name from Remington Energy in the 1990s and True Energy and Vero Energy in the 2000s, before he established Touchstone in 2010.) "This is very exciting for the company ... [and] will provide a strong foundation for continuous improvement," he declared. He also took the opportunity to remind shareholders of a much larger gas project that Touchstone is working on, Cascadura. This will have a designated production capacity of 200 million cubic feet a day, though it is still in the planning and permitting stage.
This stage can last far longer in Trinidad than investors might like. Touchstone was originally hoping to bring little Coho on production in early 2020, or roughly 2-1/2 years ago. Yet as long as shareholders invested at least three years ago, they have generally had their patience rewarded. After spending years stagnating at 20 cents, the stock soared throughout 2020 and reached a high of $3.06 in 2021, before pulling back to today's close of $1.21.
Another international producer, Gary Guidry's Gran Tierra Energy Inc. (GTE), lost 13 cents to $1.80 on 1.51 million shares, after delivering a sadly familiar update: It is having production problems in Colombia. Specifically, one of its blocks has been experiencing "occasional disruptions due to temporary localized blockades."
This is the latest in a string of setbacks at various assets since 2019. From equipment failures to restless protesters (generally more anti-government than anti-Gran Tierra), the last few years have brought seemingly countless updates about lower-than-hoped for production. Gran Tierra sighed today that its production in the third quarter came to 30,400 barrels a day, or nearly 1,000 barrels a day lower than it would have been without the blockades. (To put the overall problems in context, Gran Tierra's production entering 2019 was 40,000 barrels a day.)
CEO Mr. Guidry soon brightened, emphasizing Gran Tierra's "strong performance" from other producing assets and "progress on several prospects" where it is conducting exploration. He also boasted that the third quarter marked the start of "returning value to shareholders" through share buybacks. From the launch of the program on Sept. 1 up through Sept. 30, the company bought back 10.8 million shares (out of 368 million outstanding on Sept. 1) for $14.4-million (U.S.). It also spent another $17.3-million (U.S.) during on the quarter on bond buybacks. As of Sept. 30, the company had a cash balance of $118-million (U.S.) and $462-million (U.S.) in net debt.
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