Stockwatch Energy for yesterday
Energy Summary for Oct. 13, 2022
2022-10-13 20:12 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for November delivery added $1.84 to $89.11 on the New York Merc, while Brent for December added $2.12 to $94.57 (all figures in this para U.S.). Western Canadian Select traded at a discount of $27.43 to WTI, unchanged. Natural gas for November added 30 cents to $6.74. The TSX energy index added 7.91 points to close at 245.57.
Oil prices settled higher as traders sifted through mixed U.S. inventory data. The U.S. Energy Information Administration (EIA) reported today that crude stockpiles jumped by 9.9 million barrels last week, far exceeding analysts' predictions of a rise of 1.8 million. This would normally be bearish for oil prices, but the EIA report also showed that distillate stockpiles (which include diesel and heating oil) plunged by 4.9 million barrels -- another big miss for analysts, who were expecting a drop of just two million. Distillate levels are now at their lowest level since May. This prompted a surge in buying in preparation for the fast-approaching winter.
Here in Canada, Brian Schmidt's Tamarack Valley Energy Ltd. (TVE) added 17 cents to $4.26 on 7.81 million shares. It has closed its $1.42-billion takeover of the private Deltastream Energy in the Alberta Clearwater play. The price tag comprised $825-million cash, $300-million in deferred acquisition payment notes and 80 million shares.
"The acquisition further solidifies Tamarack as the largest producer in the Clearwater," cheered the company's president and chief executive officer, Mr. Schmidt. He said Deltastream's assets are currently producing 19,500 barrels a day, but should rise to 23,000 barrels a day in 2023 and presumably climb even higher thereafter. To show his confidence, he confirmed a previously announced dividend hike to 1.25 cents a month (from a penny a month), for a yield of 3.5 per cent.
Mr. Schmidt also announced some board and management changes. Ian Currie has resigned from Tamarack's board of directors after five years, while Kathleen Hogensen will take his seat. Mr. Currie happens to be in charge of a company that Tamarack has no doubt been watching closely. That would be Spur Petroleum, a private company that was one of the very first start-ups in the Clearwater, and is thus one of Tamarack's current Clearwater competitors (or possibly targets). Prior to Spur Petroleum, Mr. Currie was in charge of Spur Resources, a Viking player that he sold to Tamarack for $407-million in 2017.
As for incoming director Ms. Hogensen, she is the president of and CEO of Zone Oil & Gas, a private U.S. oil and gas advisory firm that she founded in 2007. She is also on the boards of the TSX-listed First Quantum Minerals and the Nasdaq-listed Verisk Analytics. She will not be today's only newcomer to Tamarack: The company has also hired a new vice-president of exploration, Lynne Chrumka. Ms. Chrumka was recently vice-president of geosciences at Seven Generations Energy and then ARC Resources Ltd. (ARX: $18.76) after ARC bought Seven Generations for $2.7-billion last year.
Elsewhere in Alberta, Doug Bartole's Cardium-focused InPlay Oil Corp. (IPO) added 13 cents to $3.08 on 533,500 shares, after arranging a share buyback program. It plans to buy back up to 6.46 million shares, or 10 per cent of its public float. (The company has over 87 million shares outstanding, but more than 20 million of them are held by Carbon Infrastructure Partners (CIP), formerly known as JOG Capital. CIP has been a major backer of InPlay since its long-ago days as a private oil start-up. Presumably CIP is a fan of InPlay's management, which previously led Vero Energy, a predecessor to what became TORC Oil & Gas in 2012. TORC was then bought by Whitecap Resources Inc. (WCP: $10.03) for $565-million last year.)
The buyback program keeps a promise that InPlay has been dangling for months. Since oil prices began to rally more than a year ago, "shareholder returns" has been the catchphrase echoing throughout the oil patch, with one company after another raining down buybacks and dividends. (The above Tamarack, for example, did not pay its first dividend until last February.) InPlay finally bowed to the trend over the summer and promised to start "evaluating a potential return of capital." It gave itself plenty of wiggle room, telling investors last month that it was considering a range of options that could include "potential share buybacks, dividends, increased tactical capital investment and accretive strategic acquisitions."
Now it has given itself the wiggliest, lowest-commitment option of all, a buyback. Investors were nonetheless pleased. If InPlay is cautious on the returns front, it is one of the more ambitious operators when it comes to production. Its most recent update (last month) pegged current production at 9,600 barrels a day, or nearly double pre-COVID levels.
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