Stockwatch Energy for yesterday
Energy Summary for Oct. 24, 2022
2022-10-24 20:41 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for December delivery lost 47 cents to $84.58 on the New York Merc, while Brent for December lost 24 cents to $93.26 (all figures in this para U.S.). Western Canadian Select traded at a discount of $27.00 to WTI, down from a discount of $25.75. Natural gas for November added 24 cents to $5.20. The TSX energy index added 1.95 points to close at 253.44.
Oil prices had a lacklustre start to the week, on ho-hum Chinese consumption data. Here in Canada, the oil patch is bracing for quarterly reporting season, which will kick off after the close today with the third quarter financials of PrairieSky Royalty Corp. (PSK: $20.50). Other companies reporting their financials this week include Crescent Point Energy Corp. (CPG: $10.40), Whitecap Resources Inc. (WCP: $10.42), Tamarack Valley Energy Corp. (TVE: $4.61), Advantage Energy Ltd. (AAV: $9.74) and Imperial Oil Ltd. (IMO: $66.65).
Further afield, Charle Gamba's Canacol Energy Ltd. (CNE) lost one cent to $2.14 on 315,100 shares, after providing a long-awaited update on a sizable gas pipeline in Colombia. The company has finally chosen a builder for the pipeline. As well, it is also proposing a 1-for-5 share rollback.
The pipeline, which will carry 100 million cubic feet of gas a day from Jobo to Medellin, has been on Canacol's mind for years. It originally told investors that definitive agreements on building and financing the pipeline should be in hand by the end of 2019. That did not happen, so Canacol shrugged and gave itself an extension to the end of 2020, saying in September of that year that it was "in the final stages of completing the financial structuring" and "in advanced negotiations with multiple international pipeline construction and operational companies." Yet it rang in 2021 with no agreements. They remained frustratingly out of reach throughout 2021 and most of 2022 as well.
Now, at long last, Canacol has pinned down a builder and financier. China's SETCO (Shanghai Engineering and Technology Corp.) will wear both hats: It will build and own the 289-kilometre pipeline, and will assume the full costs of construction, operatorship and maintenance. Canacol's only commitment will be a fixed-fee transportation contract. Its president and chief executive officer, Mr. Gamba, did not disclose the fee but showed no concerns about paying it, boasting that Canacol has already secured enough take-or-pay contracts with customers to cover three-quarters of the line's capacity, with every expectation of finding more by the time the line comes into service in late 2024.
Investors remained aloof. Getting a builder is one thing; getting the builder to finish the work on time can be quite another. Memorably, when Canacol was having a different 100-million-cubic-foot-a-day pipeline built a few years ago, the contractor at the time (local utility Promigas) vowed to finish the line in 2018, only to fall far behind schedule and not finish it until the summer of 2019. Canacol will have to hope that SETCO sticks to a sterner schedule.
Separately, and without explanation, Mr. Gamba announced that Canacol wants to roll back its shares on the basis of 1 for up to 5. The company currently has 170 million shares outstanding -- not trim, but hardly hefty. Management presumably sees an advantage in prodding the company's share price (however artificially) above its current level of $2.14. Shareholders will have to approve the rollback at a special meeting on Dec. 19.
In neighbouring Ecuador, Jose Francisco Arata's New Stratus Energy Inc. (NSE) added one cent to 89 cents on 78,100 shares. It is planning to buy out the last of its joint venturers at blocks 16 and 67 in Ecuador's Oriente basin. Only two months ago, New Stratus owned a 35-per-cent interest in these blocks. Through three separate deals, New Stratus boosted its interest in September to 66 per cent, then in early October to 80 per cent and now to 100 per cent.
The three acquisitions have a collective price tag of $21-million (U.S.), which New Stratus presumably sees as a good deal, given that they will effectively triple its production to over 15,000 barrels of oil a day. The price seemingly reflects the fact that the blocks are still under a service contract that expires at year-end, only about 10 weeks away. New Stratus has been working all year to extend the contracts and convert them into more favourable production-sharing agreements. Today's announcement (like the last two) offered little update on these talks, merely noting that management "continues to negotiate with the government."
Mr. Arata, New Stratus's chairman and chief executive officer and a long-time oil man in South America, is used to the sometimes slow wheels of dealmaking in this region. He spent his early career at Petroleos de Venezuela. Then he had quite the promotion in Pacific Rubiales, a high-flying Colombian oil producer that crashed into bankruptcy in 2016, although Mr. Arata had left by then, retiring as president in 2015. He arrived at New Stratus in 2017 and tried to turn it into another Colombian producer through the takeover of Vetra Energy. That deal fell apart in 2020. Mr. Arata turned to Ecuador, setting his sights on the above-mentioned blocks 16 and 67, only for regulators to scuttle an initial deal. The patient Mr. Arata tried again with a restructured version of the deal and it successfully went through last January.
Back in North America, Wolf Regener's Oklahoma-focused Kolibri Global Energy Inc. (KEI) added 18 cents to $2.87 on 82,400 shares, extending a winning streak that has seen it add 85 cents in just four trading days. Investors have been waiting for an update on its five-well drill program at its Tishomingo field. They got their wish today, with president and CEO Mr. Regener cheering that the program is "progressing smoothly." He said the third and fourth wells have found "good oil and gas shows," like the first two wells earlier this year, while well No. 5 is "progressing as expected."
His enthusiasm offset news of a delay in completing the new wells and getting them on production. Mr. Regener emphasized that they will all be on production by year-end and will thus contribute to this year's revenue, but by less than he had hoped. He now expects full-year revenue of $35-million (U.S.) to $37-million (U.S.) on revenue of 1,500 to 1,700 barrels a day.
For context -- although Mr. Regener opted not to provide it -- the previous guidance was for revenue of $39-million (U.S.) and production of 1,700 to 1,900 barrels a day. Even though Mr. Regener omitted those prior numbers, he did make sure to stack the new numbers against Kolibri's performance in 2021, a much more favourable comparison. In 2021, the company produced 975 barrels a day and took in revenue of $15-million (U.S.).
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