Stockwatch Energy today
Energy Summary for Nov. 16, 2022
2022-11-16 20:20 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for December delivery lost $1.33 to $85.59 on the New York Merc, while Brent for January lost $1.00 to $92.86 (all figures in this para U.S.). Western Canadian Select traded at a discount of $29.07 to WTI, unchanged. Natural gas for December added 17 cents to $6.20. The TSX energy index lost 6.09 points to close at 264.42.
Oil prices tumbled as global recession concerns offset bullish U.S. inventory data. In its latest weekly report, the U.S. Energy Information Administration (EIA) said U.S. crude inventories fell by 5.4 million barrels last week. This significantly exceeded analysts' forecasts of a drop of 440,000 barrels. It was not enough to overcome a broader market swoon, with the Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite all ending the day down.
Here in Canada, oil sands giant Suncor Energy Inc. (SU) lost 88 cents to $48.31 on 18.7 million shares, despite offering shareholders a dividend hike. It is boosting its quarterly payout to 52 cents from 47 cents, for a new yield of 4.3 per cent. The increase reflects "confidence in sustained improving operating performance and the strengthening financial position."
The show of confidence went largely unrewarded by shareholders, many of whom are still punishing Suncor for gutting the dividend during the 2020 downturn, when it slashed the quarterly payout to 21 cents from 46.5 cents. Today marks the third increase since then (and the second this year), but the new payout of 52 cents is still only 12 per cent higher than the pre-COVID level. By contrast, fellow oil sands giants Imperial Oil Ltd. (IMO: $75.33) and Canadian Natural Resources Ltd. (CNQ: $80.90) did not cut their dividends during the downturn and have since doubled them from pre-COVID levels. Suncor used to trade in close alignment with those two competitors or at a premium; now it trades at a steep discount.
Besides the dividend woes, Suncor has spent the last couple of years battered by a worsening safety record, a skirmish with an activist investor, and the abrupt departure of its president and chief executive officer (Mark Little) last July, after yet another workplace fatality. Interim president and CEO Kris Smith will be discussing safety improvements and other operational plans during an investor presentation on Nov. 29. Investors are also hoping for an update on the timing of the search for a new CEO.
Elsewhere in Alberta, in other unfortunate safety news, Brian Schmidt's Tamarack Valley Energy Ltd. (TVE) lost 22 cents to $5.14 on 5.68 million shares, after local media reported the deaths of two workers in an explosion near Slave Lake. Alberta's Ministry of Jobs, Economy and Northern Development confirmed the deaths today. It did not disclose the location or the employer, but Tamarack's president and CEO, Mr. Schmidt, released a statement saying the victims were contractors working at the company's Marten Hills site in the Clearwater play.
"We wish to extend our deepest sympathies to the families on this tragic accident," said Mr. Schmidt. "Tamarack Valley has an excellent safety record. We are deeply saddened by this event and are taking this very seriously." The explosion happened on Saturday afternoon, according to Mr. Schmidt. He noted that the site is new to Tamarack, coming as part of its $1.4-billion takeover of Deltastream Energy last month The site is now closed pending an investigation into the explosion by Occupational Health and Safety.
Further afield, Gabriel de Alba's South American oil producer, Frontera Energy Corp. (FEC), added five cents to $11.05 on 215,000 shares. This was on top of the 33 cents it added yesterday after holding an all-day investor presentation. It spent much of the day talking up its "significant asset value and cash flows" in Colombia, where it gets the bulk of its 41,000-barrel-a-day production. Colombia is also at the heart of its "value-driven production plan" to reach 50,000 barrels a day by 2026. In Frontera's view, Colombia is a delightful place to do business and management is "excited about Frontera's future."
The attempts to polish Colombia's investment reputation come at an apt time. Just two weeks ago, the Colombian government approved a sweeping tax reform bill aimed at raising $4-billion (U.S.) annually for the next four years, in part through increased levies on oil. Notably, the package includes an income tax surcharge that will rise in tandem with oil prices, and removes the ability of oil and gas producers to deduct royalty payments for tax purposes. Critics of the reform package say it will lead to decreased investment in Colombia's energy sector. Yet this seems to be exactly the plan of leftist new President Gustavo Petro, who took office in August after campaigning on a promise to end oil exploration and wean the country off fossil fuels. He has yet to specify how Colombia would recover from the economic toll of such actions. In 2021, his apparently most despised commodities, oil and coal, accounted for nearly half of the country's export revenue.
Large oil producers in Colombia, such as Ecopetrol and Parex Resources Ltd. (PXT: $19.40), have tried to downplay the reforms. Frontera adopted a similar approach at yesterday's presentation, but also made sure to play another card, emphasizing its exposure to other countries. It already produces about 2,600 barrels a day in Ecuador, a "new, exciting country" chock full of exploration targets. Even more "high-impact" is Guyana, where Frontera has a "transformational exploration opportunity with world-class potential." It was referring to its offshore Guyanese joint venture with CGX Energy Inc. (OYL: $0.94). They drilled their first well in 2021 and were hoping to drill their second in 2022, but Frontera has warned that this could slip into 2023 instead.
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