Pine Cliff Energy Ltd T.PNE

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Morning Report: Pine Cliff CEO buys after Alberta gas storage slides 

January 19, 2023

Today we revisit Alberta-focused natural gas producer Pine Cliff Energy (PNE), last featured here on July 11th. The stock is up 2.1% since that report and, along with Q2 results, Pine Cliff boosted its monthly dividend to $0.01 from $0.0083. That works out to a total return of about 6% since that report. Pine Cliff reported Q3 adjusted funds flow of $34.9 million, up from $13.3 million in Q3 2021. Production averaged 21,276 barrels of oil equivalent per day (86% natural gas), up from 18,316 boe/d (91% NG) in the comparable period. It expects 2022 average production to come in between 21,000 and 21,250 boe/d.

The stock has been selling off as North American natural gas prices have fallen. CEO Philip Hodge addressed natural gas fundamentals in a newsletter earlier this month. He noted that while the NYMEX price is the one many investors hear about the most, "in Western Canada, where Pine Cliff sells 90% of [its] gas, December Alberta storage withdrawal was 64 BCF" versus a historical average of only 40 BCF. The letter suggests the drop was due to record exports and domestic Alberta demand. According to the CEO, Alberta is Canada's biggest natural gas consumer, driven by oil sands projects, petrochemicals, and power generation.

Meanwhile, it is encouraging to see that Mr. Hodge has been buying the pullback. He and two other insiders have spent a combined $129,581 picking up shares in the past 90 days through a combination of public market purchases and options exercises.