Energy Summary for Nov. 28, 2019 2019-11-28 20:45 ET - Market Summary
by Stockwatch Business Reporter
It was a quiet day for equities as U.S. markets stayed closed for American Thanksgiving. West Texas Intermediate crude for January delivery added 13 cents to $58.24 in electronic trading on the New York Merc, while Brent for January lost 11 cents to $63.95 (all figures in this para U.S.). Western Canadian Select traded at a discount of $19.65 to WTI, unchanged. Natural gas for January lost two cents to $2.48. The TSX energy index added a fraction to close at 133.67.
Jim Evaskevich's Alberta Cardium producer, Yangarra Resources Ltd. (YGR), edged down one cent to $1.16 on 89,800 shares. It is jumping on the buyback bandwagon and has received TSX approval to repurchase up to 4.26 million of its 85 million shares. Such purchases are deemed "a good investment" by Yangarra, claiming that its share price does not reflect its underlying value. By now, energy investors have lost count of how many times they have heard that. In the last month alone, Birchcliff Energy Ltd. (BIR: $2.24) and International Petroleum Corp. (IPCO: $5.63) have announced share buyback programs, Enerplus Corp. (ERF: $8.41) has expanded its existing buyback program, and Athabasca Oil Corp. (ATH: $0.38) declared its interest in a buyback program subject to receiving shareholder approval at a special meeting on Jan. 8. All of them despaired of their current share prices and insisted that they are, in fact, worth far more.
In Yangarra's case, insiders share the sentiment. From mid-September through to last week, four directors and officers have bought a total of 268,500 shares, at prices ranging from $1.04 (the price last week) to $1.80 (the price in September). The drop of roughly 80 cents partly reflects concerns that Yangarra may fall below its full-year production target of 13,000 to 14,000 barrels of oil equivalent a day. Yangarra, for its part, has no concerns about its production-boosting abilities, and recently announced that next year's target will be 14,000 to 15,000 barrels a day.
Another Alberta junior enjoying insider buying is Michael Kabanuk and Brendan Carrigy's Bakken-focused Granite Oil Corp. (GXO), unchanged at 42 cents on 6,200 shares. Both Mr. Kabanuk and Mr. Carrigy have been steady buyers over the last six weeks. Mr. Kabanuk, Granite's president and CEO, has bought 77,500 shares since Oct. 23 and now owns 1.23 million of Granite's 38 million shares, while Mr. Carrigy, a director, has bought 99,000 shares since Oct. 21 and now owns 1.18 million. Both seem optimistic that Granite's slow and steady pace of developing its Bakken assets will eventually bring investors around. This has worked in the past: When Granite first went public in mid-2015, as part of a corporate split of its parent company, its stock quickly rose to over $9 from around $6. Investors were impressed by the company's generous dividend and its EOR (enhanced oil recovery) project in the Bakken. Alas, the dividend is long gone and EOR alone could not hold the market's attention, even though the project is still chugging along. EOR is why Granite has been able to keep its production relatively steady at around 1,600 barrels of oil equivalent a day this year despite a lack of drilling. It last drilled a well in April, 2019, and before that its last well was in May, 2018.
Granite has focused this year on improving its balance sheet. In its third quarter financials earlier this month, it patted itself on the back for having reduced its net debt by 14 per cent over the first nine months of the year (to $41-million from nearly $48-million). It also talked up its new recompletion program. This is a relatively low-risk, low-cost way of boosting production by stimulating (fracking) older wells. Granite recompleted its first well during the third quarter and says the well's production tripled over the prefrack rate. A larger recompletion program is set to begin in the first quarter of 2020. Although the press release did not discuss Granite's 2020 guidance, the company has published some specifics in a new presentation on its website, calling for full-year production of 1,638 barrels a day (relatively flat with 2019) on a budget of $5.9-million. Cash flow is expected to be more than double the budget, resulting in approximately $7-million in forecast free cash flow. Granite says it will have "free cash flow optionality" to direct that money toward debt reduction, drilling, share buybacks or even special dividends."
(my comment: this report overlooks some very positive factors about both companies, like the 2X commodities prices in Canada than 2018, the new TCP, the profitability etc)