Stockwatch Energy for yesterday
Energy Summary for June 27, 2022
2022-06-27 20:54 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for August delivery added $1.95 to $109.57 on the New York Merc, while Brent for August added $1.97 to $115.09 (all figures in this para U.S.). Western Canadian Select traded at a discount of $17.55 to WTI, unchanged. Natural gas for July added 28 cents to $6.50. The TSX energy index added 10.47 points to close at 232.27.
Oil prices bounded into the week, as traders awaited updates from a continuing Group of Seven (G7) summit in Germany. The Russia-Ukraine war dominated the talks, with G7 leaders vowing to support Ukraine "for as long as it takes." They suggested that further sanctions aimed at squeezing Russia's finances could include a cap on the price of Russian oil. Meanwhile, traders also began turning their attention to the next monthly OPEC+ meeting, scheduled for this Thursday. The group is expected to stick to its previously announced production policy.
Here in Canada, oil sands giant Imperial Oil Ltd. (IMO) added $1.91 to $62.33 on 1.87 million shares, after trumpeting its "commit[ment] to long-term shareholder value." By way of translation, it has renewed its regular share buyback program. It will be able to buy back up to 31.8 million of its 636 million shares over the next 12 months.
Imperial is a fan of buybacks, which it calls "a flexible and tax-efficient way of distributing surplus liquidity to shareholders." The company had a buyback program starting last June as well, which it used fully by the end of January, buying the maximum of 35.6 million shares at what ended up being a total cost of $1.5-billion. It then announced a special program in June, buying a further 32.4 million shares for a total of $2.5-billion (its share price was higher then). It buys some of the shares in the market and some from its parent company, ExxonMobil, to maintain Exxon's ownership at 69.6 per cent. Exxon has agreed to participate in the new buyback as well.
Another Alberta giant (this time in the gas sector), Mike Rose's Tourmaline Oil Corp. (TOU), added $4.13 to $68.01 on 2.71 million shares. Its chairman, president and chief executive officer, Mr. Rose, was no doubt in a cheery mood over the weekend. Late Friday, BNN Bloomberg noticed that Mr. Rose has crossed into the ranks of Canadian billionaires. He controls 16.3 million of Tourmaline's 334 million shares. BNN noted that this position, which was worth $662-million at the start of the year (and was worth just $110-million during the worst of the COVID downturn in 2020), was worth $1.04-billion as of Friday's close (and took another jump to $1.11-billion today).
The BNN article opted not to mention that Mr. Rose's position was worth an even better $1.32-billion barely a month ago, when Tourmaline's share price got as high as $80.66 on May 31. June was not nearly as kind to Tourmaline. On June 3, TD analyst Aaron Bilkoski downgraded the stock to "hold" from "buy," saying its valuation had become "stretched." A bigger calamity fell on June 14, when Freeport LNG, one of the largest operators of liquefied natural gas (LNG) export terminals in the United States, said it suffered a fire that will keep a crucial Texas facility off-line until at least September. The facility was sending exports to Europe. Its shutdown is contributing to a backup of gas in North America, which is contributing to a plunge in gas prices from over $9 (U.S.) in May to their current level of about $6.50 (U.S.). Gas producers such as Tourmaline have fallen in turn.
Fortunately, gas prices are still around double what they were at the start of the year, and Mr. Rose has been able to claw back his billionaire status -- to a point. More than 5.8 million of the 16.3 million shares controlled by Mr. Rose are actually owned by his wife, Susan Riddell Rose. She is an energy CEO in her own right and is in charge of Perpetual Energy Inc. (PMT: $1.41) and Rubellite Energy Inc. (RBY: $3.60). Her brother, Jim Riddell, is also a CEO, at Paramount Resources Ltd. (POU: $30.83).
Further afield, Paul Baay's Trinidad-focused Touchstone Exploration Inc. (TXP) stayed unchanged at $1.20 on 694,500 shares, after an update that left investors caught between good news and bad. The good news is that Touchstone claimed to be within weeks of achieving gas production from the Coho prospect at its Ortoire block. "The [Coho] pipeline ... has been completed, and hydro testing is scheduled to commence this week, upon which the pipeline will be ready for first gas," cheered Mr. Baay, Touchstone's president and CEO.
Mr. Baay added that this will be the first onshore Trinidadian gas project to come on stream in two decades, marking an "important milestone" for Touchstone and the entire country. He opted not to mention that the milestone is running more than two years behind the original plan of getting Coho on-line in early 2020. The long wait aside, if all goes to plan, Coho should roughly double Touchstone's current production of around 1,400 barrels a day.
The less pleasant news had to do with one of the already producing assets. At the Fyzabad oil block, a recent "act of vandalism" -- the deliberate cutting of an oil transfer line -- has led to an oil spill of about 250 barrels. Mr. Baay said Touchstone has notified the authorities and is conducting cleanup. He does not expect a "material impact" on production. (Fyzabad contributed less than 10 per cent of the company's production in the first quarter.)
Back in Canada, Tony Berthelet's Prairie Provident Resources Inc. (PPR) added three cents to 23.5 cents on 706,300 shares, after bringing in a new board member. It chose Matthew Shyba. Mr. Shyba is a lawyer and a shareholder of Prairie Provident, owning 4.2 million of its 128 million shares. He is the former associate general counsel of AutoCanada, and before that worked in the securities and capital markets group of Borden Ladner Gervais. Three months ago, he incorporated his own private investment firm, the Calgary-based Shyba Capital. Prairie Provident cheered his addition as "an important step in enhancing our board's alignment with shareholders."
The company may be feeling a bit sensitive these days about "alignment with shareholders." Last month, just two days before the scheduled annual meeting, two of the board's six directors (Derek Petrie and Rob Wonnacott) abruptly stepped down. Their resignations came at a time when several energy directors were leaving board seats prior to annual meetings, some of them explicitly saying it was because the proxies received ahead of the meetings were unpromising. Prairie Provident made no such comments, but said it would start "reviewing the board's skills matrix to ensure an optimal mix of competencies and perspectives." Evidently it feels that Mr. Shyba's competencies and perspectives will make a good first addition.
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