Energy Summary for May 21, 2021
2021-05-21 20:23 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for July delivery added $1.53 to $63.58 on the New York Merc, while Brent for July added $1.33 to $66.44 (all figures in this para U.S.). Western Canadian Select traded at a discount of $14.60 to WTI, down from a discount of $12.79. Natural gas for June lost two cents to $2.91. The TSX energy index lost a fraction to close at 124.30.
Not everyone was in a cheery mood heading into the long weekend. "We are incredibly disappointed by this setback," lamented a supporter of a proposed LNG (liquefied natural gas) project in British Columbia, in an interview with The Globe and Mail. The supporter was referring to the recent announcement that Woodside Petroleum, the Australian company that owns a 50-per-cent interest in the proposed Kitimat LNG project, is putting this interest up for sale. Woodside said it would "prioritize the allocation of capital to opportunities that will deliver nearer-term shareholder value."
The exit is another blow to the struggling B.C. LNG industry. It is also another blow specifically to the Kitimat LNG project. The other 50-per-cent owner of this project, Chevron, put its interest up for sale back in December, 2019, with no takers so far. Chevron initially continued to pay its share of costs at Kitimat LNG while marketing the interest. Two months ago, however, Chevron said it was done spending that money. This is what prompted Woodside to look at its own interest and decide that it wants out too.
It is not at all clear that Woodwide will have any better luck than Chevron in attracting a buyer. Woodside seems aware of this, noting that if it cannot sell the assets, it will wind them up instead. A sale would be preferable, however -- not just for Woodside, but for the local First Nations Limited Partnership, which represents 16 indigenous communities in Northern British Columbia and is a supporter of the project. Partnership chairman Mark Podlasly made the above "incredibly disappointed" comment in today's Globe and Mail. He added that the partnership "stands ready to support the right buyers." It may want to sit. There could be a long wait.
In Alberta, George Fink's Cardium-focused Bonterra Energy Corp. (BNE) stayed unchanged at $4.12 on 42,800 shares, after releasing the results of yesterday's shareholder meeting. It seems that shareholders were none too pleased with Mr. Fink, the company's founder and long-time chief executive officer. He was also its long-time chairman but stepped back and became a regular director last month. At yesterday's annual meeting, most of Bonterra's directors kept their seats with more than four-fifths voting support (Mr. Stewart even got 96.9 per cent). Mr. Fink did not fare nearly as well, barely getting 62 per cent of the vote.
The 81-year-old Mr. Fink, who founded Bonterra in 1998 and controls 4.57 million of its 33 million shares, reportedly became the target of increased "animosity" several months ago. That was the word he used in an interview with The Canadian Press in March. At the time, Bonterra had just fended off a hostile takeover offer from fellow Cardium player Obsidian Energy Inc. (OBE: $2.01), which had been trying to snap up Bonterra since September. "It's really a relief to be rid of that," sighed Mr. Fink during his March interview. He acknowledged feeling "animosity" from some of the criticisms flung his way during the lengthy battle. Rather than list the criticisms, he talked about Bonterra's future plans, explaining that the company wants to restore its production to pre-COVID levels and eventually reintroduce a dividend. (It suspended its old one-cent monthly dividend in March, 2020.)
The results of yesterday's director election suggest that not everyone is a fan of this plan. Mr. Fink, for his part, still seems perfectly content with it. After buying a total of 148,800 shares of Bonterra from December to March (when the hostilities with Obsidian were in full swing), Mr. Fink resumed his purchases this week, buying 6,000 shares yesterday and another 6,000 the day before that. This brings the dollar amount of his purchases since December to $425,587.
Another company enjoying insider buying is North Dakota Bakken producer Enerplus Corp. (ERF), up eight cents to $7.31 on 1.92 million shares. President and CEO Ian Dundas bought 90,000 shares from May 11 to yesterday, spending $672,250. He now owns about 275,000 of Enerplus's 256 million shares. The buying activity comes shortly after Enerplus reported crowd-pleasing quarterly financials and raised its dividend on May 6. Its new 3.3-cent quarterly dividend represents a yield of 1.8 per cent.
Mr. Dundas was surely sighing with relief this afternoon, after a U.S. district judge ruled that the contentious Dakota Access pipeline can keep operating while a federal agency conducts an environmental review. Dakota Access is the main pipeline for the North Dakota Bakken oil industry. The industry grew nervous last July, when the above-noted judge revoked a key permit for the pipeline and ordered it to be shut down for an extended environmental review. An appeals court determined that the judge had not justified the shutdown order. That was dropped, but the permit revocation went ahead. The U.S. Army Corps of Engineers began the required environmental review to determine whether Dakota Access can get the permit back. In the meantime, anti-pipeline activists petitioned the judge to impose an injunction and shut Dakota Access down while the review was in progress -- something the Corps, the pipeline's owners and the oil industry argued would be unnecessary.
Perhaps worried that an appeals court would take the same view, the judge ruled today that he will not issue an injunction. The line can stay open during the review, which is scheduled to be finished next March. This is good news for Bakken operators. In the event of a shutdown, they would have had to rely on rail transportation, pushing up their costs.
Besides Enerplus, another North Dakota Bakken producer is Bruce Chernoff's PetroShale Inc. (PSH), down half a cent to 20 cents on 191,500 shares. The drop reflects the first quarter financials that PetroShale released last night. This was a difficult quarter. Production averaged 10,100 barrels of oil equivalent a day, down sharply from 12,200 barrels a day in the fourth quarter of 2020. PetroShale spent most of the quarter focusing not on its operations but on its balance sheet, leading to a recapitalization that it completed in April. The recapitalization wiped out some of its debt -- though the remaining balance of $185-million is still lofty next to its market cap of $104-million -- and sent its share count rocketing to 520 million from 188 million.
President and CEO Jacob Roorda kept his chin up in yesterday's financials. He vowed to "prudently" increase spending over the rest of the year, with the aim of getting full-year production up to a range of 10,500 to 11,500 barrels a day. As of today, at least he will not have to worry about moving any of that production by rail.
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