Energy Summary for July 7, 2021
2021-07-07 19:53 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for August delivery lost $1.17 to $72.20 on the New York Merc, while Brent for September lost $1.10 to $73.43 (all figures in this para U.S.). Western Canadian Select traded at a discount of $13.54 to WTI, unchanged. Natural gas for August lost four cents to $3.60. The TSX energy index lost 3.03 points to close at 135.86.
Oil prices had another down day as traders watched for signs that OPEC+ will resolve its recent impasse. Although the breakdown of talks on Monday sent prices to a six-year high early Tuesday, the general consensus is that OPEC+ will make amends and increase production. JPMorgan joined the consensus today, predicting that in the coming days or weeks, the group will agree to boost output by 400,000 barrels a day each month for the rest of 2021.
Here in Canada, oil stocks fell alongside oil prices, despite a cacophony of horn tooting at an industry conference. Since yesterday, executives from some of Canada's largest oil and gas companies have been wooing investors at the two-day TD Securities Energy Conference. Presenting companies included oil sands major Suncor Energy Inc. (SU: $28.94), gas giant Tourmaline Oil Corp. (TOU: $34.24), the largest Montney producer, ARC Resources Ltd. (ARX: $10.09), and over two dozen others.
Prices overshadowed presentations. For example, Baytex Energy Corp. (BTE) lost 10 cents to $2.30 on 10.6 million shares today, on top of the 18 cents it lost yesterday, despite the best efforts of chief executive officer Ed LaFehr during his speech to the conference yesterday afternoon. "We've never been stronger," he declared. This month happens to mark the five-year anniversary of Mr. LaFehr's arrival at Baytex, which he joined on July 18, 2016. "It's been a wild ride over the last five years," he said, "but I can say that this is the strongest I've ever felt in terms of Baytex."
Mr. LaFehr devoted particular attention to Baytex's assets in the Clearwater play of Alberta. This is a relatively new play for Baytex, which until now has been focusing on the Saskatchewan Viking and the Texas Eagle Ford, but Mr. LaFehr said he sees the play as a "world-class resource." The company is currently drilling its third Clearwater well. "The Clearwater, if it works as we think it will, outcompetes everything in the portfolio and would jump to the top of the stack along with our wells in the Eagle Ford," he declared. He emphasized that Baytex did not include any Clearwater contribution in the five-year plan that it unveiled earlier this year, which sees the company generating $2-billion in free cash flow over this period. Much of this is earmarked for debt. Eventually, hinted LaFehr, Baytex will "look forward to moving more aggressively towards offering a more direct return to shareholders." (A more direct manner of speaking might be nice, too.)
Even Mr. LaFehr had to acknowledge that the market's attention is currently gripped by the OPEC+ drama. In his view, a permanent collapse of the group "will not happen. I guarantee you, it will not happen." He opined that OPEC+ is just trying to "spook the market" and keep it from getting "frothy."
Further afield, Craig Steinke's Reconnaissance Energy Africa Ltd. (RECO) lost 55 cents to $11.40 on 887,800 shares, despite cheering the arrival of a 2-D seismic permit for its Kavango basin assets in Namibia. The seismic survey will begin in a week or two and last until late August or mid-September. Attentive investors may have already known the permit was here, as the Namibian Ministry of Environment and Tourism -- an interesting pairing -- disclosed the award on its website last Friday. Why Reconnaissance waited five days to announce it is not clear. Perhaps it was rounding up boosterish quotes, such as the one from chief executive officer Scot Evans, who cheered the company's progress toward "commercializing this potential major source of energy for Namibia."
Speaking of boosterish quotes, attentive investors may have noticed something else this week: the sudden disappearance from Reconnaissance's website of all research reports from Haywood Securities. Haywood analyst Christopher Jones began covering Reconnaissance last November. Worth noting is that David Elliott, vice-president and director of Haywood, was disclosed in the November note as a sizable shareholder of Reconnaissance, owning over 7.3 million shares. He presumably still owns them, though financings have diluted the share count to the point that he no longer has to file insider reports. Haywood has generally led the financings. Throughout it all, Mr. Jones has kept up a steady stream of commentary, recently hiking his price target to $16 from $12.40 on June 24. Reconnaissance liked to post his reports on its website. Now those reports have quietly vanished, with no reason provided. Most companies do not put such reports on their website to begin with. Perhaps Reconnaissance or Haywood, or both, outgrew the PDA.
Someone was still happy to keep the hype machine cranked. The Oilprice website, whose founder is long Reconnaissance and has been firing off articles about it for the past year -- often with breathless rhetorical headlines such as "The Largest Oil Of The Decade?" or "Is This The World's Most Exciting Oil Discovery?" -- dropped the question marks in its latest article, entitled "Update On World's Most Exciting Oil Play: An Interview With Jim Granath." Dr. Granath is a director and geologist at Reconnaissance. He also quite likes the word "remarkable." Among other things, Dr. Granath touched on Reconnaissance's current seismic efforts, which are aimed at "map[ping] the structure to see if it's sizable enough to trap enough hydrocarbon to be commercial." Appraisal drilling is to follow.
Back in Canada, Neill Carson's i3 Energy PLC (ITE) -- which is British by birth, but has focused on Western Canada since last year -- lost 2.5 cents to 22 cents on 7.15 million shares, after announcing an asset acquisition and a financing. It will buy $65-million worth of central Alberta assets from Cenovus Energy Inc. (CVE: $11.39). The assets are producing 8,400 barrels of oil equivalent a day, enough to nearly double i3's production over the next 12 months to 18,500 barrels a day. They represent i3's fourth notable Canadian acquisition in less than a year. It previously bought Toscana Energy and Gain Energy last year, before picking up some Alberta Montney assets over the spring.
To pay for the Cenovus assets, i3 proposed a 40-million-pound financing of 363 million shares at 11 pence (about 18 cents). The company already has 700 million shares outstanding. It will need shareholder approval to close the financing, and says it will hold a shareholder meeting on July 26. The circular for the meeting is not yet on SEDAR. One wonders, when it arrives, whether it will contain any mention of those unpopular but probably unavoidable words: share consolidation.
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