Energy Summary for July 30, 2021
2021-07-30 20:00 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for September delivery added 33 cents to $73.95 on the New York Merc, while Brent for September added 28 cents to $76.33 (all figures in this para U.S.). Western Canadian Select traded at a discount of $14.70 to WTI, down from a discount of $14.45. Natural gas for September lost 15 cents to $3.91. The TSX energy index lost 1.12 points to close at 124.29. The steady stream of second quarter financials continued.
Oil sands giant Imperial Oil Ltd. (IMO) lost 69 cents to $34.18 on 2.57 million shares, disappointing investors with its results. The company earned 51 cents a share on revenue of $8.0-billion. Those numbers fell well below analysts' predictions for earnings of 76 cents a share on revenue of $8.6-billion.
Imperial sprinkled the blame across its upstream (production) and downstream (refining) operations. The upstream division was affected by maintenance-related downtime, which reduced production to 401,000 barrels of oil equivalent a day in the second quarter from 432,000 in the first quarter. The downstream sector had an even worse time, dropping to a profit of $60-million from the first quarter profit of $292-million. Higher oil prices increased the price of feedstock and eroded margins.
Chief executive officer Brad Corson kept a smile on. "Now that most of our scheduled downtime is behind us, we are in great shape heading into the second half of the year," he declared during a conference call this morning. He added that even with the downtime, Imperial achieved "our highest second quarter production in over 25 years." The company also achieved higher operating cash flow in a single quarter than in all of 2020 combined. Speaking of cash, Mr. Corson reminded investors that Imperial already increased its quarterly dividend in April to 27 cents from 22 cents (for a yield of 2.3 per cent), and then announced a large share buyback program in June. Chief financial officer Dan Lyons chimed in to declare that Imperial still has so much cash coming in that it may start considering special dividends.
Elsewhere in Alberta, Andy Mah's Montney-focused gas producer, Advantage Energy Ltd. (AAV), lost 16 cents to $4.69 on 1.88 million shares. Today it gave shareholders more than its second quarter financials to sift through. The financials are worth a quick mention, showing earnings of four cents a share, cash flow of 23 cents a share and production of 50,000 barrels of oil equivalent a day (all in line with analysts' predictions of five cents a share, 24 cents a share and 50,200 barrels a day). These numbers were overshadowed by the news that the above-mentioned Mr. Mah, Advantage's long-time CEO, is retiring at the end of the year.
The 62-year-old Mr. Mah has been hinting at retirement for some time. He first came to the company in 2006, when Advantage bought Ketch Resources, where Mr. Mah was serving as president and chief operating officer. Advantage brought him aboard in the same roles. In 2009, it gave him a promotion to president and CEO. Mr. Mah stayed in both positions until 2019, when he handed the president's duties to Mike Belenkie, who had joined as COO just one year earlier. The succession rumours that started with Mr. Belenkie's arrival in 2018 were fanned even more furiously with his promotion to president in 2019. Today, after two patient years, Mr. Belenkie was able to confirm that he will take over as CEO upon Mr. Mah's retirement. Advantage thanked Mr. Mah for his "strong, dynamic leadership" and noted that he will remain on the board of directors.
Another company coupled its financials with an executive appointment. Texas- and Saskatchewan-focused Baytex Energy Corp. (BTE) lost one cent to $2.13 on 4.85 million shares today, giving back some of the four cents it added yesterday after a barrage of announcements. These included second quarter financials that surpassed analysts' predictions. Baytex reported cash flow of 31 cents a share and production of 81,200 barrels of oil equivalent a day, better than the 28 cents a share and 78,900 barrels a day that analysts were expecting. (Baytex also reported net earnings of over $1-billion. As this reflected sizable impairment reversals and was more than double the company's revenue, investors found the cash flow measurement more useful.)
In addition to the financials, Baytex released its latest sustainability report yesterday, and even created the job of chief operating and sustainability officer to underline its "commit[ment] to developing responsible energy." The new officer is Chad Lundberg. He has been with Baytex since 2018 (which was when Baytex bought Raging River, where Mr. Lundberg was vice-president of operations) and is currently the head of its light oil business. Now, according to Baytex, Mr. Lundberg will "spend more time explicitly linking the company's sustainability priorities ... [to its] strategic planning processes." One hopes that Mr. Lundberg's ideas are clearer than that job description. He presumably has plenty of them; his biography on Baytex's website says he comes from a line of Alberta farmers and is "passionate about sustainability and building for future generations."
Back in the Montney, ARC Resources Ltd. (ARX) lost 15 cents to $9.44 on 8.51 million shares, after it too released its second quarter financials. The highlight of the quarter was the merger with Seven Generations on April 6, turning ARC into Canada's largest Montney producer. This boosted production to 336,000 barrels of oil equivalent a day in the second quarter from 170,000 in the first quarter. Unfortunately, to hear ARC tell the story, Seven Generations also saddled the company with burdensome hedging contracts. (ARC's own hedges are apparently quite different and positive because they were arranged to "derisk its deleveraging plan.") In any case, ARC took a $513-million loss on its various contracts in the second quarter, dragging its overall net loss down to $123-million. This was even worse than its loss of $43.5-million in the same period last year.
Interestingly, one of the executives who joined as part of the Seven Generations merger is now resigning, after just three months on the job. That would be David Holt. Mr. Holt joined Seven Generations as COO three years ago, and then became ARC's COO and senior vice-president. He did not provide a reason for stepping down, and ARC did not name a successor.
ARC did resolve a separate little mystery. Three weeks ago, Reuters began reporting that ARC had sold its non-core Cardium assets to the private Ricochet Oil for $100-million. Neither company would confirm the rumour at the time. In its financials, ARC revealed that it did indeed sell the Cardium assets, although it did not mention the buyer or the price tag. It may have a good reason to keep a lid on the latter. If Reuters is correct and ARC sold the assets for $100-million, that would be well below analysts' valuations of $130-million to $200-million.
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