Energy Summary for Aug. 9, 2021
2021-08-09 19:53 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for September delivery lost $1.80 to $66.48 on the New York Merc, while Brent for October lost $1.66 to $69.04, as both benchmarks buckled under fresh COVID-19 restrictions in China and other Asian countries (all figures in this para U.S.). Goldman Sachs, JPMorgan and Morgan Stanley all lowered their Chinese economic forecasts this morning. Western Canadian Select traded at a discount of $13.87 to WTI, unchanged. Natural gas for September lost eight cents to $4.06. The TSX energy index lost 2.62 points to close at 120.18.
The week got off to a quiet start for news in the Canadian oil patch. Then plenty of chatter was kicked up by Cenovus Energy Inc. (CVE), down 22 cents to $9.96 on 8.35 million shares, after it suggested that if Ottawa wants to paint the oil sands green, Ottawa should buy the paint. Chief executive officer Alex Pourbaix told the Financial Times that the government should pay for up to 70 per cent of a proposed $75-billion project to "decarbonize" the oil sands. Canada's oil has every potential to become the "cleanest in the world," asserted Mr. Pourbaix. He reckoned that getting to that stage will cost "tens of billions of dollars over 30 years." Yet seeing as it would also "protect something in the range of $3-trillion of GDP," the government should be ready and willing to pay up.
Mr. Pourbaix did not explain how he came up with the 70-per-cent figure, or his specific ideas for federal funding. Two months have passed since Cenovus, along with Canadian Natural Resources Ltd. (CNQ: $41.20), Imperial Oil Ltd. (IMO: $33.69), MEG Energy Corp. (MEG: $7.45) and Suncor Energy Corp. (SU: $24.12), signed a joint pledge to achieve net zero emissions from their oil sands facilities by 2050. Their June announcement indicated that they would focus on building a carbon capture trunkline and "sequestration hub" (essentially creating one of the largest carbon capture and storage networks in the world). They added that they would be counting on government support such as "dependable access to carbon sequestration rights, emissions reduction credits and continuing investment tax credits." Mr. Pourbaix presumably had similar things in mind. As for the idea that taxpayers should be on the hook for most of the cost, Mr. Pourbaix noted that most of the pollution is caused by consumers (driving cars, flying planes and so on). In his view, "absolving the consumer of accountability for this doesn't make sense."
Although Mr. Pourbaix succeeded in getting Cenovus's name in the headlines, the stock still fell with oil prices, sliding below $10. This time last month, it traded above $11.50. Some insiders have been taking the dip as a buying opportunity. Last week, chairman Keith MacPahil (who is also a director of NuVista Energy Ltd. (NVA: $3.22)) dropped more than half a million dollars -- $509,250, to be precise -- buying 50,000 shares. Fellow director Hal Kvisle bought 17,000 shares, spending $172,330. (Mr. Kvisle is also the chairman of ARC Resources Ltd. (ARX: $8.49) and did not neglect that company last week either. He bought 20,000 shares of ARC for a total of $179,600.)
Meanwhile, investors continued to sift through scores of quarterly financials. Neil Roszell's Alberta oil producer, Headwater Exploration Inc. (HWX), lost 16 cents to $3.82 on 1.17 million shares, on top of the five cents it lost on Friday after releasing its report for the second quarter. It swung to a profit of $4.58-million from a loss of $1.67-million in the same period last year.
Last year's results reflected Headwater's status as a newly recapitalized company under fresh management. Mr. Roszell and his people took over a quiet New Brunswick gas producer, Corridor Resources, in March, 2020, and changed its name to fit in with their preferred water theme. (Their previous promotions were Raging River, Wild Stream and Wild River, which they sold to Baytex Energy Corp. (BTE: $2.05), Crescent Point Energy Corp. (CPG: $4.30) and Crescent Point again, respectively.) Headwater did not start acquiring new assets until November, 2020. As a result, its production in the second quarter of last year was next to nothing, rising all the way to 6,700 barrels a day in the second quarter of 2021. Investors were thus unsurprised by the jump in revenue to over $37-million from barely $500,000.
Separately, George Fink's Alberta gas producer, Pine Cliff Energy Ltd. (PNE) lost one cent to 40 cents on 361,500 shares, with investors remaining mostly unmoved by the second quarter financials that it released late last week. Pine Cliff was unable to join many of its competitors in swinging to a profit. It did manage to narrow its loss significantly, however; net loss improved to $744,000 in the second quarter from $14.1-million in the same period last year. The improvement came even as production dipped to 18,100 barrels of oil equivalent a day from 19,000. Over 90 per cent of Pine Cliff's production is gas, which has been enjoying a lovely price rally. Benchmark AECO prices in Alberta are reaching "levels not witnessed for several years," marvelled president and CEO Phil Hodge. He noted that Pine Cliff is not ignoring oil either. In late July it spudded two new wells in the Pekisko play, representing its first oil wells since 2019 and its fourth and fifth oil wells ever.
Pine Cliff remains a sizable investment of Vancouver broker Robert Disbrow. He has been putting some selling pressure on the stock lately, unloading over 2.5 million shares since late April, including 239,000 shares sold since the start of August. Earlier in the year, however, he was a significant buyer at lower prices than what he sold at. His trading activity for the year so far works out to 3.6 million shares bought for about $990,000 and 3.9 million shares sold for over $1.4-million -- not bad for barely seven and a half months. Mr. Disbrow continues to own 44.6 million of Pine Cliff's 337 million shares.
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