Energy Summary for Jan. 18, 2022
2022-01-18 19:59 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for February delivery added $1.27 to $85.43 on the New York Merc, while Brent for March added $1.03 to $87.51 (all figures in this para U.S.). Western Canadian Select traded at a discount of $12.53 to WTI, unchanged. Natural gas for February added two cents to $4.28. The TSX energy index lost 1.27 points to close at 192.31.
OPEC is sticking to its forecast for a healthy increase in global oil demand this year. In the latest version of its closely watched monthly report, released this morning, OPEC predicted that demand will rise by 4.15 million barrels a day in 2022 (same as last month). "The oil market is expected to remain well supported throughout 2022," said the group. It downplayed concerns about the COVID Omicron variant or interest rate hikes, noting that "projections for economic growth remain robust," while hinting that some "overheating economies" could use a breather anyway.
Here in Canada, Suncor Energy Inc. (SU) lost 34 cents to $35.77 on 19.8 million shares, after facing up to recent "operational incidents" at its oil sands assets. One of those incidents was a fatality at its base plant two weeks ago, when two heavy-haul trucks collided (as discussed in Stockwatch on Jan. 6). Chief executive officer Mark Little said today that he is "deeply saddened" by the death and "committed to implementing corrective actions." An investigation is still in progress.
Separately, Mr. Little noted that Suncor suffered equipment failures at both its Syncrude and Firebag projects in mid-December, causing no fatalities but curtailing production for weeks. The result is that Suncor fell short of its full-year production target. It was aiming for 740,000 barrels a day; instead it produced 732,000 -- not a big gap, but a disappointment nonetheless. Mr. Little emphasized that both projects are now back at normal production levels. He did not mention any changes to Suncor's 2022 guidance of 750,000 to 790,000 barrels a day.
In a happier mood was Mike Rose's Tourmaline Oil Corp. (TOU), up $1.18 to $47.23 on 5.28 million shares. It pleased investors today with another quarterly dividend increase, its ninth in four years. The new 20-cent quarterly dividend (up from 18 cents) represents a yield of 1.7 per cent. Tourmaline also announced a separate special dividend of $1.25 a share.
Tourmaline had already told investors that it wanted to pay them a special dividend in early 2022. Its founder, chairman and CEO, Mr. Rose, headed to BNN in November to marvel that the company is enjoying more than $200-million in free cash flow every month, with the majority earmarked for shareholder returns. He added that he is having "a ton of fun" amid the recent rally in commodity prices. (The higher dividend will surely add to the fun: He personally owns 8.7 million of Tourmaline's 330 million shares, which will now provide him with $1.7-million in quarterly dividend payments, in addition to his $600,000 annual salary.) At the time, Mr. Rose did not specify how generous Tourmaline planned to be with dividends in 2022, quipping that investors could "do the math." Today brought a generous sum.
One analyst still sees more to the equation. In a research note this morning, Canaccord Genuity analyst Anthony Petrucci predicted that Tourmaline could dole out as much as $5.80 a share to its shareholders by the end of the year. (Specifically, this would be the regular quarterly dividend of 20 cents -- 80 cents annualized -- plus $1.25 in special dividends every quarter, for the other $5.) The analyst called this "very achievable." He added that the special dividend is a "tangible reminder" of just how much cash flow is being generated by oil and gas producers right now. Indeed, he mused, "we may witness several quality producers following [Tourmaline's] lead." He did not name any names. Apparently his calculator was working better today than his crystal ball.
Further afield, Serafino Iacono and Ron Pantin's NG Energy International Corp. (GASX) added nine cents to $1.89 on 427,400 shares, as it strove to recapture enthusiasm for its soon-to-be-producing Colombian gas assets. "The glycol and dehydration units have arrived at site," it cheered this morning. The comment makes more sense in light of the fact that these units were the holdup in finishing the new gas facilities at the company's Maria Conchita block. NG Energy announced the holdup on Jan. 4, but said it expected resolution "in the coming days." The stock was then trading above $2.30. Amid rising impatience, the stock fell steadily to yesterday's close of $1.80.
Today the stock perked up again, though relatively mildly; the plant still faces an indeterminable period of testing before it can come on-line and officially turn NG Energy into a producer. Investors were originally hoping for this milestone months ago. In the Jan. 4 press release, it fell to CEO Mr. Iacono to try to cheer them up by stating that 2022 will be "transformational." In today's update, executive chairman Mr. Pantin took over the chant, stating that NG Energy is about to "transition from a developer to a producer ... [in] the premium-priced Colombian marketplace."
Both men have been active in this marketplace for years. Their previous promotion was Pacific Rubiales, a once-high-flying Colombian oil producer that traded above $35 in 2008, but collapsed below 40 cents and declared bankruptcy in 2016. It underwent a massive restructuring and subsequently re-emerged (under new management) as Frontera Energy Corp. (FEC: $9.43).
Back in Canada, Don Simmons and Charlie O'Sullivan's Hemisphere Energy Corp. (HME) added three cents to $1.07 on 518,900 shares, after boasting of a strong end to 2021 in Alberta. The company was able to start the first drill program since 2019 at its Atlee Buffalo project in September. Its production at the time was about 1,750 barrels a day. With the addition of three new wells, Hemisphere boosted this to 2,700 barrels a day for the month of December -- already approaching the goal of CEO Mr. Simmons to hit 3,000 barrels a day by the end of 2022.
Mr. Simmons applauded Hemisphere for being "very active in the field." Just prior to year-end, the company drilled another four wells at Atlee. Those wells should come on production by the end of the month. Naturally, production is highest when a well is new (known in the industry as the flush rate), but Mr. Simmons is confident that Hemisphere's average production will stabilize at 2,600 barrels a day for full-year 2022, a nearly 50-per-cent jump from 2021.
With oil prices holding strong, the timing of the increase is working out nicely for Hemisphere, which at $1.07 is trading even higher than it was before prices crashed in 2014 (a rarity in the sector). It still has a long way to climb back to its 2005 high of $13. Back then it was not an oil junior but a Far North metals explorer, with Vancouver gold promoter Frank Callaghan serving as CEO. He left in 2006 and Hemisphere brought in Mr. Simmons CE and switched to Alberta oil in 2007. Overseeing it all has been the company's 78-year-old chairman, Mr. O'Sullivan, who founded it back in 1977. Above all else, the company is a survivor.
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