Energy Summary for March 24, 2022
2022-03-24 20:49 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for May delivery lost $2.59 to $112.34 on the New York Merc, while Brent for May lost $2.57 to $119.03 (all figures in this para U.S.). Western Canadian Select traded at a discount of $11.00 to WTI, up from a discount of $11.45. Natural gas for April added 17 cents to $5.40. The TSX energy index lost a fraction to close at 223.57.
Oil prices slid on reports that the U.S. government and its allies are discussing another co-ordinated release of emergency crude supplies. "All those tools are certainly on the table," U.S. Energy Secretary Jennifer Granholm told a press conference at the Paris headquarters of the International Energy Agency (IEA). The executive director of the IEA, Fatih Birol, said the previous co-ordinated release -- 60 million barrels, announced earlier this month -- represents just 4 per cent of member countries' total reserves. (It also represents less than one day of global demand, but the hope is that any action will help calm markets and reduce dependence on energy from Russia.)
Canadian government officials are also in Paris this week for the IEA meeting, behaving in the typical Canadian fashion of wanting a seat at the table while not being entirely sure what to do with it. "Canada wants to help our European friends and allies at a time of crisis," declared Natural Resources Minister Jonathan Wilkinson in a statement this afternoon. He added, "But of course we are looking to be sensitive and consistent with the commitments we've made with respect to climate change." Ultimately, he vowed that Canada will increase its exports in 2022 by about 300,000 barrels a day (which more or less lines up with what the industry was planning to do anyway). Canada currently exports four million barrels a day to the United States, a fraction of which is then rerouted overseas.
Within the sector, Pat Carlson's Kiwetinohk Energy Corp. (KEC) lost 10 cents to $12.00 on 18,300 shares. (The first word sounds like "key-wheat-in-no" and is a Cree word that means north. Investors tend to stick to the abbreviation KEC.) This morning, KEC released its year-end financials and reserves. Thanks largely to last year's merger with Distinction Energy, a private Alberta Montney producer, KEC's production climbed to 12,400 barrels a day in the fourth quarter from just 600 in the same period a year earlier. Reserves took a sizable jump as well.
These are KEC's first year-end round-ups since it went public just two months ago. Its chief executive officer, Mr. Carlson, is likely best known for his prior promotion, a different Alberta Montney producer called Seven Generations. Seven Generations was publicly traded until its $2.7-billion takeover last year by ARC Resources Ltd. (ARX: $16.91). Mr. Carlson was the founding CEO of Seven Generations, but left it in 2017; he seemingly prefers the start-up stage. Prior to Seven Generations, he built and sold Passage Energy, Krang Energy and North American Oil Sands from 1998 to 2007.
KEC's January debut in the stock market did not include a financing. Now, to shore up the finances, Mr. Carlson has announced his intention to file a base shelf prospectus. This has yet to appear on SEDAR, but the plan is to qualify up to $500-million in potential debt or equity financings over 25 months. Any proceeds would go toward helping the company "evaluate opportunities, including potential acquisitions, acceleration of development programs or general corporate purposes."
Speaking of acquisitions, Alex Verge's Journey Energy Inc. (JOY) added 52 cents to $5.72 on 1.5 million shares, after agreeing to buy a pirate company in central Alberta for about $17-million in cash and shares. The target is producing 625 barrels a day and will add "significant development drilling upside," boasted president and CEO Mr. Verge. Separately, Journey is forking over $5-million to increase its interest in a gas processing facility and an associated gathering system, also in Central Alberta. Journey will then be the majority owner and operator of this infrastructure. It says the move will cut its operating costs and boost its processing revenue to the combined tune of $1.25-million a year.
Journey has the cash to pursue acquisitions because it just closed a $12-million financing last week. (While the proceeds of that financing are mostly earmarked for drilling, they freed up cash on hand.) The company issued a total of 2.85 million shares at $4.25, meaning that participants are already sitting on a 35-per-cent gain on paper. According to SEDI, the only insider to have disclosed his participation (so far) is chief financial officer Gerry Gilewicz, who bought 23,500 shares for $99,875. He now owns 224,593 of Journey's 50.9 million shares.
Another Alberta producer -- though its dreams lie further east -- is Alfred Sorensen's Pieridae Energy Inc. (PEA), which lost nine cents to 66 cents on 1.08 million shares today, after releasing its year-end financials. Alas, these did not show any particular progress toward the aforementioned dreams. Pieridae's finances look more precarious than ever.
Naturally, CEO Mr. Sorensen did not take that approach in today's press release. "We have transformed as a company," he proclaimed, hyping Pieridae's "adjusted" focus on "building the upstream side of our business." Up until now, the company has treated its upstream assets -- its 40,000-barrel-a-day gas production in the Alberta Foothills -- largely as a means to an end. Its real dream has been to build a $10-billion (U.S.) liquefied natural gas (LNG) terminal in Nova Scotia. This project, called Goldboro, took centre stage, with the Alberta assets getting second billing as a potential source of feedstock. Unfortunately, after years of delay, Pieridae missed the deadline to make a final investment decision on the Goldboro terminal in June, 2021. It is still weighing its options.
In light of Europe's gas crisis, investors have been hoping that the Canadian government will see the benefits of Pieridae's proposed LNG terminal and give it a financial boost. Today's update contained no such windfall. "We continued to believe that an LNG project at our Goldboro site could be an economically compelling and nation-building opportunity," said Mr. Sorensen (a staunch LNG bull for the last two decades). He added, however, that Goldboro requires "a commitment of support from the government of Canada that this initiative is a national priority." Best not to hold one's breath.
In the meantime, Pieridae will start giving its gas assets more of its attention. "We believe there is great value in developing our Foothill assets ... and we will work to demonstrate that it is an economic place to drill," vowed Mr. Sorensen. He talked of a "potential" launch of a drill program in the second half of the year. The qualifier is presumably an acknowledgment that it will first need to do some much-needed cleanup of its balance sheet. As noted above, Pieridae is in an increasingly precarious financial position. It has a working capital deficit of $87.6-million (as of Dec. 31) and net debt of $205-million.
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