Energy Summary for April 13, 2022
2022-04-13 20:45 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for May delivery added $3.65 to $104.25 on the New York Merc, while Brent for June added $4.14 to $108.78 (all figures in this para U.S.). Western Canadian Select traded at a discount of $12.66 to WTI, down from a discount of $12.64. Natural gas for May added 32 cents to $7.00, its first time in the $7 range since 2008, on unusual spring weather forecasts. The TSX energy index added 3.90 points to close at 235.42.
Oil prices took another jump as China's commercial capital, Shanghai, set another daily record for COVID cases. The city is in its third week of harsh lockdown conditions. Even so, it has set daily infection records in 11 of the last 12 days, stoking fears about the length of the lockdowns and the effect on fuel demand.
In a report this morning, the International Energy Agency (IEA) specifically cited the Chinese lockdowns as it lowered its forecast for 2022 global oil demand. It noted, however, that this (along with a massive release of emergency oil reserves by IEA members, as previously announced) could help counteract the loss in supplies caused by Russia's invasion of Ukraine. "The market does look more balanced," said Toril Bosoni, head of the IEA's markets and industry division, in an interview today on Bloomberg Television.
Here in Canada, the only liquefied natural gas (LNG) project under construction in the country has a new chief executive officer. Shell Canada, the main backer of the $18-billion (U.S.) LNG Canada terminal being built in Kitimat, B.C., has seconded Jason Klein to be LNG Canada's CEO. Mr. Klein was formerly Shell Canada's vice-president of integrated gas. He replaces Peter Zebedee, who abruptly left LNG Canada last month to join Suncor Energy Inc. (SU: $42.06) as a vice-president.
"I'm excited to join the team [at LNG Canada], especially at this time, with construction in Kitimat progressing steadily," said Mr. Klein in a statement. The project is indeed entering its busiest construction phase. Although construction began in late 2018 and was nearly 60 per cent finished as of last month, it is the final stretch -- the next two years -- that will require the largest number of workers (up to 7,500, or about double the number of workers this time last year, according to LNG Canada). The terminal is scheduled to enter service in 2025. The total cost, including the related Coastal GasLink pipeline being built by TC Energy Corp. (TRP: $72.37), is estimated at $40-billion (U.S.).
In Alberta, Doug Bailey and Frank Muller's Razor Energy Inc. (RZE) shot up 58 cents to $3.14 on 303,700 shares, more than regaining the 41 cents it lost yesterday after releasing its year-end financials. The numbers did not seem to warrant yesterday's drop or today's bounce. Razor had already released a year-end operational update in February, so the financials held few surprises. Shareholders may have been hoping for more ambitious -- or indeed any -- guidance for 2022. Instead Razor talked vaguely of a "strong price outlook" and a "cautious and case-by-case approach to capital spending."
Management provided a few more tidbits in a new presentation on Razor's website. It pegged Razor's production at 4,750 barrels a day during the first quarter, up sharply from 3,000 barrels a day in the same period last year (and up from 4,400 barrels a day in the fourth quarter, as noted in the financials). The gain reflects a "production enhancement/reactivation" program, as well as an asset acquisition in the core Swan Hills area last summer. Also in the Swan Hills area, Razor -- a self-billed "innovative thought leader" -- is building a "first-in-Alberta" $37-million geothermal power plant (as discussed in more detail in the Energy Summary for March 10). It said in the presentation that the plant should be on-line this October and should reach payout in 3-1/2 years.
Elsewhere in Alberta, Neil Roszell's Headwater Exploration Inc. (HWX) added 34 cents to $7.28 on 1.43 million shares. It was among the companies that got a lovely mention yesterday from the analysts at RBC. They wrote about the Clearwater play, which is now the third most active play in Canada, after the Montney and the Viking.
That is quite a showing for a play that was virtually unheard of only five years ago. Since 2017, and particularly after 2019, production has gone from nearly nothing to today's level of 70,000 barrels a day. The RBC analysts are forecasting a rise to 90,000 barrels a day by year-end. They pointed to Headwater (as well as Tamarack Valley Energy Ltd. (TVE: $5.08) and Baytex Energy Corp. (BTE: $5.83)) as one of the "key names with exposure to the Clearwater." (A required disclaimer on RBC's website reveals that the bank "makes a market" in Headwater's securities.)
Meanwhile, Headwater is preparing for its next annual shareholder meeting on May 12. The newly filed information circular for the meeting indicates that a new director will be up for election. The proposed newcomer is the 44-year-old Elena Dumitrascu, co-founder and chief technology officer of TerraHub Technologies (or Credivera), which makes technology to collect and verify workplace credentials. She is also the founder and former CEO of Caledonia Solutions and a former vice-president of Cortex Business Solutions.
Another Alberta producer is also preparing for its next annual shareholder meeting, with hopes that it will be less frustrating than last year's. Keith MacPhail and Ronald Poelzer's NuVista Energy Corp. (NVA), down one cent to $11.15 on 1.5 million shares, has filed the circular for its meeting on May 10. The items on the agenda look similar to last year. Investors may recall that at last year's meeting, nearly every item -- and every single director up for election -- received just two-thirds voting support, which was enough to secure a pass, but was a noticeable decrease from the 96-per-cent average support a year earlier.
In the circular for this year's meeting, chairman Pentti Karkkainen explained that "a significant shareholder, who is an industry competitor ... voted against all board resolutions [except one]." He did not identify the shareholder, but there is only one candidate, namely Paramount Resources Ltd. (POU: $30.87). Paramount disclosed itself as a major shareholder of NuVista in September, 2020, when it bought 17.3 million shares at just 61 cents. Just last month, it sold 2.5 million of the shares at $11.09, for a rousing profit of $26.2-million. It still owns 37.2 million of NuVista's 228 million shares. Perhaps its recent profit-taking will put it in a better mood at next month's meeting. Mr. Karkkainen did not go into the above background, but said he has "met with representatives of [the] significant shareholder" and believes "we have made appropriate decisions to secure a favorable vote this year."
Another item of note in the circular is the announcement that Brian Shaw will not be standing for re-election to NuVista's board. Mr. Shaw, the former chairman and CEO of CIBC World Markets (and predecessor Wood Gundy), has been on the board since 2014. He remains a director of U.S. shale producer Ovintiv Inc. (OVV: $66.60), as well as Manulife Bank of Canada and Manulife Trust Company.
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