Post by
loonietunes on Nov 09, 2022 9:27pm
Stockwatch Energy today
Energy Summary for Nov. 9, 2022 2022-11-09 20:31 ET - Market Summary by Stockwatch Business Reporter West Texas Intermediate crude for December delivery plunged $3.08 to $85.83 on the New York Merc, while Brent for January lost $2.71 to $92.65 (all figures in this para U.S.). Western Canadian Select traded at a discount of $29.10 to WTI, up from a discount of $29.22. Natural gas for December lost 27 cents to $5.87. The TSX energy index lost 11.25 points to close at 257.62. Oil prices foundered in a sea of bearish headlines. China's capital city, Beijing, and its manufacturing capital, Guangzhou, are facing a surge in COVID outbreaks, prompting fears of lockdowns and lower fuel demand. Meanwhile, data from the U.S. Energy Information Administration showed that U.S. crude inventories swelled by 3.9 million barrels last week, more than double the 1.4-million-barrel increase predicted by analysts. Adding to the general jitters are the too-close-to-call results of yesterday's U.S. midterms, which have yet to produce a clear answer on which party will control Congress. Here in Canada, the oil patch plowed ahead with quarterly financials. George Fink's Alberta Cardium-focused Bonterra Energy Corp. (BNE) lost $1.59 to $8.21 on 814,500 shares, a casualty of both lower oil prices and lower-than-hoped-for numbers in its third quarter report. Production averaged 13,000 barrels a day, falling short of analysts' prediction of 13,300 barrels a day. Cash flow of 95 cents a share was also markedly lower than analysts' predictions of $1.27 a share. New president and chief executive officer Patrick Oliver -- who took over in September from founder and long-time CEO Mr. Fink, though Mr. Fink remains a director and the largest single shareholder -- looked for positives. He applauded Bonterra's "keen focus on net debt reduction." Net debt was $187-million as of Sept. 30, down from $267-million at the start of the year. Mr. Oliver said Bonterra will continue to reduce debt, thereby "support[ing] its goal of restoring a shareholder-returns-based business model ... [including] sustainable dividends." The problem for shareholders is that Mr. Oliver (and Mr. Fink before him) has yet to estimate when Bonterra might return to that model. Bonterra was once a darling of yield-lovers, with a dividend as high as 30 cents a month in the good old days of 2014. Over the years, as its balance sheet grew more lopsided, it chipped away at the payout before finally suspending it in early 2020. Mr. Fink started to make noises about a revival in early 2021. This did not end up happening prior to his retirement, and now impatient eyes are fixed on Mr. Oliver. Those eyes may want to swing to Bonterra's bankers instead. Under the terms of its $125-million credit facility, the company is "restricted from making any payment of dividend distributions." The facility is up for renewal at the end of the month, giving Bonterra a chance to renegotiate terms -- and indeed Mr. Oliver noted today that "progress has been made on reconstituting Bonterra's banking syndicate and credit facility, and update will be provided upon finalization." He did not specify whether he is pushing for payouts. Another hindrance to payouts is a similarly restrictive covenant in Bonterra's 2020 loan agreement for $45-million from Business Development Canada, which would need to be repaid. All of this suggests that dividend-hungry investors may have to wait until at least 2023. Fortunately, there is no shortage of other energy dividends vying for attention. Just last night, Rick McHardy's Spartan Energy Corp. (SDE), down 17 cents to $13.58 on 1.11 million shares, opted to join the special dividend club. It has declared a one-time dividend of 50 cents, payable on Jan. 16. Management credited the payout to "exceptional execution" and "strong commodity tailwinds." The declaration came as part of Spartan's third quarter financials, which showed production of 72,100 barrels a day and cash flow of $1.15 a share, mildly ahead of analysts' predictions of 70,700 barrels a day and $1.12 a share. Unsurprisingly, most of the attention stayed on the dividend. The announcement included the unusual qualifier that shareholders will have to confirm their eligibility for the dividend, which will primarily involve attesting that they are not Igor Makarov or a related entity. Mr. Makarov is a Russian oligarch who for a time was Spartan's largest shareholder, dating back to when Spartan bought a private Montney company (Inception Exploration) backed by Mr. Makarov's ARETI International Group in early 2021. In early 2022, following Russia's invasion of Ukraine, Mr. Makarov began facing sanctions from Canada, Australia and the United Kingdom over suspected ties to the Kremlin. Days ahead of the Canadian sanctions, he sold enough of his Spartan shares to drop below the 10-per-cent disclosure threshold. Spartan's management has claimed to be unaware of whether he has since sold any more shares. In any case, to receive the special dividend, shareholders will have confirm that they are not Mr. Makarov, ARETI or any affiliated entities. Further afield, Craig Steinke and David Elliott's Reconnaissance Energy Africa Ltd. (RECO) plummeted $1.70 to $1.83 on 4.32 million shares, after a much-hyped well in Namibia found no commercial levels of hydrocarbons. It tried to put on a brave smile, claiming that the well "further confirmed the presence of a working petroleum system" and was "geologically a successful well." Yet not even Reconnaissance's practiced PR crew could polish the blunt conclusion that "economic accumulations of hydrocarbons were not encountered." Today's close of $1.85 marks a steep fall from Reconnaissance's early 2021 high of $13.84. The PR crew's polishing was in better form then, the stock soaring on the news that Reconnaissance's first two wells had found "many oil and gas shows" that appeared "remarkable" and "highly encouraging." As these were merely test wells, the analysis that followed was limited, but not the steady stream of hype. To raise money for more drilling, Reconnaissance closed nearly $90-million in equity financings from May, 2021, to February, 2022, at prices ranging from $6.35 to $9.50. Those prices were markedly lower than the all-time high, reflecting drilling delays and mounting skepticism (including from some prominent short-sellers) about Reconnaissance's claims. At today's close of $1.86, the shares issued in the above financings would now be worth just $21-million. Reconnaissance did its best to bolster investors' spirits. The above well was just the first in a multiwell program, and provided "promising" data, insisted the press release. The next well is getting ready for a mid-December spud date and will target a different location in a potentially "target-rich exploration area." Meanwhile, new seismic has produced "a series of additional leads and potential drilling targets," and a different seismic program has received regulatory approval and should start any day. Despite these robust efforts, the only ones in a good mood today were the short-sellers. 2022 Canjex Publishing Ltd. All rights reserved.