Energy Summary for Dec. 15, 2022
2022-12-15 20:56 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for January delivery lost $1.17 to $76.11 on the New York Merc, while Brent for February lost $1.49 to $81.21 (all figures in this para U.S.). Western Canadian Select traded at a discount of $26.50 to WTI, unchanged. Natural gas for January added 54 cents to $6.97. The TSX energy index lost 2.44 points to close at 239.22.
After three straight days of gains, oil prices pulled back today on recession fears. The Bank of England and the European Central Bank hiked interest rates today in an effort to curb inflation. The U.S. Federal Reserve also signalled that it will continue to raise interest rates next year, possibly to the highest level since 2007. Further weighing on oil prices was a weak industrial report from China, which posted its slowest monthly increase in factory output since May, amid surging COVID cases and lockdowns.
Closer to home, Western Canadian and Texas oil producer Baytex Energy Corp. (BTE) edged up three cents to $5.92 on 5.33 million shares. Fresh SEDI filing shows that new president and chief executive officer Eric Greager, who took over from Ed LaFehr last month, bought his very first shares in the company this week. He spent $136,507 and now owns 23,000 of Baytex's 547 million shares.
Presumably Mr. Greager has a good feeling about the guidance that Baytex put out last week, when it set its sights on full-year 2023 production of 86,000 to 89,000 barrels a day, on a budget of $575-million to $650-million. These numbers generally matched analysts' predictions. Mr. Greager emphasized that the program should bring in "meaningful" free cash flow, allowing Baytex to continue reducing its debt and (he hopes) double the amount of money that it can devote to share buybacks by around midyear. (He continued his predecessor's policy of shying away from any prediction of when Baytex might revive its long-dormant dividend, in hibernation since 2015.)
In Alberta, Pat Carlson's Montney- and Duvernay-focused Kiwetinohk Energy Corp. (KEC) added six cents to $14.23 on 34,000 shares, after unveiling its own 2023 guidance. It is aiming for 24,500 to 28,500 barrels a day on a budget of $378-million to $402-million. The budget is well above the roughly $300-million figure that analysts were expecting. Kiwetinohk (which is pronounced "key-wheat-in-no" and is a Cree word meaning north) put the emphasis on the production target, which is a 50-per-cent increase from last year's target of 17,500 barrels a day. Thanks to an acquisition in September and a busy fourth quarter drill program, Kiwetinohk's current production is already around 26,000 barrels a day.
Investors mostly yawned. This has been a common theme for Kiwetinohk, to the evident frustration of CEO Mr. Carlson (best known for a past high-flying promotion called Seven Generations Energy, acquired last year by ARC Resources Ltd. (ARX: $18.18)). "[Management is] aware of, and concerned with, the lack of trading liquidity in the company's stock ... [and] believes the market price of the common shares does not reflect their underlying value," he said. He hopes to tackle the problem through share buybacks (although Kiwetinohk's share count is already quite trim, at 44 million). Investors will have to wait for details on the size of the program until the TSX approves it later this year or early next.
Another Alberta producer looking to impress investors with its 2023 guidance today was Alfred Sorensen's Pieridae Energy Ltd. (PEA), up one cent to $1.19 on 491,800 shares. It will try to produce 37,000 to 39,000 barrels a day in the Alberta Foothills on a budget of $65-million to $75-million. For context, last year's guidance was 37,500 to 39,500 barrels a day on a budget of $37-million to $47-million, meaning that Pieridae is effectively looking at a 67-per-cent budget boost just to keep production flat. It was too distracted to grumble about inflation, however, as it emphasized that its overarching priority for 2023 is to refinance its debt. A $206-million loan facility taken out in 2019 is coming due next October. Pieridae held $8.3-million cash as of Sept. 30.
Also absent from the guidance was any mention of Pieridae's non-Alberta project, its proposed Goldboro LNG (liquefied natural gas) terminal in Nova Scotia. Building this has been a dream of CEO Mr. Sorensen for more than a decade. Unfortunately, after missing a crucial investment deadline in mid-2021, Pieridae effectively put the project on mothballs. A SEDAR filing last month kept alive a faint flicker of hope in management's efforts to "explore options and partnerships which could revitalize our compelling LNG project." Evidently, no revitalization is expected in 2023.
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