| U.S. markets were closed for Martin Luther King Jr. Day. West Texas Intermediate crude for February delivery lost $1.01 to $78.85 in electronic trading on the New York Merc, while Brent for March lost $1.09 to $84.19 (all figures in this para U.S.). Western Canadian Select traded at a discount of $23.50 to WTI, unchanged. Natural gas for February added 21 cents to $3.63. The TSX energy index added a fraction of a point to close at 243.35. Oil sands giant Suncor Energy Inc. (SU) edged up 13 cents to $43.55 on 2.69 million shares. In a one-sentence announcement this morning, it informed investors that, "in the interest of continued co-operation," it has extended the right of Elliot Investment Management to add another director to Suncor's board by about six weeks to Friday, March 17. The brief update contained no further details. Elliott, as investors will recall, is the activist shareholder that took aim at Suncor last April, lambasting its "missed production goals, high costs and safety failures." They reached a truce in July after Suncor agreed to appoint three Elliott-nominated directors and grant it the right to nominate a fourth director by Jan. 31, 2023, "if certain performance criteria relative to peers are not met by Dec. 31, 2022." They specified in a regulatory filing that Elliott would pull the trigger if Suncor's total shareholder return (dividends plus any increase in the share price) underperformed Canadian Natural Resources Ltd. (CNQ: $76.80), Cenovus Energy Inc. (CVE: $25.75) and Imperial Oil Ltd. (IMO: $65.80) by 10 per cent or more. Suncor's actual underperformance came in at 14 per cent, according to TD analyst Menno Hulshof. As a result, Elliott looks poised to exercise its right to expand Suncor's board. Why Elliott is postponing this exercise by a month and a half is not entirely clear, but TD's Mr. Hulshof is speculating that it has to do with Suncor's search for a new chief executive officer -- a process in which Elliott is actively involved, as two of its nominees from July are on the search committee. Mr. Hulshof wrote in a new research note that the committee likely expected to find a new CEO by the end of 2022. The addition of Elliott's new board member in January would thus not interfere with this process. With the committee having failed to find a new CEO by the end of 2022, Elliott and Suncor accordingly agreed to delay the board appointment, reckoned Mr. Hulshof. He took the duration of the delay -- just six weeks -- as a sign that the CEO search is in its final stages and that Suncor will provide an update when it releases its year-end financials in mid-February. Looking on the bright side (as analysts are almost always predisposed to do), Mr. Hulshof opined that that delay "reflects collaboration between Suncor and Elliott" and thus seems "beneficial to Suncor shareholders." He reiterated his "buy" rating on the stock and his price target of $52. Investors may, as ever, wish to note the fine-print disclaimers about the cozy ties between Suncor and Mr. Hulshof's employer, TD. The bank is required to disclose that it (or an affiliate) is a market maker in Suncor's securities and receives compensation for investment banking services. Elsewhere in Alberta (and Saskatchewan), Paul Colborne's Surge Energy Inc. (SGY) added two cents to $9.23 on 597,200 shares, after keeping a promise that it made more than two months ago. It told investors in November and again in December that it would soon hike its monthly dividend to four cents from 3.5 cents. Now it has made the increase official, effective with the February payment, for a new yield of 5.2 per cent. The increase comes as Mr. Colborne pursues his goal of turning Surge into a "premier Canadian crude oil divco." He laid out a three-phase "return-of-capital framework" last month. According to him, Surge is currently in the first phase, in which it will return one-quarter of its free cash flow to shareholders in the form of dividends and use the rest to reduce net debt (which was $264-million as of Sept. 30). The second phase will add possibilities such as buybacks and special dividends. Mr. Colborne hopes to enter this phase in the second half of this year. He has not said when he hopes to enter phase 3, in which imaginations can run wild, with all of the above plus new options like "strategic acquisitions" and "a modest growth wedge" entering the mix. Further afield, Manolo Zuniga's Peruvian oil producer, Petrotal Corp. (TAL), lost three cents to 66 cents on 2.01 million shares. Today it unveiled its 2023 guidance. It tried to make investors smile by dangling a promise to "initiate a capital return program ... [with] share buybacks and dividends," but instead they frowned on its lower-than-hoped-for production target. Mr. Zuniga, president and CEO, did his best to sell investors on the combination of "production flexibility" and "return-of-capital stability." He noted that the full-year production target of 14,000 to 15,000 barrels a day is above the 2022 average of 12,200 barrels a day. Investors were quick to notice, however, that it is sharply below the 20,000-barrel-a-day production achievement that Petrotal was trumpeting just last month. Mr. Zuniga said today that the company is simply trying to build in some caution in case it suffers from export capacity constraints or "social-unrest-driven downtime." Despite the cautious production target, Mr. Zuniga claimed that Petrotal will bring in enough money in 2023 to not only become debt-free, but also start "returning material cash to shareholders." It is apparently mulling both a share buyback program and a "material/progressive dividend policy." Details remain scarce for now, but Mr. Zuniga said a buyback program and dividend declaration "could commence in March." Investors remained standoffish. |