Energy Summary for Jan. 17, 2023
2023-01-17 20:53 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for February delivery added $1.33 to $80.18 on the New York Merc, while Brent for March added $1.73 to $85.92 (all figures in this para U.S.). Western Canadian Select traded at a discount of $23.50 to WTI, unchanged. Natural gas for February lost four cents to $3.59. The TSX energy index added 3.33 points to close at 246.68.
Keith MacPhail and Ronald Poelzer's Alberta Montney-focused NuVista Energy Ltd. (NVA) added 35 cents to $12.23 on 670,500 shares, pleasing investors with its latest quarterly operational update and its "increased return of capital to shareholders." It patted itself on the back for producing an average of 74,300 barrels a day. This was above its previously announced target range of 72,000 to 74,000 barrels (although this partly reflects flush production, the abnormally high rate that occurs at the very start of a well's life).
Management also toasted itself for making better-than-predicted progress on debt reduction. It had set a year-end net debt target of $200-million, but now expects to land "comfortably below" that figure, although it will leave the specifics for when it releases its year-end financials in March. In keeping with an earlier promise, it has decided to increase the amount that it earmarks for shareholder returns -- specifically share buybacks; NuVista does not pay a dividend -- to 75 per cent of free cash flow, up from 25 to 50 per cent.
The usual chorus of applause rang out from analysts. "Another quarterly production record," cheered Desjardins analyst Chris MacCulloch. National Bank's Dan Payne added that operations "continue to trend positively," with NuVista reiterating its full-year 2023 production guidance of 79,000 to 83,000 barrels a day, a sizable jump from 68,000 to 69,000 in full-year 2022. Its production ambitions help make it one of "few companies in the sector that is not penalized for a no-dividend policy," marvelled Jeremy McCrea of Raymond James. Counterparts at TD and RBC made approving noises of their own. The price targets of the above analysts range from $16 to $19.50, all nicely above today's close of $12.23. It is, as ever, worth noting that every single one of the analysts is employed by a firm that expects to receive or seek compensation from NuVista for various investment banking services.
Elsewhere in Alberta, Sue Riddell Rose's Clearwater-focused Rubellite Energy Inc. (RBY) shot up 35 cents to $2.15 on 469,800 shares, as it too impressed investors with a production update. It pegged its fourth quarter output at 2,200 barrels a day. This came in at the top end of its fourth quarter guidance of 2,000 to 2,200 barrels a day, underscoring the "successful advancement of Rubellite's growth-focused business plan," cheered management. It hyped a further growth spurt to 2,700 barrels a day in the first half of January.
Investors rewarded the somewhat surprising update. Since going public in late 2021, Rubellite has rarely issued stand-alone operational announcements, leaving investors to wait on its quarterly financials instead. Area excitement stirred up by competitors nonetheless helped Rubellite's stock soar past $5 from just $2 during the first half of 2022. The second half of 2022 was not nearly as kind, however, and the stock dipped back below $2 last month. If today's update signalled the start of a chattier approach to 2023, investors seemed to approve.
One of Rubellite's largest competitors in the Clearwater is Brian Schmidt's Tamarack Valley Energy Ltd. (TVE), up 19 cents to $4.64 on 3.83 million shares. It too had some news today, but not about its operations. Instead it is renewing its share buyback program. The TSX has granted Tamarack approval to buy back up to 27.8 million shares over the next year, out of 556 million shares currently outstanding.
Shareholders likely do not expect Tamarack to make full use of the program. It is more of a nibbler than a gobbler of its own shares; under last year's program, which gave it the ability to buy back more than 20 million shares, it ended up repurchasing just 4.3 million. This did not come anywhere close to offsetting the many millions of shares that Tamarack issued as it pursued its true passion: acquisitions. Last year's shopping spree included no fewer than three takeovers -- Crestwynd Exploration, Rolling Hills Energy and Deltastream Energy -- all in the Clearwater. These deals helped turn Tamarack into the self-proclaimed "largest producer in the Clearwater oil fairway." They also boosted its share count from 407 million at the start of 2022 to today's level of 556 million.
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