Energy Summary for Jan. 9, 2023
2023-01-09 20:09 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for February delivery added 86 cents to $74.63 on the New York Merc, while Brent for March added $1.08 to $79.65 (all figures in this para U.S.). Western Canadian Select traded at a discount of $26.30 to WTI, up from a discount of $27.40. Natural gas for February added 20 cents to $3.91. The TSX energy index added 1.49 points to close at 234.27.
Oil prices wobbled on back-and-forth headlines. Prices surged this morning after China, announcing a "new phase" in its fight against COVID-19, opened its borders for the first time in three years. The Chinese government predicted that about two billion domestic trips will occur during the Lunar New Year holidays, nearly double the amount last year -- a good sign for fuel demand (though still only about 70 per cent of comparable trips in 2019). Prices later gave back some of their gains amid concerns that the surge in Chinese travel will in turn spark surges in COVID cases.
Here in Canada, oil sands producer Cenovus Energy Inc. (CVE) added nine cents to $25.46 on 11.2 million shares. It announced last night that recent weather woes have been hurting its downstream refining operations. For the fourth quarter of 2022, Cenovus now expects Canadian throughput of about 92,500 barrels a day (relative to analysts' predictions of 107,000) and U.S. throughput of about 375,000 barrels (relative to analysts' predictions of 407,000). The numbers for the first quarter of 2023 are also looking "lower than anticipated," warned Cenovus.
Investors mostly shrugged. Cenovus has not been the first to announce that cold temperatures and winter storms are affecting its downstream operations; various U.S. Gulf Coast refiners have reported recent weather-related outages, as has Suncor Energy Inc. (SU: $42.19). One of Suncor's facilities, located just outside Denver, has been shut down since Christmas Eve and is not expected to be back on-line until late March. Cenovus seemingly strove to give the impression that its outages are not as bad as that. It promised another update when it releases its year-end 2022 financials in February, adding that it might tweak its 2023 guidance at that time, but only "if necessary."
South of the border, Wolf Regener's Oklahoma oil producer, Kolibri Global Energy Inc. (KEI), shot up 41 cents to $4.24 on 395,400 shares. It is enjoying the new year as a time of setting new multiyear highs. Today it closed above $4 for the first time since 2018, as its president and chief executive officer, Mr. Regener, trumpeted a production milestone that "far exceeded our expectations."
Mr. Regener specified that Kolibri ended 2022 with production of over 4,000 barrels a day. Its guidance, by contrast, called for a year-end target of 2,700 barrels a day (although the guidance came out seven long months ago and Mr. Regener repeatedly speculated afterward that Kolibri would "significantly" exceed this number). For a company that entered 2022 producing less than 1,000 barrels a day, this is a sizable increase. Mr. Regener gave the credit to a five-well drill program that gave off "some of the best results we have had in this field."
He remained rather coy about the company's future plans for the field. In a presentation last month on its website, Kolibri hinted that it might drill six wells in 2023, aiming for full-year average production of 3,000 barrels a day on a budget of $42-million (U.S.). Yet it was quick to add that this was merely an "illustrative" idea and not official guidance. All Mr. Regener would say today is that Kolibri is "look[ing] forward to drilling our next wells later this quarter," using a rig that should arrive in March.
Even further south, Paul Baay's Touchstone Exploration Inc. (TXP) added two cents to $1.11 on 293,600 shares, after arranging an asset swap in Trinidad. The deal involves no cash. Instead, Touchstone will trade some of its "non-core [assets with] limited scalability" for "highly prospective exploration and development acreage."
The non-core assets in question are Touchstone's Fyzabad, San Francique and Barrackpore blocks. The company has owned them for over a decade, and they are collectively producing a relatively stable if not very promotable 130 barrels a day. By contrast, Touchstone and its cheerleaders are starry-eyed over the earlier-stage Ortoire block, which is currently producing about 1,200 barrels a day and has much greater potential, according to president and CEO Mr. Baay. He made noises last month about Ortoire's ability to boost Touchstone's overall production to 15,000 barrels a day in 2023, a tenfold increase from 2022. That is its near-term potential; its long-term potential is apparently so staggering to him that he could not attempt to quantify it, beyond a vague reference to one exploration prospect that could make "everything that we've done [so far] look really small."
Mr. Baay used today's deal to add more juice to the Ortoire hype machine. In exchange for the above-mentioned non-core assets, Touchstone will take ownership of three blocks directly offsetting Ortoire, called Rio Claro, Balata East and Balata East Deep Horizons. They are only mildly productive -- about 35 barrels a day in total -- but span 28,000 acres, which will "significantly expand" the Ortoire-adjacent drilling prospects, marvelled Mr. Baay. The assets also come with an 18-kilometre pipeline that could help speed up regional infrastructure development. Mr. Baay let out a boisterous cheer about "further high-grad[ing] our portfolio" while adding "numerous drilling opportunities."
Investors seemed mildly intrigued. Many are still smarting from last month's dilutive equity financings for a total of $18-million, boosting Touchstone's share count to 233 million from 213 million. Mr. Baay has promised that Touchstone will use the money to "get back in the field" and resume drilling for the first time in over a year. He has not said when exactly the program will begin.
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