Energy Summary for Aug. 26, 2021
2021-08-26 19:03 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for October delivery lost 94 cents to $67.42 on the New York Merc, while Brent for October lost $1.18 to $71.07 (all figures in this para U.S.). Western Canadian Select traded at a discount of $12.75 to WTI, up from a discount of $12.90. Natural gas for September soared 29 cents to $4.18. The TSX energy index added a fraction to close at 120.02.
Oil sands producer MEG Energy Corp. (MEG) lost one cent to $7.94 on 1.18 million shares. It has made a couple of tweaks to its senior management. Only one, apparently, deserved a mention in the headline, which blared enthusiastically, "MEG Energy Appoints Darlene Gates as Chief Operating Officer."
Ms. Gates has spent the last 26 years at ExxonMobil and its affiliates. Most recently, she was Exxon's top executive in Alaska, overseeing its large gas reserves and production on the North Slope. She also has oil sands experience. Prior to taking the job in Alaska, she was the asset manager for the massive Cold Lake oil sands project, run by Exxon's 69.6-per-cent-owned Imperial Oil Ltd. (IMO: $33.12).
As the new COO of MEG, Ms. Gates will perhaps be looking forward to returning to slightly more southerly climes. Being in Alberta should also help with her duties as an honorary colonel of the 4 Wing Cold Lake base of the Royal Canadian Air Force. The RCAF appoints honorary colonels to act as liaisons between units and local communities, doing work that can encompass hosting parades, talking to recruits, chatting up charities and generally "fostering esprit de corps." One does not need a military background to become an honorary colonel; being a "distinguished Canadian" will do the trick. Others who hold the title include RBC Capital Markets vice-chairman Stewart Burton, financial planner and author Diane McCurdy, and singer-composer Loreena McKennitt.
As for MEG's prior COO, Chi-Tak Yee, the company has moved him over to the new role of chief technology officer. The job should suit him. Before coming to MEG in 2004, Mr. Yee studied and worked under the late Dr. Roger Butler, who is in the Canadian Petroleum Hall of Fame as "the father of steam-assisted gravity drainage (SAGD)." This process is now prevalent throughout the oil sands and involves injecting steam into reservoirs to heat bitumen and make it flow. Dr. Butler also invented SAGP (steam and gas push), which involves co-injecting gas with the steam to improve recoveries. Then MEG -- particularly Mr. Yee -- added its own twist, eMSAGP, for enhanced modified steam and gas push. MEG called itself "extremely grateful" for Mr. Yee's work so far. It then gave him his next marching orders, calling for "innovative technology ideas and solutions ... on our path to net zero [emissions]."
Further afield, Serafino Iacono's Colombian gas explorer, NG Energy International Corp. (GASX), edged up two cents to $1.02 on 113,500 shares. Last night it filed its financials for the second quarter. With no revenue to speak of, the filings were mainly an exercise in daydreaming about the company's core blocks in Colombia, specifically Maria Conchita and SN-9.
About a year has passed since Maria Conchita sprang into the spotlight, sending NG Energy's stock up to a high of $1.88 in February from less than 50 cents last August. The company was doing repairs last summer on a 40-year-old well at the block, Arucharu-1, when it unexpectedly discovered what it called "a large amount" of gas. It spent the subsequent months quantifying the gas and predicting that it could connect Arucharu to the national gas grid in early 2021. As for the SN-9 block, which is about five times the size of Maria Conchita, NG Energy was not sure when production would start, but said it would try to have rigs on site in the first quarter of 2021 to start a four-well exploration program. Alas, none of that happened. NG Energy shifted all of the goalposts to the third quarter, but impatient investors sent its stock down steadily toward $1.
The new financials were NG Energy's opportunity to emphasize the progress it has made so far -- or at least find excuses for the lack of progress. There were plenty at hand. Management largely blamed "delays due to the COVID-19 pandemic, and difficulties of mobilization on Colombian roads because of social unrest and [anti-government] blockades." Investors will just have to hope that patience brings rewards. NG Energy claimed that Maria Conchita should still enter production by "late 2021" and that the drill program at SN-9 should start later this quarter.
Back in North America, the North Dakota Bakken-focused Enerplus Corp. (ERF) added nine cents to $7.09 on 1.79 million shares. It had no news, but it received a lovely mention today from Scotia Capital analyst Jason Bouvier, who upgraded the stock to "sector outperform" from "sector perform." The $7 stock has fallen from over $9 since the end of June. In Mr. Bouvier's view, the dip is "a good opportunity to buy a quality name." He particularly likes Enerplus's gassy side. The company is better known for its Bakken oil production, but more than one-third of its output is actually gas from the Pennsylvania Marcellus play, noted the analyst. He pointed out that gas prices have held strong lately even as crude oil prices have weakened.
Mr. Bouvier kept his price target on Enerplus's stock at $10. It may interest investors to know that his employer, Scotia Capital, has been buying the stock lately, according to quarterly 13F-H4 filings with the SEC. These disclose that Scotia Capital held 72,278 shares of Enerplus at the start of the year. By March 31, this figure was 115,709 shares, and by June 30 (according to a filing from two weeks ago), the figure was 349,213. This works out to a 380-per-cent increase in six months.
Here in Canada, Rob Zakresky's B.C. Montney producer, Leucrotta Exploration Inc. (LXE), lost one cent to 70 cents on 88,900 shares, after releasing its second quarter financials. It turned a loss of $1.5-million on revenue of $6.4-million. Investors did not seem surprised. Primarily they were awaiting -- and received -- confirmation that Leucrotta has started a four-well drill program at its Mica asset. The company began hyping this asset in March, when it sold a less important asset for $30-million and crowned Mica as the project that will push production past 30,000 barrels of oil equivalent a day within five years. (For context, Leucrotta's second quarter production averaged 2,200 barrels a day.) The four-well program would start in mid-July, promised Leucrotta in June. It said today that it ran slightly behind schedule but was able to start the program in late July.
Investors have also been awaiting -- and have yet to receive -- an estimate of how much the 30,000-barrel-a-day ambition will cost. The plan requires 94 new wells, plus extra infrastructure to handle the higher output. Leucrotta said today that it is still working on cost estimates. It emphasized its working capital of $57-million and promised to release a "full financial plan" by the end of the year.
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