Energy Summary for Sept. 17, 2021
2021-09-17 19:38 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for October delivery lost 64 cents to $71.97 on the New York Merc, while Brent for November lost 33 cents to $75.34 -- both benchmarks posting their fourth consecutive week of gains despite today's drop (all figures in this para U.S.). Western Canadian Select traded at a discount of $11.90 to WTI, unchanged. Natural gas for October lost 23 cents to $5.11. The TSX energy index lost 2.60 points to close at 130.21.
Pipeline builder Enbridge Inc. (ENB: $50.66) ended the week miffed in Michigan. For starters, it has been embroiled for months in a legal battle with the Michigan government over the Line 5 pipeline, and this week the government filed a legal brief in which it "unambiguously communicated ... no desire to continue with the [court-ordered] mediation process." The state is digging in its heels about opposing Line 5, despite Enbridge's argument that pipelines are a federal matter and Line 5 has received federal clearance. An end to mediation could bring the start of more acrimony.
In addition, Enbridge has just been hit with a fine from the Michigan Department of Natural Resources (DNR). The DNR ordered the company to pay $3.32-million (U.S.) for violating environmental laws during the construction of a different pipeline, Line 3. "Enbridge breached the confining layer of an artesian aquifer, resulting in an unauthorized groundwater appropriation," stated the DNR. In plain English, Enbridge dug a trench deeper than was outlined in its construction plan, and groundwater flowed into the trench. Enbridge said today that it is "in the process of reviewing" the fine and will "continue to work closely with the agency on the resolution of this matter."
North of the border, the Alberta- and Saskatchewan-focused Crescent Point Energy Corp. (CPG) edged down 10 cents to $4.97 on 14.3 million shares. Today's drop aside, the stock has climbed from $4.30 since the start of the week. It impressed investors on Monday by introducing a three-cent quarterly dividend (for a yield of 2.4 per cent) and setting preliminary guidance for 2022. President and chief executive officer Craig Bryksa tried to keep the excitement going with an appearance this morning on BNN. He declared that the company is simply thrilled to "put our foot forward and bring back that base level dividend."
The word "back" would have been enough to remind shareholders of Crescent Point's old glory days, if the interviewer had not already reminded them. The normally buddy-buddy interviewer seemed to surprise Mr. Bryksa by noting that the new dividend is "only a shadow of what you used to pay." Indeed, the dividend was as high as 23 cents a month in 2015. The year 2016 brought a fall from grace for both the dividend and the share price. In 2018, Crescent Point brought in new management, including Mr. Bryksa, who rather defensively told his interviewer that the company has undergone "significant changes" in the last three years. Importantly to Mr. Bryksa, the company has "sight lines to our [debt] targets within the next 12 months." It is therefore ready for a dividend that is not only sustainable but offers "a lot of growth." The interviewer, by now safely back in aren't-we-good-chums mode, lobbed a finishing softball with, "Do you think people look at you with fresh eyes now?" Yes, indeed, said Mr. Bryksa. "It's an exciting time here at Crescent Point."
Further afield, Manolo Zuniga's Peruvian oil producer, Petrotal Corp. (TAL), edged down half a cent to 36.5 cents on one million shares. The stock has already climbed up from 29 cents since the start of the month, perhaps explaining today's muted reaction to the announcement of a new "record production level for Petrotal." The company's Bretana oil field in Peru is now producing 15,400 barrels of oil a day. This is around double the 7,300 barrels a day that Petrotal averaged in the first quarter of 2021.
To be clear, the 7,300-barrel-a-day rate was well below the field's capacity. Longer-term investors will remember that Mr. Zuniga, Petrotal's president and CEO, first cheered the company for cracking 10,000 barrels a day in late 2019. He forecast 20,000 by the end of 2020. That did not even come close to happening, as throughout 2020 and into 2021, pandemic restrictions, community protests and pipeline outages forced the field in and out of production. Output for full-year 2020 averaged a mere 5,700 barrels a day. Mr. Zuniga soldiered on, moving oil by barge when pipelines were down and finding Brazilian customers to make up for Peruvian disruptions. Yet over all, he is much happier when the ONP, Peru's main oil pipeline in the north, is up and running safely.
The ONP was most recently disrupted two months ago from what Petrotal called a "social dispute" (generally code for local protests). Today, Mr. Zuniga said the ONP is operational again, which is what allowed Petrotal to achieve its new production record. Though he cheered the "rewarding" milestone, he and the rest of Petrotal's investors would undoubtedly prefer to have less spotty pipeline service.
Back in Canada, Altura Energy Inc. (ATU) -- an Alberta oil junior for now, but perhaps not much longer -- added one cent to 26.5 cents on 231,400 shares. It has filed on SEDAR its notice of meeting and information circular for its proposed recapitalization and management overhaul. As announced on Aug. 30, Altura plans to complete a minimum $25-million financing with a new proposed board and management, many of which are former executives of Vermilion Energy Inc. (VET: $9.71).
The highest-profile newcomer is Tony Marino, who was Vermilion's president and CEO until 2020 and will now take on those roles at Altura. Vermilion is an international producer -- its assets are in North America, Europe and Australia -- and until last year, it paid a dividend. Mr. Marino claimed on Aug. 30 to have similar "growth-and-income" plans for Altura. He laid out a "vision and strategy" to take Altura on a global shopping spree and turn it into an intermediate, international, dividend-paying producer.
The grand plans remain subject to shareholder approval. Now Altura has scheduled the meeting for Thursday, Oct. 7 (perhaps hoping that shareholders will be in a good mood, so close to the Thanksgiving long weekend). The circular finalized some tidbits that were not sorted out at the time of the press release. Notably, to account for dilution from the above-mentioned private placement and a separate rights offering -- and probably to get ahead of some likely dilution from acquisitions -- Altura will ask shareholders to approve a 1-for-10 rollback. It currently has 108 million shares outstanding, but expects to reach 272 million once the dust settles from the financings. The rollback would bring that down to a trim 27 million.
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