Energy Summary for Sept. 30, 2021
2021-09-30 19:56 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for November delivery added 20 cents to $75.03 on the New York Merc, while Brent for November lost 12 cents to $78.52 (all figures in this para U.S.). Western Canadian Select traded at a discount of $11.70 to WTI, up from a discount of $11.80. Natural gas for November added 39 cents to $5.87. The TSX energy index added a fraction to close at 144.61.
Abu Dhabi's TAQA is ready to join the exodus of foreigners leaving Canada. The state-backed company, officially known as Abu Dhabi National Energy Co., has reportedly hired financial advisers to sell all of its Canadian oil and gas assets, according to Reuters. The assets produced 73,000 barrels of oil equivalent a day last year and are valued by analysts at up to $1.5-billion. Should TAQA find a buyer, it will join Shell, ConocoPhillips, Marathon Oil, Devon Energy, Norway's Equinor, France's Total and others on the long list of foreign companies shedding Canadian assets. Data from IHS Markit indicate that such sales have exceeded $33-billion over the last five years.
U.S. shale producer Ovintiv Inc. (OVV) -- which contributed to the above total when it sold its Alberta Duvernay assets for $263-million last February -- today lost $1.04 to $41.62 on 681,700 shares. The stock had spent the previous six days adding $6.71, so a pullback is not surprising. This one came in spite of a reminder of Ovintiv's "commitment to increase shareholder returns." The company already increased its quarterly dividend in July and promised in early September to start announcing variable dividends too. Now it is adding share buybacks into the mix, announcing that it has received TSX approval to repurchase up to 26.0 million shares.
Twenty-six million is about 10 per cent of Ovintiv's current share count of 261 million. (The company used to have over one billion shares outstanding, but rolled back 1 for 5 in January, 2020.) The last time Ovintiv repurchased any of its shares was May, 2019, back when it was not actually Ovintiv but rather its predecessor, EnCana. EnCana has gone through plenty of changes since then, most recently appointing Brendan McCracken to take over as president and CEO once Doug Suttles retired on Aug. 1. It was Mr. McCracken who unveiled Ovintiv's new "capital allocation plan" on Sept. 9. The new press release was in part an opportunity to discuss the plan again and remind shareholders of Ovintiv's grab bag of "strategic priorities," which include everything from dividends and buybacks to "driving ESG [environmental, social and governance] progress."
Here in Canada, Rick McHardy's Alberta-focused Spartan Delta Corp. (SDE) added 13 cents to $5.39 on 565,800 shares. The company has completed an early conversion of a $50-million note into 5.88 million shares at $8.50. The updated conversion price is eye-catching, as until now, the note was convertible at just $7.67 a share. Yet the noteholder would have had to wait until at least March, 2023, to convert it. Apparently it did not want to wait that long, and Spartan was happy to oblige and wipe a $50-million debt obligation off its balance sheet.
Spartan did not identify the noteholder in the press release, but a regulatory filing revealed it to be ARETI Energy, part of the ARETI International Group led by billionaire Russian oligarch Igor Makarov. The 59-year-old Mr. Makarov is "the epitome of a successful international public figure." That is, at any rate, how he describes himself on his personal website, which devotes nearly equal attention to his business achievements as it does his athletic prowess. Mr. Makarov is a former member of the USSR Olympic cycling team and apparently holds the title of "International Master of Sports." More recently, he "re-energized" ARETI's oil and gas business -- which used to be active in Siberia before Russia's Rosneft bought it out in 2013 -- and made oil and gas investments in Europe, the Middle East and North America. The North American interests included part of an Alberta Montney producer called Inception Exploration. When Spartan bought Inception last March, it issued 23.6 million shares of itself to ARETI as compensation. Those shares had a deemed value of $3.83.
Spartan's stock has since climbed to today's close of $5.83. With today's note conversion (and taking into account some prior trading), ARETI's holdings in Spartan have jumped to 30.3 million shares, representing a 19.8-per-cent interest. ARETI also has board nomination rights. Its nominees on Spartan's board are Steve Lowden and Elliot Weissbluth, both of whom are former directors of Inception.
On the B.C. side of the Montney, Brian Lavergne's Storm Resources Ltd. (SRX) added 27 cents to $5.40 on a heavier-than-usual 3.12 million shares. The company had no news today, and in fact has not released any news in over seven weeks. Rising gas prices have still pushed the stock up by over $1 in the last eight trading days. Storm also got a lovely mention in today's Globe and Mail, which quoted from a boosterish new research note from CIBC analyst Chris Thompson.
Mr. Thompson gushed over Storm's "top-tier assets, impressive capital efficiency and embedded M&A [merger and acquisition] value." The assets include a relatively new gas plant within Storm's core Nig Creek area, which the company finished building last year and expects to bring to full capacity by the end of this year. Its full-year 2021 production target is 26,000 to 28,000 barrels a day. While Storm has not released 2022 guidance, Mr. Thompson is forecasting a 29-per-cent production increase (implying a target of about 35,000 barrels a day), with "attractive free cash flow" and "peer-leading capital efficiencies through 2023." He upgraded the stock to "outperformer" from "neutral" and hiked his price target to $6.30 from $4.50.
As for the "embedded M&A value" comment, it was not clear whether Mr. Thompson sees Storm as a buyer or seller, but Storm's management is certainly used to suitors fluttering around. This is the fourth iteration of Storm for Mr. Lavergne and his people. They started with Storm Energy Inc. in 1998, selling it to Focus Energy Trust in 2002. Then came Storm Energy Ltd., which was sold to Harvest Energy Trust in 2004. Storm Exploration came third and went to ARC Resources Ltd. (ARX: $11.87) in 2010. The pattern is established, though at 11 years old, the current Storm Resources is making shareholders wait far longer than they are used to.
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