Energy Summary for Oct. 19, 2021
2021-10-19 20:24 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for November delivery added 52 cents to $82.96 on the New York Merc, while Brent for December added 75 cents to $85.08 (all figures in this para U.S.). Western Canadian Select traded at a discount of $13.30 to WTI, unchanged. Natural gas for November added 10 cents to $5.09. The TSX energy index added a fraction to close at 156.80.
After a rancorous campaign, Canada's corporate oil capital, Calgary, is getting a new mayor. Jyoti Gondek emerged as the winner in yesterday's municipal election. She succeeds Naheed Nenshi, who stepped down after three terms and 11 years on council.
Ms. Gondek (who will be Calgary's first female mayor) has been a city councillor for the last four years. Before that, she served on the city planning commission, and she worked in marketing at Greyhound Canada and two Alberta credit unions. A self-described centrist (which in Canadian politics just means gesturing to the right with one hand and to the left with the other), she vowed today to keep Calgary "focused on a recovery that is rooted in economic, social and environmental resiliency."
What this means for the corporate oil patch, still grappling with the effects of a multiyear price rout and a global pandemic, is not yet clear. Ms. Gondek's campaign platform asserted that "the seeds of our future success lie within our wealth of experience in the energy sector." It simultaneously spoke of a need to "evolve the industry" and to "change ... how the tax burden is shared."
Separately, as discussed in yesterday's Energy Summary, voters in Alberta were asked to weigh in on equalization (whereby revenue from wealthier provinces, such as Alberta, is habitually transferred to less wealthy provinces, such as Quebec). A referendum question on eliminating equalization from Canada's constitution was included as part of yesterday's municipal elections. Early results suggest that Albertans are in favour of scrapping the payments, but full results will not arrive until next Tuesday, Oct. 26. They will not actually determine the fate of equalization, of course; the province merely plans to use them as a bargaining chip in negotiations with Ottawa.
On the other side of the country, the Canada-Newfoundland and Labrador Offshore Petroleum Board (C-NLOPB) has laid charges relating to a 2018 offshore oil spill that was the largest in the province's history. The spill took place in November, 2018, at the White Rose oil field, operated by Husky Energy. Husky is now a subsidiary of Cenovus Energy Inc. (CVE), up eight cents to $14.33 on 11.5 million shares.
At the time of the spill, Husky blamed a winter storm for causing a flowline failure at the SeaRose production vessel and leaking about 1,650 barrels. (Naturally, the media insisted on using the more dramatic-sounding number of 250,000 litres.) This happened to be Husky's second incident at SeaRose in about a year, following a close call with an iceberg in 2017. The general worry was that Husky could be in for a much sterner scolding in light of this record. Cenovus inherited the problem when it bought Husky in January, 2021.
This morning, the Newfoundland regulator laid a total of three charges against Husky -- and thus Cenovus -- over alleged violations of provincial and federal petroleum regulations. The charges include having "cause[d] or permit[ted] a spill on or from any portion of the [designated] Offshore Area." As well, Husky failed to "ensure that work or activity, [which] was likely to cause pollution, ceased without delay," and then "resumed work without ensuring it could do so safely and without pollution," said the regulator. Cenovus, for its part, told Reuters that Husky "took full responsibility from the start and worked to identify and implement corrective actions." It declined further comment. The matter will head to a provincial courthouse in St. John's for a first appearance on Nov. 23.
The regulator's press release did not specify what damages may be sought. Up until now, the largest offshore oil spill in Atlantic Canadian history was a 1,180-barrel spill in 2004 off the Terra Nova field, operated by a predecessor of Suncor Energy Inc. (SU: $28.68). It forked over $290,000 in penalties. This is mild, however, next to the fines handed down by other provincial courts. In 2019, a judge in Saskatchewan ordered a company to pay $3.8-million after spilling about 1,500 barrels into the North Saskatchewan River. That company, incidentally, was Husky. It now has the ignominious distinction of holding the record for both the largest onshore and offshore spills in Canadian history.
Meanwhile, international producer Vermilion Energy Inc. (VET) lost 15 cents to $13.03 on 3.95 million shares. From late August to early October, the stock had a rapid run to over $14 from just $8, and now seems to be taking a step back. The company did have some news today: It is appointing a new director, Jim Kleckner.
Mr. Kleckner will be a familiar name to investors who follow U.S. producers. A petroleum engineer by training, he spent decades at Kerr-McGee and then Anadarko Petroleum, retiring in 2017 before popping up shortly thereafter as president and chief executive officer of Jagged Peak Energy. He sold Jagged Peak last year for $2.2-billion (U.S.) to Parsley Energy (which itself was acquired this year for $4.5-billion (U.S.) by Pioneer Natural Resources). In addition, Mr. Kleckner serves on the board of the private Great Western Petroleum in Colorado.
Vermilion will represent Mr. Kleckner's first time on the board of a Canada-based company. The company said it is "excited to welcome" him and his "diverse skills, perspectives and expertise." Its board has been undergoing quite the shuffle lately, with one director stepping down last April and three new ones added in as many months. Besides Mr. Kleckner, the newcomers include Manjit Sharma (the former chief financial officer of WSP Canada and GE Canada) and Judy Steele (the current president and chief operating officer of Emera Energy).
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