Oh look we made the funny pages?
Energy Summary for March 16, 2022
2022-03-16 20:12 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for April delivery lost $1.40 to $95.04 on the New York Merc, while Brent for May lost $1.89 to $98.02 (all figures in this para U.S.). Western Canadian Select traded at a discount of $12.55 to WTI, down from a discount of $12.52. Natural gas for April added 18 cents to $4.75. The TSX energy index added a fraction to close at 207.16.
Oil prices swung back into the triple digits and then retreated again, as traders navigated seas of headlines. The International Energy Agency (IEA) estimated today that three million barrels a day of Russian crude could vanish from the market in April, due to sanctions and to buyers shunning Russia over its invasion of Ukraine. "The prospect of large-scale disruptions in Russian production ... is threatening to create a global oil supply shock," warned the IEA. (Three million barrels a day is about one-third of Russia's current output.)
To head off a supply shock, OPEC+ member Libya said it is urging the group to boost production faster. U.K. Prime Minister Boris Johnson added that he has been talking to Saudi officials and is optimistic that Saudi Arabia would boost production "to ensure stability in global oil markets." Meanwhile, closer to home, U.S. government data showed a sharp and unexpected rise in weekly U.S. crude inventories. The Energy Information Administration reported that crude inventories rose by 4.3 million barrels, going against analysts' predictions for a 1.4-million-barrel-drop.
Here in Canada, year-end financials continued to trickle in. Doug Bartole's Alberta Cardium-focused InPlay Oil Corp. (IPO) added seven cents to $3.13 on 1.2 million shares, as it touted "record-setting" numbers. It posted a full-year net profit of $115-million. Investors will have quickly noticed that this figure exceeded InPlay's actual oil and gas sales of $113-million. The company benefited from a $61-million impairment reversal, as well as a $20-million gain on its cash-and-share acquisition of Prairie Storm Resources last November. (The shares issued under that deal had a deemed value of $2.07 each. Recipients are now sitting on a 51-per-cent gain in five months.)
InPlay's president and chief executive officer, Mr. Bartole, boasted that the company is now "in its best operational and financial position to date." Current production is just over 9,000 barrels a day, safely within the full-year guidance of 8,900 to 9,400 barrels a day. InPlay expects to generate about $150-million in cash flow on a budget of just $58-million. While most of the extra cash looks to be going toward debt reduction, Mr. Bartole hinted vaguely but cheerfully at a desire to pursue "strategic accretive opportunities with the ultimate goal of maximizing returns to shareholders," which investors are taking to mean potential acquisitions, dividends or buybacks.
Elsewhere in Alberta, Sue Riddell Rose's Perpetual Energy Inc. (PMT) added eight cents to 85 cents on 164,600 shares, after it too released its year-end financials. President and CEO Ms. Riddell Rose said the highlight of the year was the "full capital solution" in the third quarter. That was when Perpetual created Rubellite Energy Inc. (RBY: $3.45) and sold Rubellite its assets in the Clearwater play, a move that significantly reduced its debt. Net debt dropped to $59.2-million as of Dec. 31 from $104-million a year earlier. As the Clearwater assets had minimal production, Perpetual's output still climbed to 6,400 barrels a day in the fourth quarter from the year-earlier average of 4,700.
Separately, Perpetual has added Linda Dietsche to its board of directors. The press release offered few details about her background, merely giving a quick mention to her "extensive finance and accounting experience," but Ms. Dietsche is the former chief financial officer of Tervita Corp., a waste service provider that merged with Secure Energy Services Inc. (SES: $5.33) last year. Before that, she was the executive vice-president and CFO of Newalta Corp. from 2011 until its merger with Tervita in 2018.
The above-mentioned Rubellite Energy Inc. (RBY) -- which is led by Ms. Riddell Rose and many of the other people who are also at Perpetual -- lost seven cents to $3.45 on 128,000 shares. It has filed on SEDAR a prospectus clarifying the financings that it announced late last week. Initially, it aimed to close a $17-million bought deal and an $8.5-million private placement. It quickly hiked those figures to $22-million and $10.1-million, respectively. The new prospectus left the bought deal at $22-million and boosted the private placement to $13.4-million.
The proceeds -- which for clarity will now be $38.7-million, a 50-per-cent increase from the original amount -- will go toward capital spending and "general corporate purposes." It is no coincidence that Rubellite is raising money shortly after spending $10.8-million on Crown land acquisitions so far this year (and taking on some debt to do so, hence the financing now). As well, Rubellite announced last week that it is pursuing a different Clearwater farm-in and option agreement to gain even more land. Rubellite has "several potential acquisitions" under evaluation, noted the prospectus. The new financings should help with that. Rubellite has priced both of them at $3.55 a share, and will have 54.7 million shares outstanding after closing, up from 43.8 million now.
Over in British Columbia, Rob Zakresky's Montney-focused Leucrotta Exploration Inc. (LXE) added seven cents to 98 cents on 419,100 shares, pleasing investors with its year-end reserve report. It managed to increase reserves despite a sizable asset sale during the year. Last spring, it sold its Doe Montney assets for $30-million (likely to Tourmaline Oil Corp. (TOU: $49.13)), using the money for debt repayment, but also wiping out about 10 million barrels of proved and probable reserves. Fortunately, subsequent drilling and the rise in commodity prices undid the damage and then some. Leucrotta ended 2021 with 50.6 million barrels of proved and probable reserves, up from 43.5 million a year earlier.
These days, Leucrotta is focusing on its Mica Montney project, the core asset in its goal of boosting production to 30,000 barrels a day within five years. For context, production in the second quarter (after the Doe asset sale) averaged just 2,200 barrels a day. President and CEO Mr. Zakresky revealed in today's reserve report that Leucrotta was able to boost that number to 3,300 barrels a day in the fourth quarter.
Mr. Zakresky kept up the optimism during an interview today with The Market Herald (a PR firm that disclosed that the interview was "sponsored" -- paid for -- though it did not disclose a price). "We just released an excellent reserve update," cheered Mr. Zakresky. He emphasized that Leucrotta has been focusing on test drilling at Mica to prove the efficacy of a new fracking technique. Given the "great" results borne out in the reserve report, "we're now looking forward to the big ramp-up ... to take [production] from less than 3,000 [barrels a day] to over 30,000 over the next few years."
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