Energy Summary for March 21, 2022
2022-03-21 20:28 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for May delivery shot up $7.42 to $112.12 on the New York Merc, while Brent for May added $7.69 to $115.62 (all figures in this para U.S.). Western Canadian Select traded at a discount of $11.45 to WTI, down from a discount of $11.30. Natural gas for April added four cents to $4.90. The TSX energy index added 9.14 points to close at 221.66.
Oil prices had a volatile start to the week, as several European Union governments considered banning oil from Russia over its invasion of Ukraine. The United States announced a Russian oil ban two weeks ago (and Canada did so three weeks ago, though this gesture was largely symbolic). Whether the EU joins in the bans will depend greatly on Germany, which argued today that the bloc is far too dependent on Russian energy supplies to slap sanctions on them. Pro-sanction officials expressed hopes that the bloc would secure enough alternative supplies to announce sanctions by June.
In other supply news, Saudi Arabia flagged potential capacity disruptions after Yemeni Houthi rebels attacked Saudi energy facilities in at least three cities over the weekend. The government did not quantify any lost barrels, but said the attacks could have "dire effects on the production, processing and refining sectors." It demanded that other international governments stand "firmly" against the Houthis and help prevent "destructive attacks that pose a direct threat to the security of petroleum supplies in these highly sensitive circumstances that global energy markets are witnessing."
Here in Canada, oil stocks rose with oil prices. Noteworthy gainers included Paramount Resources Ltd. (POU), which hit a new seven-year high of $30.82 in intraday trading, before closing up $1.52 to $30.42 on 888,500 shares. Other gainers included Ovintiv Inc. (OVV), up $3.44 to $63.78, Vermilion Energy Inc. (VET), up $2.87 to $26.95, and MEG Energy Corp. (MEG), up $1.21 to $18.95.
David Wilson's Alberta Montney-focused Kelt Exploration Ltd. (KEL) also had a good day, adding 36 cents to $6.53 on 1.48 million shares. Last week it was trading as low as $5.10. The sharp rise is surely welcome news to Mr. Wilson, Kelt's president and chief executive officer, who used last week as a buying opportunity. New filings on SEDI show that Mr. Wilson spent a total of $4.07-million last Monday and Tuesday buying 774,850 shares at prices ranging from $5.20 to $5.30. He now controls 25.7 million of Kelt's 189 million shares.
Kelt is not the only company with insider activity. Over the last two weeks, president and CEO Mike Rose of Tourmaline Oil Corp. (TOU: $53.20) has spent $979,609 picking up 20,000 shares of Tourmaline, while four executives of Whitecap Resources Inc. (WCP: $10.21) (including president and CEO Grant Fagerheim) have spent $434,286 buying a total of 44,690 shares. Meanwhile, on the selling side, the above-mentioned Paramount Resources recently unloaded 2.5 million of its shares of NuVista Energy Corp. (NVA: $10.14). It still has 37.2 million NuVista shares left (out of 227 million outstanding). Paramount first identified itself as a major shareholder of NuVista in September, 2020, when it bought 17.3 million shares at just 61 cents. The above 2.5 million shares were sold at $11.09, for a rousing profit of $26.2-million.
Another Alberta company, Alex Verge's Journey Energy Inc. (JOY), added 17 cents to $5.06 on 724,400 shares. On Friday, it closed a $12.1-million bought deal at $4.25. It was originally aiming to raise just $10.5-million. Incidentally, when it announced that plan in late February, the shares were trading below $4, so the offer price of $4.25 represented a premium (reflecting tax advantages of these particular shares). Today's closing price of $5.06 means that subscribers are already sitting on nearly 20-per-cent paper gains.
Journey will use the money for this year's drill program, also known as its first drill program since 2019. It did not drill a single well in 2020 or 2021. Production accordingly fell from an average of 9,500 barrels a day in 2019 to 8,400 barrels a day in 2020, and then fell again to 8,000 barrels a day in 2021 (avoiding a larger drop thanks to a non-drilling workover program and a summer acquisition). Mr. Verge, Journey's president and CEO (and the former president and CEO of the above NuVista), said Journey was prioritizing its balance sheet but is now ready to return to drilling. He plans to have Journey drill 15 wells this year, almost as many as the 16 it drilled in 2018 and 2019 combined. The goal is to get production as high as 10,000 barrels a day by year-end.
Further afield, the Lundin-family-backed Eco (Atlantic) Oil & Gas Ltd. (EOG) added three cents to 58 cents on 426,700 shares, after releasing a new resource estimate. The estimate covers its assets in Guyana, South Africa and Namibia. As with the last estimate in 2020, the report throws out some massive numbers -- such as 8.2 billion potential barrels of oil net to Eco's interest -- but the resources are in the prospective category, which is the lowest level of certainty and should be taken with a massive grain of salt.
Co-founder and chief operating officer Colin Kinley stayed upbeat as he discussed Eco's "material and near-term growth and catalysts ... provid[ing] strategic value accretion through the drill bit." In Guyana, the company has a joint venture at the Orinduik project with Tullow Oil, France's Total and Qatar Petroleum. They last drilled the block in 2020 and are "confidently progressing towards drilling" again, according to Mr. Kinley (whose confidence seemed utterly undiminished by the lack of a timeline or by the qualifier, "subject to available funding"). In South Africa, Eco has plans to drill a well at block 2B in the third quarter of this year, "quickly followed" by one at block 3B/4B. As for Namibia, Mr. Kinley had little to say other than mentioning a recent acquisition that has "quickly added prospective resources to our portfolio."
His cheerfulness seemed to rub off on investors, including major investor Africa Oil Corp. (AOI), which added 12 cents to $2.35 on 3.68 million shares. Africa Oil has been investing in Eco since 2017 and currently owns 39.8 million of its 201 million shares. It spent $22.6-million amassing this position. When Eco's stock peaked at $2.95 in late 2019 (rising on later-dashed excitement about its Guyanese drill program), this position was worth $117-million. These days, it is worth a barely above-water $23.1-million, but Eco's stock has been rising lately as the South African drill program draws nearer. It has already risen to 58 cents from 35 cents since the start of the year.
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