by Stockwatch Business Reporter
West Texas Intermediate crude for January delivery added $1.12 to $50.96 on the New York Merc, while Brent for February added 95 cents to $53.99 (all figures in this para U.S.). Western Canadian Select traded at a discount of $15.45 to WTI ($35.51), unchanged. Natural gas for January added 16 cents to $3.72. The TSX energy index added a fraction to close at 220.65.
Oil sands producer Cenovus Energy Inc. (CVE) edged down six cents to $20.48 on 3.73 million shares, despite giving new life to its stalled Christina Lake expansion project, one of the first such revivals since prices crashed in 2014. Christina Lake is one of Cenovus's two producing oil sands projects and made up nearly two-fifths of its third quarter oil production, contributing 80,000 barrels a day. (That numbers is net to Cenovus; the project is part of a 50-50 joint venture with ConocoPhillips.) Years ago, Cenovus began designing a 50,000-barrel-a-day expansion to Christina Lake, called phase G, but put this work on hold in late 2014. This past summer, it started publicly toying with the idea of a resumption. It stated in July that it was rebidding work on the project and would provide more information with its 2017 guidance in December. Now the day has finally arrived: Cenovus announced this morning that it has set next year's budget at $1.2-billion to $1.4-billion, which will include money for Christina Lake phase G. The press release did not specify the amount of money, but Cenovus's website pegged the number at $115-million. To put that in perspective, the remaining cost to complete phase G and bring it on production, which is now forecast to happen in the second half of 2019, is estimated at $800-million to $900-million. Just a fraction of that will be spent next year. Still, the fact that Cenovus is ready to revive the project is an encouraging sign. As noted above, this is the second previously stalled oil sands project to be given the go-ahead, following Canadian Natural Resources Ltd.'s (CNQ: $43.73) announcement last month that it would restart activity on its 40,000-barrel-a-day Kirby North project. Such announcements are spurring renewed optimism in the oil patch. Another encouraging sign is the overall size of Cenovus's 2017 budget, which is nearly 24 per cent higher than this year's budget of $1-billion to $1.1-billion.
Cenovus is not the only one hiking its spending. Crescent Point Energy Corp. (CPG), up 24 cents to $17.85 on 4.74 million shares, has firmed up its own guidance for 2017, boosting both its budget and production targets. It had said in November that it would likely spend $1.4-billion and end 2017 with production of 175,000 to 177,000 barrels of oil equivalent a day. Yesterday after the close, it nudged those numbers up to $1.45-billion and 183,000 barrels a day. The budget represents a nearly 32-per-cent increase over this year's spending of $1.1-billion, and the year-end production guidance represents a nearly 10-per-cent increase over the year-end 2016 target of 167,000 barrels a day. Crescent Point claims to be exceeding that target already.
Now Crescent Point will aim for continued "strong production growth" in 2017 in its three core areas: the Williston basin (particularly the Saskatchewan side), southwest Saskatchewan and Utah's Uinta basin. The Williston basin is currently producing about 102,500 barrels a day and will receive just over half of the 2017 budget. Southwest Saskatchewan, with 39,000 barrels a day, will receive another quarter of the budget. This means that roughly $1.1-billion in total will be spent on Saskatchewan-focused assets. This did not go unnoticed by Saskatchewan Premier Brad Wall, who went on social media to thank Crescent Point for its "strong vote of confidence" in the province. Certainly Saskatchewan was the star of the budget, but Crescent Point has big plans for Utah as well, where it wants to increase its 12,500-barrel-a-day production to nearly 19,000 by the end of next year. It plans to do so by drilling 25 to 30 net horizontal wells. By comparison, the original plan for 2016 was to drill just three horizontals in Utah. Crescent Point then started seeing the results of the wells -- recently described by management as "some of the biggest wells in our history" -- and tripled the well count to nine. Next year's well count will see another tripling. Crescent Point says it can achieve its production goals while maintaining its three-cent monthly dividend, which yields 2 per cent. It already has plenty of cash to help cover expenses as a result of a $650-million financing completed in September at $19.30 a share. The financing displeased investors, who sent the stock down to $18.15 on the day of the announcement, and then on to a low of just $14.39 last month. OPEC's meeting at the end of last month helped push the stock back over $17, but it has yet to recover fully, closing today at $17.85.
Would-be oil and gas producers in Quebec had an interesting day. Junex Inc. (JNX) added 15 cents to 65 cents on 1.01 million shares, while Petrolia Inc. (PEA) rose 2.5 cents to 18 cents on 953,000 shares and Questerre Energy Corp. (QEC) shot up 24 cents to 76 cents on 3.22 million shares. The only one to mention the activity was Questerre, which, in response to the very narrow question posed by IIROC, gave the very narrow answer that it was unaware of any undisclosed material development that would account for its stock's behaviour. It then immediately noted that the National Assembly in Quebec is scheduled to vote on Bill 106 tomorrow.
Bill 106 is intended to (among many other things) enact the Petroleum Resources Act, creating a framework for oil and gas development in the province. The act will "govern the development of petroleum resources while ensuring the safety of persons and property, environmental protection, and optimal recovery of the resource, in compliance with the greenhouse gas emission reduction targets set by the government." Obviously, the keep-it-in-the-ground types despise it. Many of them claim that the act will allow energy companies to waltz in and seize private land, something Quebec's Energy Minister has denied. Companies must try to come to agreements with landholders, and if they cannot, they will still need government and court permission before any seizing can be done. (Worth noting -- though critics generally do not -- is that miners in Quebec have the same ability under the Mining Act.) Opponents also say Bill 106 will throw the door wide open to fracking all over the province. The bill does not actually mention fracking, although of course that means it does not prohibit it either. It does talk of wells being completed "by physical, chemical or other stimulation" and says authorization must first be obtained from the government.
The bill was tabled by the government in June and has caused no end of hysterics since. Now it is in the news again, specifically in the Montreal Gazette, which reports that the bill is set to be "steamrolled into law." The bill is stuck at the committee level, said Liberal house leader Jean-Marc Fournier, adding: "We are up to 140 hours of debate ... The principle is simple: There is a time to act, and, at some point, a time to decide." A decision has been made to invoke closure, which means capping the debate in order to fast-track the bill. That will happen late tomorrow (hence Questerre's announcement) or possibly very early Saturday. This decision infuriated the opposition. "There is zero social acceptability for the idea of hydraulic fracking. It has to be banned," Manon Masse of Quebec solidaire told the Montreal Gazette. Sylvain Rochon of Parti Quebecois added mournfully, "It's a very dark day for democracy."
Most Quebeckers actually support developing their resources, according to various surveys (including one conducted this year by the Montreal Economic Institute, which found that 54 per cent of respondents favoured development and just 23 per cent favoured the current import-everything state of affairs. Another 21 per cent said they did not know, and 2 per cent would not answer). Given that, it seems to be a perfectly fine day for democracy, and evidently it was a excellent day for the above-mentioned explorers. The one seen as closest to production is Junex. Its president and chief executive officer, Peter Dorrins, told the Canadian Press last week that its Galt No. 4 well, which has undergone extensive testing, could initially produce about 240 barrels a day and could earn money even at today's prices. He said Junex has applied for a permit and hopes to start production next spring. If that happens, Quebec will finally become an oil-producing province.