|
|
Canadian Blue-chip Industrial Forum
|
|
||
Energy Summary - 28thEnergy Summary for March 28, 2017
2017-03-28 20:25 ET - Market Summary
by Stockwatch Business Reporter West Texas Intermediate crude for May delivery added 64 cents to $48.37 on the New York Merc, while Brent for May added 58 cents to $51.33 (all figures in this para U.S.). Western Canadian Select traded at a discount of $12.45 to WTI ($35.92), unchanged. Natural gas for April added five cents to $3.10. The TSX energy index added 4.10 points to close at 200.63. One of the largest LNG (liquefied natural gas) proposals in British Columbia has taken another step toward reality, although that final destination remains years away. The Vancouver-based Steelhead LNG, which is behind the proposed Sarita and Malahat LNG projects on Vancouver Island, has received support for Sarita from the local Huu-ay-aht ("who-way-ut") First Nation, which owns the land on which Sarita would be built. A joint press release from Steelhead and the Huu-ay-aht announces that members of the 750-strong community have voted 70 per cent to approve the project. Steelhead and the Huu-ay-aht will now move forward with a co-management arrangement to develop Sarita, which is hoped to be an "economic game-changer," according to the press release. Sarita has already received National Energy Board approval to export up to 24 million tonnes of LNG a year. (By comparison, the better-known Pacific NorthWest LNG project, backed by Malaysia's Petronas and expected to be built near Prince Rupert, would export about 19 million tonnes a year.) The vote to approve Sarita represents one of the earliest points in time that this kind of project has received this kind of support. Indeed, it is so early in the process that Sarita is still in the preliminary engineering and design stage. One of the elements that still needs designing is how to get the necessary gas supplies to the site. Steelhead's chief executive officer, Nigel Kuzemko, told The Canadian Press that he favours using existing pipelines, and would consider piping the gas across Southern British Columbia or bringing it across the Salish Sea from Washington. He added that Steelhead plans to make a final investment decision on Sarita in 2019 or 2020 and to start production in 2024. One gas producer with a keen interest in Steelhead's progress is the Alberta Montney-focused Seven Generations Energy Ltd. (VII), up 40 cents to $23.10 on 1.49 million shares. In September, Seven Generations and Steelhead entered a development agreement "to explore infrastructure development and open new overseas markets for Canadian natural gas." Seven Generations also acquired a minority interest in Steelhead. Pat Carlson, founder and CEO of Seven Generations, and Jeff van Steenbergen, a director of Seven Generations, both sit on Steelhead's board. They were doubtless pleased to see Sarita win the locals' approval. Even so, Seven Generations' stock is still struggling to recover from a blow in early January, when the company announced that its fourth quarter production was sharply below guidance. It did not give a specific number at the time, but it pegged its full-year 2016 production at about 117,500 barrels of oil equivalent a day. Investors quickly realized that this meant the company had missed its fourth quarter target by approximately 20,000 barrels a day. The stock, which had been trading at around $30 before the announcement, promptly plunged to $27 and continued to slide over the following weeks, getting as low as $21.63 last Wednesday. It has since rallied to the current level of $23.10. Investors seem to be regaining confidence in the company's guidance for 2017, which has remained intact despite the problems in late 2016. Seven Generations repeated as recently as March 8 that it expects to produce 180,000 to 190,000 barrels a day this year. That compares with about 117,800 barrels a day in 2016, 60,400 barrels a day in 2015 and 31,100 barrels a day in 2014, one of the most impressive records in the industry. On the B.C. side of the Montney, Crew Energy Inc. (CR) added eight cents to $4.95 on 4.51 million shares. A good chunk of the volume came from Peters & Co., which crossed 2.35 million shares at $4.80 this morning. Crew last released news on March 14, when it completed a debt refinancing by issuing $300-million in 2024 notes with the intention of using the proceeds to redeem $150-million in 2020 notes. A recent presentation on its website says the refinancing increases the company's total debt capacity to $535-million (up from $385-million at year-end 2016). The extra capacity is expected to help Crew continue "building our future in the Montney," a slogan that appears in the presentation three times. As well, the extra capacity gives Crew more time to pursue much-desired sales of non-core assets, according to Scotia Capital analyst Cameron Bean. In a research note two weeks ago, Mr. Bean reminded readers that Crew has been marketing its heavy oil assets in Saskatchewan and Alberta for months, without success. He wrote that he still sees asset sales as important to Crew, so he is pleased that the new notes will give Crew breathing room to find buyers. Crew, for its part, barely mentions the heavy oil assets in its new presentation. It says they are still for sale and are expected to produce 2,000 barrels of oil equivalent a day this year, down from about 2,500 last year. Total production this year is expected to average 25,000 to 27,000 barrels a day, with the Montney's contribution expected to exceed 20,000 barrels a day for the first time. By comparison, in 2009, the Montney's contribution was closer to 1,000 barrels a day. North of Crew, in the Birley/Umbach area of the Montney, Chinook Energy Inc. (CKE) lost half a cent to 37.5 cents on 674,400 shares. It has lost 2.5 cents over the last three trading days, following the release of its year-end financials and an operational update on Friday. Fourth quarter production of 2,593 barrels of oil equivalent a day was well below guidance of nearly 3,000 barrels a day. Chinook blamed a delay at its Boundary Lake North field, as well as cold weather and third party facility downtime. Fortunately, these problems did not prevent Chinook from drilling three more wells at Birley/Umbach in December, all of which came in at more than one-quarter below budget. Unfortunately, the results of these wells left something to be desired. Chinook announced on Friday that the wells tested at 1,094 to 1,364 barrels of oil equivalent a day, with 88 to 96 per cent being gas. This means the free-condensate-gas ratios of these wells ranged from eight to 25. By comparison, the average ratio for the six other wells that Chinook has drilled at Birley/Umbach is almost 30. (Higher is better, as condensate fetches a better price than gas.) Unfazed, Chinook is moving ahead with what it says is a new and improved drill program for 2017. It plans to drill four longer wells instead of six shorter ones, and has boosted its year-end production target to a range of 6,300 to 6,500 barrels a day from a range of 6,000 to 6,150 barrels a day. Despite the guidance bump, investors and analysts remain disappointed. In a research note this morning, Raymond James analyst Kurt Molnar said he had wanted more from the three new wells, specifically more condensate or, failing that, a higher test rate. He added that the wells may have prompted Chinook to raise its 2017 production guidance, but the guidance still implies "the lowest netback of Chinook's regional peers." (For context, Chinook pegged its fourth quarter operating netback at $9.54 a barrel, while the above-mentioned Crew pegged its comparative figure at $18.22 a barrel.) By Mr. Molnar's calculations, Chinook will eat up most of its working capital this year, but its return on capital "is likely to be unattractive in our eyes," which in turn "raises doubts as to the saleability of the company/assets unless the buyer could sharply reduce cash costs." Mr. Molnar downgraded Chinook's stock to "underperform" from "market perform" and chopped his price target to 35 cents from 50 cents. The new target is lower than today's close of 37.5 cents. |
return to message board, top of board |