by Stockwatch Business Reporter
West Texas Intermediate crude for October delivery added $3.96 to $42.56 on the New York Merc, while Brent for October added $4.42 to $47.56 (all figures in this para U.S.). The benchmarks enjoyed their biggest one-day rally since 2009 thanks to better-than-forecast U.S. economic data, a rebound in Chinese stock markets and Shell's declaration of force majeure on Nigerian oil exports. Western Canadian Select traded at a discount of $14.75 to WTI ($27.81), down from a discount of $14.25. Natural gas for September lost 5.5 cent to $2.638. The TSX energy index added 10.71 points to 172.10.
Canadian producers rose with oil. Dozens of them saw their stocks go up by 10 or even 20 per cent, including Canadian Oil Sands Ltd. (COS), up $1.01 to $7.13, Enerplus Corp.(ERF), up 86 cents to $7.45, Trilogy Energy Corp. (TET), up 47 cents to $4.00, Bonterra Energy Corp. (BNE), up $1.99 to $18.78, and little Lightstream Resources Ltd. (LTS), up 7.5 cents to 42 cents.
Mart Resources Ltd. (MMT) lost two cents to 18 cents on 2.22 million shares, on the unwelcome but unsurprising news that its takeover by Midwestern Oil, a joint venturer in Nigeria, has been cancelled. As well, Mart has cut ties with former CEO Wade Cherwayko. (The press release chose not to mention that Mr. Cherwayko is apparently about to go to jail for failing to comply with court orders in his contentious divorce case -- more on that later.) The nearly six-month drama with Midwestern began unfolding in early March, when Mart's stock was closer to 60 cents. Midwestern made an 80-cent-a-share takeover offer. Normally shareholders would rejoice, but in this case, there were immediate doubts as to whether Midwestern would be able to raise the necessary money. Mart's stock did not go anywhere near 80 cents over the following months, or even above 70 cents. The skepticism deepened as Mart repeatedly extended Midwestern's financing deadline. Last week, with Mart's stock still holding out at around 45 cents, Midwestern made it official: It could not pay 80 cents a share. The two companies talked about a possible lower offer, but this morning, even that hope -- if investors ever really held it -- was dashed.
The months of talks with Midwestern were going on against a backdrop of internal drama at Mart. In February, Mart started investigating its then-CEO, Mr. Cherwayko, about various behavioural breaches. Mr. Cherwayko went on "voluntary" leave as CEO but was kept on as a consultant to help with the Midwestern negotiations. Mart ultimately found that Mr. Cherwayko had improperly used Mart's resources, failed to disclose conflicts of interest and failed to file insider trading reports in a timely manner. That last part is in reference to Mr. Cherwayko's sale of five million shares in December and subsequent failure to file SEDI reports until Feb. 20. The sale seemed to be related to his five-million-pound divorce case, which is taking place in a London court and has captivated U.K. papers for months. The Daily Mail reported last month that Mr. Cherwayko, who had apparently ignored the court's order to pay his ex-wife five million pounds -- or rather, he had given her the money in share certificates, but then acquired duplicate certificates and sold the shares, rendering them worthless -- was also failing to show up to the hearings. The judge threatened a two-year jail term if he did not come next time. This did not seem to faze him. The Daily Mail reported this week that Mr. Cherwayko went to Dubai rather than attend his most recent hearing, leading the judge to rule that his "untrustworthy" behaviour and "contempt for this court" merited a "term of immediate imprisonment." She gave him a 21-month jail sentence. He is likely to serve just half of it, she added, assuming of course that the sentence can even be implemented, which it cannot at the moment because he is out of the jurisdiction.
Mart's press release this morning did not discuss Mr. Cherwayko except to say that he is no longer a consultant. All in all, tomorrow's conference call with management should be interesting.
Jim Saunders's Twin Butte Energy Ltd. (TBE) added 4.5 cents to 33.5 cents on 1.69 million shares. It is no doubt benefiting from the rise in oil prices, and perhaps also from the confidence shown by president and CEO Rob Wollmann, who bought 156,000 shares today at 32 cents. This brings his holdings to 815,629 of the company's 353 million shares. Had he bought yesterday, ahead of today's ex dividend date, he would have enjoyed the benefits of Twin Butte's 0.3-cent monthly dividend, which was cut from one cent earlier this month but still yields a generous 10.7 per cent. Mr. Wollmann, who regularly writes messages on Twin Butte's website, had warned in a message earlier this year that the dividend would have to be cut if low oil prices persisted. His new message suggests that the company is now relatively comfortable with its position. "No material changes are anticipated for the balance of the 2015 capital budget or 2015 guidance," writes Mr. Wollmann. He cites "increased confidence" in the company's results in its core Provost medium oil area in Alberta and its Lloydminster heavy oil area in Alberta and Saskatchewan. Over four-fifths of this year's $100-million budget is going to Provost, where, according to public data, Twin Butte just spudded its 15th well since it resumed drilling on June 1. The company is starting to put together its plans for 2016. Its website indicates that if WTI is $55 (U.S.) next year, the budget will be around $100-million again. At $45 (U.S.), the budget will be reduced to "minimum levels," but if WTI goes to $65 (U.S.), the budget will be $130-million. Raising the dividend is not a key priority for the company, but reducing the $307-million net debt would be swell.
Rob Zakresky's Leucrotta Exploration Inc. (LXE) added 13 cents to 95 cents on 69,300 shares, after releasing its second quarter financials. These actually showed a net profit of $31.5-million for the quarter, although that was mainly because of a $45.7-million gain on an asset sale. Negligible cash flow per share and production of 1,463 barrels of oil equivalent a day were both in line with analysts' predictions. When Leucrotta was created about one year ago (as a spinout to hold the B.C. Montney assets of Crocotta Energy that Crocotta's acquirer did not want), its production was around 2,100 barrels a day, but the difficult market and the above-mentioned asset sale have taken their toll. The market is still difficult, and Leucrotta has lowered its near-term guidance as a result. Its original plan was laid out in late May. Between then and the first quarter of 2016, Leucrotta planned to spend $40-million on a program that included four Montney development wells in the Doe area, up to three Montney step-out wells in the Greater Dawson area and up to two vertical wells at exploration-stage Montney assets farther north 147104. Leucrotta has now sliced that program in half. The new budget is $20-million and the new program includes one development well, two step-outs and two verticals. Work is expected to start in the middle of next month. Leucrotta can easily afford it, with $77-million in working capital, $15-million of assets held for sale and an undrawn bank line of $10-million. Presumably it sees more sense in saving its cash for better days rather than splurging on an ambitious drill program, particularly as it has large neighbours to do a lot of the drilling and (ideally) stir up some excitement. Tourmaline Oil Corp. (TOU: $31.39) is drilling just a few miles west of Leucrotta's core Doe development area, and ARC Resources Ltd. (ARX: $18.07) surrounds Doe on all other sides.