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Energy Summary - 21stEnergy Summary for July 21, 2017
2017-07-21 20:15 ET - Market Summary
by Stockwatch Business Reporter West Texas Intermediate crude for September delivery lost $1.02 to $45.77 on the New York Merc, while Brent for September lost $1.24 to $48.06 (all figures in this para U.S.). Western Canadian Select traded at a discount of $10.30 to WTI ($35.47), unchanged. Natural gas for August lost seven cents to $2.97. The TSX energy index lost 2.43 points to close at 171.49. With three days to go before a scheduled OPEC/non-OPEC meeting in Russia to discuss compliance with last November's production-cutting agreement, preliminary reports are showing that OPEC's production continues to head higher. Petro-Logistics, one of several consulting companies that estimate OPEC's production by monitoring tanker shipments, told Reuters this morning that OPEC is on track to produce over 33 million barrels a day in July. That will represent an increase of 145,000 barrels a day from June, and an increase of more than 600,000 barrels a day over the average for the first half of 2017. Petro-Logistics attributed July's increase to rising supplies from Saudi Arabia, the United Arab Emirates and Nigeria. Although Nigeria is exempt from the production cuts (at least for now), both Saudi Arabia and the United Arab Emirates signed last November's production-cutting agreement. If the latest numbers are correct, they suggest that compliance with the agreement, which was 78 per cent in June, is continuing to weaken. EnCana Corp. (ECA) added 17 cents to $12.34 on 12.9 million shares, after releasing its second quarter financials along with updated full-year guidance. Production for the quarter came to 316,000 barrels of oil equivalent a day, in line with analysts' predictions, while cash flow of 36 cents a share exceeded predictions of 34 cents a share. One of EnCana's big announcements during the quarter was its agreement to sell its gas assets in the Piceance (pronounced "pee-ants") basin of Colorado for $735-million (U.S.). The Piceance assets are producing over 40,000 barrels of oil equivalent a day. Their sale, which is scheduled to close later this quarter, will take a toll on EnCana's full-year production, but not as great a toll as investors might have expected. EnCana announced this morning that it is reducing its full-year 2017 production guidance to a range of 310,000 to 320,000 barrels a day from a range of 320,000 to 330,000 barrels a day to account for the Piceance sale. TD Securities analyst Menno Hulshof pointed out that, if the Piceance sale were factored into the old guidance, the new guidance actually represents an increase of 2 per cent. The budget remains intact at $1.6-billion (U.S.) to $1.8-billion (U.S.). President and chief executive officer Doug Suttles applauded EnCana during a conference call this morning for "another very strong quarter of execution." He added that the company is now "well ahead of year one of our five-year plan." EnCana unveiled its five-year plan last October, putting the emphasis on its four core plays, namely the Permian and the Eagle Ford in Texas and the Montney and the Duvernay in Western Canada. These four plays make up over 90 per cent of EnCana's post-Piceance-sale production. Originally, EnCana had expected to increase production from these core plays by about 20 per cent this year (as measured from the fourth quarter of 2016 to the fourth quarter of 2017), but now it says it can increase that production by 25 to 30 per cent. "We'll enter 2018 even stronger," promised Mr. Suttles. He did not provide many details about the company's plans for 2018, but said his "starting point ... is to grow within cash flow." Despite Mr. Suttles's sunny mood, there was a cloud hanging over the event, or rather three clouds, in the form of three lawsuits filed this week in California. The lawsuits take aim at EnCana and 36 other companies producing oil, gas or coal. They were filed by the coastal communities of Marin county, San Mateo county and the City of Imperial Beach. "California communities confronting rising sea levels fight back ... to hold [the] largest fossil fuel polluters accountable," blared a press release published by the law firm of Sher Edling LLP. The complaints draw on legal precedents used against tobacco companies, which reached a $368.5-billion (U.S.) settlement in 1998. Now the complaining communities want to make fossil fuels the new cigarettes. Their complaints claim: "Defendants have known for nearly 50 years that greenhouse gas pollution from their fossil fuel products has a significant impact on the Earth's climate and sea levels. ... Defendants concealed the dangers, sought to undermine public support for greenhouse gas regulation and engaged in massive campaigns to promote the ever-increasing use of their products." The communities are requesting, among other things, "compensatory damages in an amount according to proof," "equitable relief to abate the nuisances complained of [in the lawsuits]," punitive damages, disgorgement of profits and "other relief as the court may deem proper." EnCana's management did not mention the lawsuits at all in this morning's conference call. Generally speaking, the lawsuits are not thought to have much chance. The Canadian Press, reporting on the story yesterday, noted that similar lawsuits have been thrown out. Crescent Point Energy Corp. (CPG), down 19 cents to $9.21 on 4.09 million shares, is engaged in a quarrel of its own, this time with the operator of a pipeline in Saskatchewan. That operator is Tundra Energy Marketing, an affiliate of Tundra Oil & Gas, the largest oil producer in Manitoba. Tundra Oil is owned by James Richardson & Sons Ltd. As discussed most recently in the July 11 Energy Summary, Crescent Point filed a 48-page complaint with the National Energy Board (NEB) against Tundra Energy last month, accusing it of using "incomplete and inadequate" methods to operate a provincial pipeline system. These methods were causing financial harm to Crescent Point and others using the system, alleged the complaint. It also expressed concerns that Tundra Energy could share market-sensitive information with Tundra Oil about competitors' production and development and plans. After receiving the complaint, the NEB told Tundra Energy to file comments by July 11 and Crescent Point to file reply comments by July 21. Tundra Energy's response, as detailed in the July 11 Energy Summary, was brief and consisted largely of challenges to the jurisdiction of the NEB (as a national body) over a provincially regulated pipeline system. It concluded that the complaint should be dismissed. Crescent Point filed its reply comments today. It clearly does not think much of Tundra Energy's letter, which in its opinion "does not allay any of the concerns raised in the complaint" and in fact "casts little doubt on the merits of the complaint." Tundra Energy either did not address the issues or provided "hollow" assurances about them, sniffs Crescent Point. As for jurisdiction, Crescent Point argues that until recently, no one even worried about such things because the previous operator, Enbridge, used a "uniform, transparent and verifiable" process. Tundra Energy changed that, says Crescent Point, and as a result, the Saskatchewan government and other regulators could actually benefit if the NEB holds a hearing. "Both the NEB and the government of Saskatchewan have a vested public policy interest in ensuring that these principles [of transparency and uniformity] continue to be followed," says Crescent Point. It says it would gladly have the complaint considered in a joint proceeding with the NEB and the Saskatchewan Ministry of Economy. Whether the NEB proceeds jointly or not, a hearing is crucial to provide a "transparent evidentiary record" to allow other regulators to "maintain the public interest," argues Crescent Point. It concludes that the NEB should hear the complaint and, if possible, expedite it because of the financial damages being incurred by producers every month. (Although Crescent Point did not bring this up in its response, its original complaint estimated that the company lost an estimated $1.1-million in one month because of Tundra Energy's methods.) With the receipt of Crescent Point's latest letter, the NEB is now ready to start reviewing all comments on the complaint. These include letters of support for Crescent Point by Cenovus Energy Inc. (CVE: $9.34), Enerplus Corp. (ERF: $10.85), Spartan Energy Corp. (SPE: $6.00) and several others. All of them must now await the NEB's reaction, which could be anything from a ruling, to a continuation of the complaint process, to an outright dismissal of the complaint. It is unclear when the NEB will make this decision. |
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