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Energy Summary - 17thEnergy Summary for Oct. 17, 2017
2017-10-17 20:32 ET - Market Summary
by Stockwatch Business Reporter West Texas Intermediate crude for November delivery edged up one cent to $51.88 on the New York Merc, while Brent for December added six cents to $57.88 (all figures in this para U.S.). Western Canadian Select traded at a discount of $11.35 to WTI ($40.53), unchanged. Natural gas for November added one cent to $2.96. The TSX energy index added a fraction to close at 184.70. EnCana Corp. (ECA) added 13 cents to $14.30 on 5.41 million shares. It is preparing to hold its 2017 investor day tomorrow in New York, where it says it will provide details on its "longer-term strategic outlook." It already released a five-year plan at last year's investor day, but president and chief executive officer Doug Suttles has been hinting that this plan is in need of an update. He predicted during an industry conference in New York last month that the "updated guidance will be even better than what we rolled out last year." Canaccord Genuity analyst Dennis Fong, evidently taking this as an invitation to start peering into his crystal ball (although analysts never actually need such invitations), released his own predictions for tomorrow's investor day in a research note this morning. All in all, he expects EnCana to be able to "self-support its growth objects" at oil prices of $50 (U.S.) and gas prices of $3 (U.S.). The "growth objects" are expected to benefit from "strong improvements in well performance" in the B.C./Alberta Montney, the Texas Eagle Ford and the Texas Permian. These are three of EnCana's four core plays, with the fourth being the Alberta Duvernay. Interestingly, although EnCana's press release about last year's investor day emphasized its position in these four plays (making specific reference to the company's "world-class core four assets"), this year's press release skips over the number of plays and merely refers to "the company's core assets." This has raised speculation that EnCana may add a fifth area to its priority list. The company has been quietly working on a six-well drill program in the San Juan basin of New Mexico. Although Canaccord's Mr. Fong does not expect an update on this program at tomorrow's investor day, he did point out that, based on public data from four wells, each well has shown a 30-day initial production rate of about 1,200 barrels of oil equivalent a day. That is nicely above Mr. Fong's forecast of just 840 barrels a day. Perhaps EnCana will look to "evolve [San Juan] into a new core area," mused Mr. Fong. Alternatively, the company could also sell its 200,000 acres in the basin. Based on Mr. Fong's calculations, the San Juan assets could be worth up to $1.5-billion (U.S.). Turkey-focused Valeura Energy Inc. (VLE), a sizable investment of Cormark Securities CEO Scott Lamacraft (who owns about 8.5 million of its 73 million shares), shot up 12.5 cents to 58 cents on 339,600 shares. It has reached an agreement with joint venturer Statoil for a testing program on their Yamalik-1 well. This is the first deep exploration well drilled as part of Valeura's multimillion-dollar farm-out agreement with Statoil at the Banarli gas licence. Valeura and its shareholders have been waiting many years for test results from a deep well at Banarli. Although Valeura has long held an interest in the licence, on its own it could drill only shallow targets, providing production but leaving the main prize -- a potential BCGA (basin-centred gas accumulation) play -- maddeningly out of reach. Valeura spent two years looking for a farmee to help shoulder the cost of a deep program. In May, 2016, it finally succeeded in finding its farmee, Statoil. This news sent Valeura's stock shooting up to as much as $1.44 in June, 2016, from just 65 cents before the farm-out was announced. Unfortunately, the closing of the agreement took longer than expected, and although Statoil was supposed to drill its first deep well (Yamalik-1) by the end of 2016, drilling did not actually begin until May, 2017. In the meantime, Valeura's stock slipped back toward the 60-cent level. It got a slight boost in July, when the joint venturers announced that Yamalik-1 had shown "positive evaluation results." This meant gas shows, not test results, so investors remained relatively unimpressed. Valeura strove to reassure them that the test program would begin in the third quarter. This did not happen, and the stock continued to slide, reaching a low of 42.5 cents earlier this month. The excitement reignited today as Valeura announced that the terms of the test program have been settled, equipment is on the way and the program will begin next month. Statoil is expected to cover the entire cost of the program. Investors will still have to wait until the new year for actual results, as the testing is expected to take about two months. In Valeura's view, that is just one more reason to look forward to 2018. The company is also expecting 2018 to be the year in which Statoil drills the second deep well under the farm-out agreement. Another company hoping for near-term excitement from its wells is Ian Telfer and Craig Steinke's Renaissance Oil Corp. (ROE), up two cents to 26 cents on 739,300 shares. The company has been firming up the plans for its first-ever drill program in Mexico. It previously said it wanted to start this program at some point in the fourth quarter. This morning, it narrowed that down to November. It plans to focus on its Amatitlan block. There are two main targets at Amatitlan: the shallow Chicontepec formation, a conventional play that is a known producer in Mexico, and the deeper Upper Jurassic shale, which is undeveloped but has been likened to the Eagle Ford. Renaissance's goal is re-establish production at Amatitlan from the Chicontepec formation while proving that the deeper shale is commercially viable. If both goals are accomplished, Amatitlan will be a "company-maker," the above-mentioned Mr. Telfer declared in a conference call earlier this year. (Mr. Telfer is the co-founder and a director of Renaissance, as well as the chairman and past CEO of Goldcorp.) A six-well drill program targeting the Chicontepec formation is expected to begin next month. Renaissance has yet to receive the much-desired permits for a deeper shale program, but says it is currently completing the final necessary documents. Renaissance has some fresh cash to help with its Mexican activities. It announced this morning that it has closed a $3.15-million private placement of 18.2 million units at 17.25 cents, with each unit comprising a share and a warrant. The private placement was done with new "strategic partner" Eskandar Maleki, whom Renaissance praises for his "strong track record of building successful oil and gas companies, most notably Tullow Oil." To say that Mr. Maleki "built" the London-listed Tullow is something of a stretch, but he was certainly an important backer of it. He made enough of an impression during Tullow's early days that the company appointed him to its board of directors in 1996 (a little under a decade after it was founded in 1985). At the time, he owned a 9-per-cent interest in Tullow through Centrotrade Corp., his investment company. The Irish Times, reporting on Mr. Maleki's addition to Tullow's board, said (oddly) that Mr. Maleki had not asked to become a director but had been approached by Tullow because of his history as a "solid shareholder" since 1992. Mr. Maleki stayed on the board until 2004, at which point he retired to focus on other interests. Tullow changed significantly during his time on the board. In the 1990s, Tullow focused largely on small, mature assets, mostly in various parts of Asia. It was not until 2000 that Tullow began what it now calls its "defining period" by making increasingly large acquisitions in the North Sea and Africa. By the end of 2004, the year Mr. Maleki retired, Tullow was considered one of Europe's top independent oil companies, with a market cap in the neighbourhood of $2-billion (U.S.). More recently, debt woes and low oil prices have taken a toll on Tullow, but it remains an active explorer and producer. These days it focuses largely on West and East Africa. Canadian energy investors will be familiar with it as one of the joint venturers of Africa Oil Corp. (AOI: $1.57), a Lundin company, in the Lokichar basin of Kenya. |
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