by Stockwatch Business Reporter
U.S. markets were closed today for American Thanksgiving. West Texas Intermediate crude for January delivery lost 72 cents to $44.99 in electronic trading on the New York Merc, while Brent for January lost 83 cents to $47.78 (all figures in this para U.S.). Western Canadian Select traded at a discount of $11.40 to WTI, down from a discount of $11.10. Natural gas for December added three cents to $2.93. The TSX energy index lost a fraction to close at 90.78.
It was a day of turkey and football for our neighbours to the south, but here in Canada, many energy workers were in a gloomy mood as they watched more layoff notices being posted in the oil patch. Oil sands producer Imperial Oil Ltd. (IMO: $24.48) is laying off about 200 of its 6,000 employees, according to The Canadian Press. Imperial confirmed the news on its website as it said it was "respond[ing] aggressively to the challenging business environment by reducing capital and operating expenditures." This news comes less than two months after another oil sands giant, Suncor Energy Inc. (SU: $22.64), said it will let go as many as 2,000 workers (or 15 per cent of its work force) over the next year and a half. As well, one month ago, Cenovus Energy Inc. (CVE: $6.89) and Husky Energy Inc. (HSE: $5.66) announced a merger that could reduce their combined staff by approximately one in four, affecting around 2,000 jobs.
Happily, some companies have been hiring. Coastal GasLink, which is building a pipeline of the same name across Northern British Columbia, provided a November construction update in which it said it has added 528 more field workers, bringing its field work force to over 4,000. "Peak pipeline construction is under way and work on our facilities continues to advance," it cheered. It reckoned that the work is now one-third complete. It should be in service some time in 2023.
In other pipeline news, U.S. President-elect Joe Biden raised eyebrows among proponents of TC Energy Corp.'s (TRP: $58.90) Keystone XL pipeline after he appointed a familiar face as his special adviser on climate -- John Kerry. Mr. Kerry is the former secretary of State who rejected Keystone XL under then-president Barack Obama in 2015. The project was later revived by outgoing president Donald Trump, while Mr. Biden has said he will kill it again. Mr. Kerry's appointment as climate envoy has sharpened fears that Mr. Biden will do just that. Not necessarily, said Canada's U.S. ambassador, Kirsten Hillman, at a panel conference on foreign relations earlier this week. "Times have changed," she said, as quoted in CTV News. "The project itself is not the same project. The company itself [TC Energy] has made enormous innovations, and the sector is enormously innovative -- they're cutting their emissions in important ways." Ms. Hillman also drew attention to Canada's commitment to achieving zero emissions by 2050. All of this could serve to sway Mr. Biden into letting the project live. Were Keystone XL a human child, it would have celebrated its 12th birthday in September. May its teenage years be smoother sailing.
Further afield, Serafino Iacono and Frank Giustra's NG Energy International Corp. (GASX) edged down two cents to 83 cents on a heavier-than-usual 252,700 shares. It has filed its third quarter financials on SEDAR but did not put out a press release. NG Energy is the new name of Cruzsur Energy, a Colombian gas explorer with ambitions of becoming a producer within months. These hopes -- and NG Energy's stock -- sprang up in July after the company found "a large amount" of gas at its Maria Conchita block, while doing what should have been some standard repair work on an old well called Aruchara-1. To narrow down "a large amount," NG Energy spent August conducting initial flow tests on Aruchara-1 and saw rates of up to 11 million cubic feet of gas a day (over 1,900 barrels of oil equivalent a day). Next came a reserve report in October that pegged the block's net 2P (proved and probable) undeveloped reserves at 25.8 million cubic feet. This prompted NG Energy's chief executive officer, Mr. Iacono, to declare himself "very happy to be commencing a new chapter in [the company's] existence."
The new quarterly financials contained more details about this chapter. Notably, NG Energy is aiming to connect Aruchara-1 to a nearby gas line by the end of the first quarter of 2021, at which point it will look to start "capitalizing on a premium pricing market in Colombia of over $5 (U.S.) [per unit of gas]" -- well above the U.S. benchmark. As well, the company plans to spend 2021 carrying out a feasibility study to see how many wells would be needed to sustain an eventual production capacity of 20 million cubic feet a day.
All of that is happening at Maria Conchita. NG Energy has another core block, SN-9, which is about five times Maria Conchita's size. SN-9 got its own special press release earlier this month after CPVEN, a Venezuelan energy services provider, made a binding offer whereby it will drill and complete four gas wells for a total cost of $27.2-million (U.S.). In return, it will become NG Energy's preferred service provider for all phases of the block's development. It is not clear how long all of this will take, but the new quarterly financials show that NG Energy wants to have drill rigs on site by the end of the first quarter of 2021.
Back in Canada, Don Gray's Alberta- and Saskatchewan-focused Gear Energy Ltd. (GXE) lost one cent to 23.5 cents on 158,500 shares. President and chief executive officer Ingram Gillmore has posted his latest monthly update on Gear's website. He pegged Gear's production for the month of October at 5,828 barrels of oil equivalent a day. This is down from 6,654 barrels a day in September, but Mr. Gillmore suggested that readers should not get too caught up in such numbers. It is important to "be nimble with production," he advised, which sometimes means refusing to "give away reserves at low pricing" and rather postponing production until prices are better. Gear has certainly been nimble this year, with its monthly production sometimes going as low as 1,300 barrels a day or as high as 6,800 barrels a day. By Mr. Gillmore's calculations, deferring some of Gear's production in the spring (when prices were incredibly weak) to the fall (when prices were somewhat stronger) resulted in approximately $6.5-million in incremental revenue.
Mr. Gillmore had other suggestions in his letter on how to "pro-actively and aggressively" maximize revenue, but investors did not seem impressed. No oil producer is genuinely pleased with the money it is bringing in these days. In Gear's case, it signalled some financial worries in August, when it hired an unnamed financial adviser "to consider a number of possible strategic alternative transactions to improve liquidity, provide additional flexibility and enhance shareholder value." A strategic alternatives review is usually code for a company hanging out the for-sale sign. As of yet, there are no takers.