by Stockwatch Business Reporter
West Texas Intermediate crude for October delivery was unchanged at $72.61 on the New York Merc, while Brent for November added 21 cents to $75.78 (all figures in this para U.S.). Western Canadian Select traded at a discount of $11.90 to WTI, unchanged. Natural gas for October lost 12 cents to $5.34. The TSX energy index lost 1.24 points to close at 132.81.
Alberta oil sands giant Suncor Energy Inc. (SU) edged up five cents to $24.83 on 13.9 million shares, after trumpeting a "historic" pipeline partnership. The company and eight indigenous groups in Alberta will jointly buy TC Energy Corp.'s (TRP: $62.47) 15-per-cent interest in the Northern Courier pipeline. This 90-kilometre pipeline connects Suncor's Fort Hills oil sands mine and a storage terminal near Fort McMurray. The new 15-per-cent owners collectively expect to enjoy gross annual revenue of $16-million, primarily linked to long-term tolling contracts that do not vary with oil prices.
The above figure was one of the few financial figures in the press release. Suncor did not state how much it is paying for its share -- or even what its specific share is -- merely noting that the entire pipeline is valued at $1.3-billion. This matches the value set in May, 2019, when TC Energy sold an 85-per-cent interest in Northern Courier to Alberta Investment Management Corp. (AIMCo) for $1.15-billion. Suncor has now revealed that it started eyeing the pipeline around that time, obtaining a right to buy the remaining 15-per-cent interest "with this collaboration [with indigenous communities] in mind." President and chief executive officer Mark Little dubbed himself "excited" to finally exercise the right and to be part of the "unprecedented" partnership.
If the press release was short on finances, it was certainly long on sound bites. After Mr. Little said his piece, the indigenous groups flocked around to praise the "game-changing partnership" and "investment in a better Canada." The Alberta government got in on it too, sending Indigenous Relations Minister Rick Wilson to cheer the "momentous and historic" occasion. Several parties, including AIMCo and the Willow Lake Metis Nation, put out their own press releases. Anyone determined to wade through all the fluff would eventually have been rewarded with a tidbit of extra information: According to Alberta Indigenous Opportunities, the eight indigenous groups will collectively own 14.25 per cent of the pipeline, while Suncor will own 0.75 per cent. (This suggests that Suncor's financial outlay is minimal. The good PR, it surely hopes, is priceless.)
Elsewhere in Alberta, Darren Gee's gassy Peyto Exploration & Development Corp. (PEY) added 64 cents to $9.55 on 3.14 million shares. It has not been this close to $10 since 2018. Peyto has also been enjoying some good PR this week, courtesy of boosterish analysts. On Monday, Canaccord Genuity analyst Anthony Petrucci said Canadian gas stocks are currently looking "extremely compelling." He raised his price targets on seven of them, including hiking Peyto's to $10.50 from $9.50. Peyto then got its own special mention from Scotia Capital analyst Cameron Bean, who is even more bullish on the stock. Mr. Bean hiked his price target to $13 from $12.
Both analysts' excitement is rooted in rising gas prices. After years of hovering around $2, spot gas prices are now above $4.50 and winter futures are above $5, as Mr. Petrucci pointed out in Monday's note. Peyto is taking advantage of the rally to try to boost its production to 100,000 barrels of oil equivalent a day by year-end (up from 80,000 this time last year). Meanwhile, insiders are taking advantage of the rally in the share price to do some option flipping. Over the last month, nine directors and officers have exercised options at around $2 to $4 and sold the resulting shares at around $6 to $8. President and CEO Mr. Gee did especially nicely, pocketing $439,063 in just two days.
Back in the oil sands, Cenovus Energy Inc. (CVE) lost 23 cents to $11.24 on 10 million shares. It has announced the results of its any-and-all tender offer for various batches of notes, following the expiry of the offer yesterday evening. The offer is part of a larger debt refinancing that was discussed in the Energy Summary for Sept. 9. Cenovus has now put out four press releases about its progress on the refinancing -- a useful distraction, perhaps, from some far less pleasant updates from another corner. New regulatory filings show that major shareholder ConocoPhillips is continuing to unwind its position.
Conoco received 208 million shares of Cenovus (relative to two billion shares currently outstanding) as consideration for an asset sale in 2017. It held on to the shares for years before announcing in May, 2021, that it would unload all of them "in the open market ... by year-end 2022." Cenovus was surprised; it had been expecting to reach a formal disposition arrangement with Conoco, perhaps buying back some or all of the shares. In any case, from May through August, Conoco filed frequent EDGAR disclosures as it trimmed its position to 170 million shares. Now a fresh EDGAR filing shows that it has knocked this all the way down to 149 million.
Lastly, a much smaller Alberta oil producer, Don Simmons and Charlie O'Sullivan's Hemisphere Energy Corp. (HME), added one cent to 87 cents on 5,800 shares. It added four cents yesterday after starting its first drill program at its Atlee Buffalo project since 2019. The program comprises three wells, all of which should be on production by mid-October, said president and CEO Mr. Simmons. He is "excited to return to more active development."
As Mr. Simmons clarified, Hemisphere has not been idle at the assets for the last two years. It has been converting them from a waterflood set-up to a polymer flood set-up. (Both are methods of EOR, or enhanced oil recovery, but the chemicals in polymer flooding are generally better at coaxing out the really stubborn oil.) As well, Hemisphere has been reshaping its balance sheet, finally succeeding last month in securing a $35-million credit facility (which allowed it to terminate a high-cost term loan from 2017). Now Mr. Simmons is ready to resume drilling. His goal is to boost production to 3,000 barrels a day (from the current 1,900) by the end of next year.
With oil prices going strong, the timing of Hemisphere's program has worked out nicely. The 87-cent stock is now trading even higher than it was before oil prices first crashed in 2014 -- a rarity in the sector. Of course, longer-term investors may cast their minds back to 2005, when the stock was worth as much as $13. At the time it was not an oil producer but a Far North metals explorer, called Northern Hemisphere Development, with Vancouver gold promoter Frank Callaghan serving as its CEO. He left in 2006, and Hemisphere appointed Mr. Simmons as CEO and switched to Alberta oil in 2007. Its 78-year-old chairman, Mr. O'Sullivan, has overseen it all, having founded Hemisphere way back in 1977. The company is, above all else, a survivor.