by Stockwatch Business Reporter
West Texas Intermediate crude for October delivery lost $1.18 to $54.17 on the New York Merc, while Brent for October lost 58 cents to $59.34 (all figures in this para U.S.). Western Canadian Select traded at a discount of $12.85 to WTI, unchanged. Natural gas for September lost one cent to $2.15. The TSX energy index lost 3.91 points to close at 120.09.
The oil patch enjoyed some good news heading into the weekend. TC Energy's Keystone XL pipeline cleared a major legal hurdle this morning, as the Nebraska Supreme Court upheld the state's route approval. Nebraska's Public Utilities Commission (PUC) had granted this approval in November, 2017, although it chose the route's "mainline alternative" rather than the "preferred route" that TC Energy had liked better. Opponents of the pipeline latched on to the PUC's decision as an excuse to demand that TC Energy seek full-scale regulatory approval of the alternative route, and further declared that the PUC had failed to prove that the pipeline is in the public interest. The state's Supreme Court has now rejected those challenges and confirmed that the PUC followed proper procedures in granting its approval.
"The Supreme Court decision is another important step as we advance towards building this vital energy infrastructure project," cheered TC Energy's president and chief executive officer, Russ Girling. He gave thanks for the "unwavering support" of the project's many thousands of proponents. They are very patient proponents indeed, given that next month will mark 11 years since TC Energy submitted the project application to the U.S. State Department. Of course, for opponents of the line, 11 years of reviews and consultations and approvals are not enough; nothing will be enough. The Nebraska Branch of the Sierra Club declared as much this morning, stubbornly insisting that the court' ruling "does nothing to change the fact that Keystone XL ... simply will never be built. The fight to stop this pipeline is far from over." They are a cheerful bunch, those activists.
Here in Canada, Jeff Tonken's Alberta Montney producer Birchcliff Energy Ltd. (BIR) lost 20 cents to $1.93 on 6.16 million shares. After reaching an all-time low of $1.90 late last week in the wake of a 15-per-cent budget boost (to $283-million from $245-million), the stock spent most of this week rallying, but has now fallen almost all the way back down. Investors have yet to make up their minds on Birchcliff's plan to drill an extra seven wells this year. It tried to sell the plan by providing updates on several recent wells, including a six-well pad on the new Pouce Coupe landholdings acquired near the beginning of this year. The pad delivered average per-well rates of 4.65 million cubic feet of gas a day and 282 barrels of condensate a day over the first 30 days. Another pad, this time with five wells in the Gordondale area, returned average per-well rates of 2.8 million cubic feet of gas a day and 423 barrels of oil a day over the first 30 days. Scotia Capital analyst Cameron Bean was a fan of these wells, declaring in a recent research note that these results were better than he expected (or, in analyst-speak, they were "ahead of our high-case type curve peak-month estimate"). He has a "sector outperform" rating on Birchcliff and a price target of $5.50.
Though investors do not seem to share Mr. Bean's good cheer, insiders remain optimistic. In the last week, four directors and officers have spent over a quarter of a million dollars buying a total of 126,000 shares. The largest buyer was director James Surbey, who bought 100,000 shares at an average price of $1.97. He now owns 900,000 of Birchcliff's 265 million shares.
Mr. Surbey has been a director of Birchcliff since mid-2017 and before that was its founding vice-president of corporate development. He and Mr. Tonken, Birchcliff's president and CEO, go back many years. Each of them held those positions at three previous promotions, starting in 1987 with Mr. Tonken's founding of Stampeder Exploration. Stampeder was sold to Gulf Canada Resources in 1997 for about $700-million (about $7.50 a share). Their next promotion did not go nearly as well and in fact gave rise to one of the biggest scandals in oil patch history. Long-time investors will easily remember Mr. Tonken's Big Bear Exploration, which in 1999 acquired Blue Range Resources in a hostile takeover, only to immediately discover several nasty accounting errors and inflated reserve estimates in Blue Range's books. Big Bear placed Blue Range under creditor protection and then sued it -- its own subsidiary -- to try to recover some gains while shielding itself from the bank. Big Bear's story abruptly ended a year later when it agreed to sell itself for half of what it was trading at prior to the Blue Range takeover. Meanwhile, the Blue Range executives held responsible for cooking the books entered a decade-long legal battle, which included a record-breaking four years of hearings by the Alberta Securities Commission. The executives were found guilty of many violations, and though they appealed, the Alberta Court of Appeal dismissed their case in 2009, ending the nearly 10-year saga.
As for Mr. Tonken, Mr. Surbey and the handful of others who had been around since the Stampeder days, they went on to their next promotion, Case Resources. Case roughly tripled investors' money between its founding in 2000 and its sale in 2004. Birchcliff came along shortly thereafter. It has had a productive 15 years, going from output of essentially nothing in 2004 to nearly 80,000 barrels a day currently, but the stock has not followed this upward march. Its chart shows peaks near $15 and valleys near $3. This month, it fell below $2 for the first time. Mr. Surbey and some of his fellow directors and officers are taking the dip as a buying opportunity.
Another Alberta producer with recent insider buying is the gassy Pine Cliff Energy Ltd. (PNE), down half a cent to 10.5 cents on 471,100 shares. Robert Disbrow, a Vancouver broker and major shareholder of Pine Cliff, has boosted his holdings 1.79 million shares this month alone, paying about 12 cents a share. He evidently sees 12 cents as a bargain. Pine Cliff, like Birchcliff, has been laid low lately by weak Alberta gas prices. In its second quarter financials two weeks ago, Pine Cliff expressed optimism that gas prices will stabilize soon, while reminding investors of its efforts to expand beyond gas and into oil. It drilled its Pekisko light oil well last year and says the well "continues to exceed expectations." In May, it said it would drill its second well in the second half of 2019. Its latest announcement narrowed that timeline to the fourth quarter of 2019, but also noted that "at least" one well would be drilled, raising hopes for a more ambitious program. The last well cost a total of about $3-million, with a projected payback period of 14 months.
Pine Cliff is not the only one showing interest in expanding its near-term work programs. After the Alberta government announced this week that it would exempt over a dozen more companies from its oil production curtailment policy (specifically by doubling the threshold to 20,000 barrels a day from 10,000, as discussed in more detail in Wednesday's Energy Summary), several of those companies began to talk cautiously of opening their wallets. "We were diverting capital into share buybacks and into Saskatchewan. Now we'll put capital back to work in Alberta," president and CEO Brian Schmidt of Tamarack Valley Energy Ltd. (TVE: $1.70) told Reuters. His counterpart at Whitecap Resources Inc. (WCP: $3.64), Grant Fagerheim, said the new policy "changes the way we think [about Alberta]" as the company starts to design next year's budget. Meanwhile, Pete Sametz, president and CEO of Pengrowth Energy Corp. (PGF: $0.30), said Pengrowth is "really happy" about the new policy and will look to boost its drilling activity in Alberta as soon as October. (The changes to the policy will take effect Oct. 1.) Other companies that should benefit from the relaxed quotas, according to the analysts at AltaCorp Capital, include Athabasca Oil Corp. (ATH: $0.59), Baytex Energy Corp. (BTE: $1.65) and Obsidian Energy Ltd. (OBE: $1.32).