by Stockwatch Business Reporter
West Texas Intermediate crude for January delivery added 42 cents to $59.18 on the New York Merc, while Brent for February added 48 cents to $64.20 (all figures in this para U.S.). Western Canadian Select traded at a discount of $20.35 to WTI, up from a discount of $20.53. Natural gas for January added nine cents to $2.33. The TSX energy index added 2.82 points to close at 138.86.
U.S.-focused shale producer EnCana Corp. (ECA) added 20 cents to $5.52 on 13.2 million shares, as it pressed forward with its plans to move its headquarters to Denver from Calgary, change its name to Ovintiv Inc. and roll back its shares 1 for 5. It announced this morning that it has filed a definitive proxy statement/prospectus with U.S. and Canadian regulators. As well, it confirmed (as previously disclosed on SEDAR) that it will hold a special meeting on Jan. 14 to seek two-thirds shareholder approval. EnCana's board is unanimously recommending that shareholders vote in favour. It claims that the proposal serves "to further create shareholder value and to recognize the company's significant transformation" since late 2013/early 2014, when it was predominantly a gas producer in Canada. Now less than half of its production is gas and it spends about four-fifths of its budget in the United States.
Not all shareholders are in favour of the move. The stock has been largely treading water since the plan was announced in October (and at $5.52 remains well off its mid-2014 level of nearly $27 -- a "significant transformation" indeed). One of the most prominent voices of opposition belongs to Letko, Brosseau & Associates, a Canadian investment firm that owns about 4 per cent of EnCana's 1.29 billion shares. Letko Brosseau began publicly criticizing the proposal on Nov. 19. Moving to the U.S. will trigger a wave of selling by Canadian institutions, argued Letko Brosseau. EnCana responded the same day and downplayed the significance of those sales. They would be outweighed, claimed EnCana, by incremental U.S. demand, which it estimated at $1-billion. Letko Brosseau ran its own numbers and lashed out again on Nov. 28, insisting that EnCana will lose more than it will gain. By Letko Brosseau's calculations, there is "a potential negative impact of up to 441 million shares [being sold], far in excess of the potential 250 million shares from the company's estimated billion-dollar incremental demand. Moreover, added Letko Brosseau, there is "nothing in the proposed plan ... [that] decreases costs or improved revenues, cash flows profits or growth ... [and] it is highly speculative that the value of the company would be improved in any way by the simple fact that U.S. index funds decide to buy the shares."
EnCana did not respond by press release to the Nov. 28 letter. In its newly filed information circular, it acknowledged that there may be "potential temporary downward pressure" from Canadian sell-offs, but continued to assert that this pressure will be more than offset by the expected rise in U.S. demand. Over all, EnCana maintained that the move will "help capture the value we deeply believe exists within our company." It hopes to complete the reorganization "as soon as practicable" after the shareholder meeting on Jan. 16 and a related court hearing for final approval on Jan. 17.
Saskatchewan- and Alberta-focused TORC Oil & Gas Ltd. (TOG) added 19 cents to $4.21 on 2.07 million shares, after releasing its 2020 guidance and tweaking -- but not lowering -- its generous dividend. The 2020 guidance was roughly as analysts had expected, with TORC aiming for full-year production of 28,300 barrels of oil equivalent a day (flat with the year-end 2019 level) on a budget of $190-million (up slightly from this year's budget of $180-million). TORC emphasized that this is an initial budget and provides for "spending flexibility through the year." Other priorities include protecting the balance sheet and maintaining the dividend. TORC currently pays a 2.5-cent monthly dividend, for a yield of 7.1 per cent. It raised this dividend from 2.2 cents in May, 2019, and before that raised it from two cents in May, 2018, both times citing its rising production and cash flow per share. The dividend has long been considered a relatively affordable one, at least in terms of the cash cost, because TORC's largest shareholder -- the Canada Pension Plan Investment Board (CPPIB), which owns over 64 million of TORC's 2019 million shares -- has always taken its dividend payments in the form of additional stock. Yet now TORC has tired of the monthly dilution to its share count. It has indefinitely suspended its share dividend plan, effective for the January dividend payable in mid-February. The CPPIB can now look forward to monthly cash payments of about $1.16-million.
TORC has also added Catharine de Lacy to its board of directors. Ms. de Lacy bills herself on her LinkedIn social media profile as a "trusted thought leader experienced in international public policy related to the change in the evolving energy economy." She was most recently the vice-president of global public affairs and sustainability at the specialty chemicals firm Albemarle Corp. from 2015 to 2019. Before that, she spent four years as vice-president of global stewardship at The Clorox Company, and further back in the past (from 1993 to 1998) she was at Occidental Petroleum as vice-president of HESPRM (health, environment, safety and process risk management). TORC mentioned none of this -- it talked ambiguously of "prior executive experience globally across a variety of industrial sectors" -- but it did mention the bit about Ms. de Lacy's being a "recognized thought leader." Her addition to TORC's board will represent her first time as a director of a public company.
Up in the Alberta Montney, Andy Mah's gassy Advantage Oil & Gas Ltd. (AAV) added nine cents to $2.67 on 2.47 million shares. It has not released specific 2020 guidance yet, beyond what it announced a little over a year ago when it sketched out a three-year plan covering 2019 through 2021. Yesterday, its CEO, Mr. Mah, made an appearance on BNN and said Advantages is keeping an eye on benchmark AECO gas prices as it finalizes its 2020 plans. There are "some green shoots" of optimism on AECO, he said. Notably, the recent improvements to TC Energy's NGTL system (the largest gas pipeline network in Canada) have led to stronger gas prices and less volatility. "We are watching it, but we think it's moving in the right direction at this time," said Mr. Mah. The stock is doing likewise. Since the end of August, Advantage's stock has risen to $2.69 from a low of $1.35.
Mr. Mah's interviewer noted that Desjardins Securities recently forecast that Advantage will aim to produce 45,000 barrels of oil equivalent a day in 2020, fairly flat with the 2019 level of 44,000 barrels a day. Mr. Mah said he would generally agree with that forecast. (Worth noting -- though neither BNN nor Mr. Mah did -- is that the above-mentioned three-year plan originally called for 2020 production of almost 49,000 barrels a day. That has since been reduced on Advantage's website to a range of 46,000 to 48,000 barrels a day. Now, apparently, it may be reduced again.) In any case, Mr. Mah emphasized that Advantage's real priority is not necessarily to boost overall production, but rather its production of high-margin liquids. Gas will still make up about 80 per cent of next year's production, according to Desjardins, but that is a big change from 2016, when that figure was over 97 per cent.
Down in South America, Manolo Zuniga's Peruvian oil producer, Petrotal Corp. (TAL), edged up half a cent to 42 cents on 663,200 shares. It has kept its word and declared a dividend. The promise of a dividend was made nearly seven months ago, with Petrotal saying it would definitely do an interim dividend before year-end and a final dividend in the spring of 2020. The targeted annualized yield would be 4 per cent. With that in mind, the company has declared a dividend of 0.17 cent for the second half of 2019, to be paid on Jan. 20, 2020. Mr. Zuniga, Petrotal's president and CEO, declared himself "delighted to be in a position to share [Petrotal's] success with our dedicated shareholders." Those shareholders remained relatively unmoved by today's announcement. In fairness, the stock has already been one of the better performers of 2018, rising to 42 cents from 23.5 cents since the start of the year. That includes a recovery from a 20-per-cent drop it suffered last month after mistakenly telling investors that it held $40-million (U.S.) in cash instead of the correct figure of $20.5-million (U.S.). It has since wiped the egg off its face by increasing its year-end production guidance and, as of today, finalizing its long-awaited dividend.