by Stockwatch Business Reporter
West Texas Intermediate crude for July delivery closed out the final trading day of the month by adding $1.78 to $35.49 on the New York Merc, up from $19 at the start of the month, for its largest monthly percentage gain on record (all figures in this para U.S.). This was also the benchmark's first time closing above $35 since Friday, March 6, which was the last trading day prior to the Black-Monday-esque meltdown that started March 9. Brent for July edged up a mere four cents to $35.33 but still logged its best monthly percentage gain since 1999. (Interestingly, today also marks the first time in years that WTI has closed at a premium to Brent, even if that premium is just 16 cents. The last time WTI overtook Brent was during intraday trading in 2015. In general, Brent has traded higher than WTI since 2010.) Here in Canada, Western Canadian Select traded at a discount of $7.50 to WTI, up from a discount of $7.60. Natural gas for July added two cents to $1.85. The TSX energy index lost 1.05 points to close at 78.10.
Brett Herman's Alberta- and Saskatchewan-focused TORC Oil & Gas Ltd. (TOG) lost 11 cents to $1.44 on 7.31 million shares, after a win-some-lose-some conversation with its bankers. The bankers have agreed to extend their borrowing-base review of TORC's $500-million reserve-based credit facility by one month to June 30. Reserve-based facilities, which tend to be more common among smaller producers, have their borrowing bases linked to reserves and commodity prices, which is why the companies that have them are particularly anxiety-prone these days. TORC is relatively well off: Not only was the facility just $309-million drawn as of March 31 (so a cut would have be drastic to tip it into a shortfall), but TORC also has the benefit of a large anchor shareholder, the Canada Pension Plan Investment Board, which owns 65 million of TORC's 222 million shares. Both of those factors look good in discussions with lenders. Now those discussions can continue a few weeks longer, while TORC and the bankers assess changing commodity prices and the effects of government support programs. The bankers are not being flexible for free, however. They have tacked on an amendment to the facility requiring TORC to seek unanimous consent before drawing amounts higher than $425-million.
This extension with strings attached echoes what happened earlier this week with Alberta oil producer Cardinal Energy Ltd. (CJ), unchanged at 4.5 cents on 779,000 shares. It too has a reserve-based credit facility, for $325-million, which was $193-million drawn as of March 31. Cardinal announced on Monday that its bankers were granting a month-long extension of the facility to June 30. In exchange, however, the bankers imposed an undisclosed but probably disagreeable limit on Cardinal's borrowings during the extension period. They also forbade Cardinal from using the facility to repay its $44.4-million in outstanding convertible debentures due at the end of this year. These debentures are currently trading at just 53 cents on the dollar, down from roughly par value in February. Cardinal is proposing to exchange these debentures for a new series, with a higher interest rate and a lower strike price, maturing in 2022. It will first need to seek debentureholder approval at a special meeting. Yesterday it filed the circular for this meeting, scheduled for June 19. It said if the debentureholders do not approve the exchange, and if no acceptable alternative financing is available, the 2020 debentures will be repaid in shares. This will cause "significant equity dilution," warned Cardinal. Indeed, if Cardinal's share price at the time is 38 cents or lower -- it is currently 46.5 cents -- then the current share count of 115 million will more than double.
A few other companies also had debt-related news. Don Gray's Alberta- and Saskatchewan-focused Gear Energy Ltd. (GXE), down one cent to 19 cents on 56,900 shares, announced yesterday after the close that its bankers have