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Msg  68184 of 70741  at  9/18/2020 9:25:00 PM  by


Energy Summary - 18th

Energy Summary for Sept. 18, 2020

2020-09-18 20:02 ET - Market Summary

by Stockwatch Business Reporter

West Texas Intermediate crude for October delivery edged up 14 cents to $41.11 on the New York Merc, while Brent for November lost 15 cents to $43.15 (all figures in this para U.S.). Western Canadian Select traded at a discount of $10.80 to WTI, down from a discount of $10.75. Natural gas for October added one cent to $2.05. The TSX energy index lost a fraction to close at 70.93.

Oil sands giant Suncor Energy Inc. (SU) lost 21 cents to $17.64 on 23.5 million shares, despite touting its "gold" certification in the Progressive Aboriginal Relations (PAR) program from the Canadian Council for Aboriginal Business (CCAB). According to the CCAB's website, the PAR program measures "leadership in aboriginal relations," based on jobs and other criteria. Companies that pass muster can be certified as gold, silver or bronze. Then they can adorn themselves with a PAR logo that "signal[s] to communities that they are good business partners, great places to work and committed to prosperity in aboriginal communities." The PAR application fee is a cool $1,000, on top of the cost of CCAB membership, which runs anywhere from $2,500 to $25,000 depending on a company's size. For companies keen to boost their reputation for CSR (corporate social responsibility), this is apparently a worthwhile investment.

This is not the first time that Suncor has achieved gold-level PAR certification, but it does appear to be the first time that it has marked the occasion with an entire press release. Suncor is in bad need of some good press. In the last four months, its stock has plunged to around $17.50 from nearly $30. The most recent setback involved a fire last month at its base plant operations, which last week prompted it to slash its full-year production guidance to a range of 680,000 to 710,000 barrels a day from a range of 740,000 to 780,000. Alas, the decoration from PAR did nothing to improve investors' moods.

Suncor did at least manage to improve paleontologists' moods this week, thanks to an intriguing discovery at its majority-owned Syncrude oil sands mine (a joint venture with Imperial Oil Ltd. (IMO: $18.40), Nexen and Sinopec). Syncrude recounted the story on its website on Wednesday. A foreman was walking on site earlier this summer, checking out the right-of-way for a planned access road, when he saw something sticking out of a pile of dug-up material. It turned about to be a nearly perfect Ice Age bison skull. "Both horns, all of its bones and even almost all of its teeth [are] still intact," marvelled Syncrude geologist Patrick Dunbar. The skull is thought to be 5,000 years old. When COVID-19 restrictions are lifted, it will be moved to the Royal Alberta Museum. A curator at the museum, Chris Jass, told Syncrude that these fossil finds are quite rare. "We don't have a good Ice Age fossil record from northeastern Alberta," he said, explaining that the region is covered with vegetation and has acidic soil, which can break down bones quickly. He added, "This is very exciting for us."

Rare as these finds are, they are enough of a possibility in this part of the world that Syncrude and other companies have learned to put workers and protocols in place to protect them. Long-term Suncor investors may remember that one of the best-preserved dinosaur fossils in the world came from a Suncor mine, Millennium, back in 2011. An employee stumbled upon it while doing some excavating. The fossil turned out to be a new species of nodosaur (armoured dinosaur) and is estimated to be 112 million years old. On another occasion, at a Tourmaline Oil Corp. (TOU: $16.90) project near Spirit River in 2013, a pipeline installation crew unearthed what turned out to be the fossilized tail of a 98-foot-long duckbill dinosaur. Tourmaline was not put out by the need to delay the pipeline until specialists could remove the fossil. As one Tourmaline executive put it at the time, "It's kind of cool."

Speaking of Tourmaline, its stock added 70 cents to $16.90 on 3.02 million shares today, for a total of $1.25 gained this week. Part of the excitement reflects speculation about its private royalty and infrastructure company, Topaz Energy. Tourmaline created Topaz last year and indicated that it would eventually take Topaz public. Currently it owns about two-thirds of Topaz, an interest that it valued in May at around $1-billion. This is near the top end of analysts' valuations, which have ranged from $650-million to $1.1-billion, but regardless, a sale would put quite a bit of money in Tourmaline's pockets. Tourmaline has already said it would use the money primarily for acquisitions in 2020 and 2021. That would mean taking Topaz public before the end of 2020. To that end, when Topaz decided this week to cancel a planned appearance at a virtual energy conference, it immediately sparked rumours that it has entered the mandatory quiet period before filing a prospectus. There is nothing on SEDAR yet, but it will be worth watching.

Another company making its way toward a Toronto listing is i3 Energy PLC, a London-listed junior currently pursuing a reverse takeover of Toscana Energy Income Corp. (TEI: $0.01). The companies announced this deal in June. Toscana is not the most eye-catching promotion, so i3 separately agreed to buy Gain Energy, a private 10,000-barrel-a-day producer in Alberta and Saskatchewan, in a deal initially worth $80-million. That was a steep price tag for a company as small as i3. It ended up tweaking the Gain deal by agreeing to flip the Saskatchewan assets over to Harvard Energy for $45-million, effectively reducing the cost of Gain to $35-million, while still adding nearly 9,000 barrels a day of production. The Gain deal closed earlier this month. As for the Toscana deal, it is still in progress. (It is also quite a bit cheaper. i3 is issuing about 0.03 of an i3 share for every Toscana share, valuing Toscana at a grand total of $323,000.) Toscana announced last week that the shareholder meeting to approve the deal has been scheduled for Oct. 26. Closing is expected Oct. 30.

That brings the story to today. This morning, i3 received a lovely mention from Canaccord Genuity analyst Charlie Sharp, who applauded i3's "transformative acquisition [and] revitalized strategy." In his view, Western Canadian assets have a lot to offer. He sees the potential for i3 to pursue "further step-change acquisitions to grow the company." Although he cut his price target on the stock to 11 pence from 20 pence -- saying the 20-pence target had assumed the full inclusion of the Gain assets, prior to flipping the Saskatchewan ones -- he upgraded his rating to "buy" from "speculative buy." The revised price target of 11 pence is still more than double i3's closing price today of 4.25 pence. In Canadian dollars, 11 pence is about 19 cents, or 19 times Toscana's current share price of one penny.

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