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Msg  72072 of 72289  at  8/16/2022 9:27:01 PM  by


Energy Summary - 16th

Energy Summary for Aug. 16, 2022

2022-08-16 20:54 ET - Market Summary

by Stockwatch Business Reporter

West Texas Intermediate crude for September delivery lost $2.88 to $86.53 on the New York Merc, while Brent for October lost $2.76 to $92.34 (all figures in this para U.S.). Western Canadian Select traded at a discount of $19.66 to WTI, unchanged. Natural gas for September added 60 cents to $9.33. The TSX energy index lost 2.83 points to close at 226.84.

Canadian LNG (liquefied natural gas) projects got a fresh set of champions today. Ahead of a planned visit to Canada next week by German government officials, a group of German and Canadian business groups released a joint statement this morning calling for their governments to "strengthen economic and political co-operation and defend our shared values," including on energy matters. They specifically urged co-operation in "speeding up the deployment of Canadian LNG export facilities, [so that] Canada can help keep European industry running and households warm."

The statement -- signed by the Business Council of Canada, the Canadian Chamber of Commerce, the Canadian German Chamber of Industry and Commerce, and the Transatlantic Business Initiative -- also addressed trade and investment, mineral resources, hydrogen, semiconductors, and more. Yet energy played a prominent role, given Europe's pressing need to wean itself off Russian gas. "[Europe must] increase its imports of energy products, especially LNG, from other suppliers," emphasized the groups. They proclaimed themselves "ready to do their part in helping to overcome these challenges."

The groups did not single out a particular project behind which they would throw their support. Canada currently does not have a single active LNG export terminal. The one closest to reality is the Shell-backed LNG Canada terminal in British Columbia, which will focus primarily on Asian customers once it starts up in 2025, though this should have indirect benefits for Europe in that it would free up other LNG for rerouting. A much smaller project in B.C., the Woodfibre LNG terminal (newly backed by Enbridge Inc. (ENB: $55.47) after it agreed to acquire a 30-per-cent interest last month), is hoping to become Canada's second LNG exporter when it starts service in 2027.

Projects aimed more specifically at the European market include one proposed a decade ago -- and still not built -- by Alfred Sorensen's Pieridae Energy Ltd. (PEA), unchanged at $1.18 on 291,400 shares. It has long wanted to build the Goldboro LNG terminal in Nova Scotia. The German government was once so enthusiastic that it offered to guarantee up to $4-billion (U.S.) in loans to help build the Goldboro. Alas, the project's price tag was a resounding $10-billion (U.S.), and Pieridae could not scrape up enough money for the rest. It missed a key investment deadline in mid-2021 and the project has effectively been mothballed ever since.

In recent months, Pieridae started floating the idea of building a scaled-down version of Goldboro, but a key problem (besides money) remains a lack of pipeline capacity to the East Coast. Goldboro has thus steadily dwindled in prominence in Pieridae's press releases. It got scarcely a single mention in the second quarter financials released last week, in which Pieridae kept the focus on its gas assets in the Alberta Foothills, which are generating "record" amounts of cash. (For context, net operating income for the quarter was $56-million, nearly one-third of Pieridae's total market cap of $186-million.) A new presentation on Pieridae's website indicates that the Foothills will be at the heart of the company's "strategic path to success," with Goldboro being simply "an opportunity."

Further afield, the Lundin Group's Africa Oil Corp. (AOI) edged down one cent to $2.48 on 670,100 shares. Investors calmly took in the latest turmoil known as a Kenyan election. Africa Oil has exploration-stage and early-development-stage assets in Kenya, but unlike in the previous 2013 and 2017 elections, these are no longer its primary focus. The potential for political upheaval thus did not seem to faze investors. With Kenyans having cast their votes last week, the official results released yesterday showed a narrow victory by William Ruto over Raila Odinga (outgoing president Uhuru Kenyatta did not run because of term limits). Mr. Odinga announced today that he rejects the results and believes that Kenya is facing a "grave legal and political crisis."

The rejection is a worrisome sign in a country that has a history of election-related violence, including more than 100 people who died during protests after the 2017 election, as well as an estimated 1,200 to 1,500 people who died during months of violent clashes after the 2007 election. As of today, the situation in Kenya remains tense but relatively calm. There are continuing protests but no reported death toll, and Mr. Odinga, despite rejecting the election results as a "travesty," urged his supporters to remain peaceful and refrain from "tak[ing] the law into their own hands."

Africa Oil has stuck to its usual practice of not commenting on the election. Although Kenya was its main home for many years -- it even helped make the country's very first oil discovery in 2013 -- it found development to be quite a struggle, and in 2018 it started the process of putting its eggs in a few more baskets. Now it has interests in Nigeria, South Africa and Namibia and more. Investors seem to be focusing more on the news from these other assets than the Kenyan upheaval. Notably, late last week, Nigeria renewed various oil licences, including one crucial to Africa Oil (the OML 130 licence). Last week also brought announcements from Eco (Atlantic) Oil & Gas Ltd. (EOG: $0.51) and Africa Energy Ltd. (AFE: $0.36) -- both sizable investments of Africa Oil -- confirming that they will drill their next exploration well in South Africa in either September or October.

Elsewhere in Africa, Randy Neely's Egypt-focused TransGlobe Energy Corp. (TGL) lost eight cents to $4.18 on 95,300 shares. Its suitor, the NYSE-listed and Gabon-focused Vaalco Energy, has announced that Aug. 24 will be the record date to qualify its shareholders to vote on the companies' proposed merger. The date of the vote itself remains up in the air. It will be "determined and announced at a later time," promised Vaalco.

Long-term investors of TransGlobe can be forgiven for taking such promises with a grain of salt. The last time that TransGlobe tried to complete a major merger was in 2014, when it agreed to combine with Gary Guidry's Caracal Energy, only to see Caracal change its mind within a single month. (Caracal merged with Glencore instead and Mr. Guidry got a new job leading the Colombia-focused Gran Tierra Energy Inc. (GTE: $1.54).) TransGlobe and Vaalco are now themselves at the one-month mark, having announced their merger in mid-July. The plan is that Vaalco will issue about two-thirds of a share of itself for each TransGlobe share -- valuing TransGlobe at about $307-million, or $4.19 a share -- and the resulting entity will be owned 54.5 per cent by Vaalco's shareholders and 45.5 per cent by TransGlobe's.

Perhaps in light of the bad memories of 2014, TransGlobe seems keen to chivvy this deal along. Just two weeks after the announcement, it filed a SEDAR notice saying that it would hold its own shareholder vote on the deal on Sept. 21, for shareholders of record as of Aug. 16 (today). Now it has had to amend those timelines. The new record date is Aug. 24, and the meeting will (it hopes) take place on Sept. 29. Ideally, Vaalco will stick to a similar schedule and this merger will go through as planned by the end of the year.

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