by Stockwatch Business Reporter
West Texas Intermediate crude for December delivery added 74 cents to $85.32 on the New York Merc, while Brent for December added 26 cents to $93.52 (all figures in this para U.S.). Western Canadian Select traded at a discount of $26.50 to WTI, up from a discount of $27.00. Natural gas for November added 41 cents to $5.61. The TSX energy index added a fraction of a point to close at 254.40.
Oil prices rose as the U.S. dollar fell to a three-week low. (A lower U.S. dollar makes oil less expensive in other currencies, bolstering demand.) Prices also got a boost from supply concerns. At an investment conference in Riyadh, Saudi Arabia's energy minister, Prince Abdulaziz bin Salman, suggested that countries should save their emergency oil stockpiles for potential supply shortages, rather than tapping them in a misguided attempt to manipulate prices. "Losing emergency stocks may be painful in the months to come," he warned.
The comments are being taken as a criticism of U.S. President Joe Biden, who has released more than 100 million barrels of emergency oil so far this year, seemingly to reduce fuel prices for consumers ahead of the Nov. 8 midterms. One major U.S. refiner expects the near-term drawdowns to continue. "I think you'll continue to see drawdowns at least through this year," predicted Lane Riggs, president and chief operating officer of Valero Energy Corp. (U.VLO: $126.80), during a conference call this morning. Valero has been the biggest buyer of this year's SPR releases. Today's call was held to discuss Valero's third quarter financials, which were released this morning and showed a bumper profit of $2.8-billion (U.S.) or $7.19 (U.S.) a share.
Quarterly earnings season has also begun in Canada's oil patch, kicking off today with the third quarter financials of PrairieSky Royalty Corp. (PSK), up 60 cents to $21.10 on 1.81 million shares. (PrairieSky is not a direct oil and gas producer, but collects royalties from producers across Western Canada, providing a useful indicator of industry activity.) The company turned a profit of $76.2-million or 32 cents a share on revenue of $154.7-million. It also announced a doubling of its quarterly dividend to 24 cents from 12 cents, for a new yield of 4.5 per cent.
Analysts cheered the better-than-expected quarterly numbers and the faster-than-expected dividend hike. "[PrairieSky is providing] a signal to the market of confidence in its high-margin business model and the outlook for drilling and leasing activity," declared iA Capital Markets Matthew Weekes. He increased his price target on the stock to $24 from $23. Similarly (but never exactly the same, in accordance with some unspoken code of conduct among analysts), Raymond James's Jeremy McCrea increased his price target to $28 from $27, CIBC's Jamie Kubik hiked his target to $27 from $26, and RBC's Luke Davis hiked his to $25 from $24.
PrairieSky's numbers (and the outpouring of analyst adulation) bode well for when producers' financials start to flow in. Crescent Point Energy Corp. (CPG: $10.48) will open the floodgates tomorrow morning, followed by Whitecap Resources Inc. (WCP: $10.38), Advantage Energy Ltd. (AAV: $9.87) and Tamarack Valley Energy Ltd. (TVE: $4.71) on Thursday and Imperial Oil Ltd. (IMO: $65.80) on Friday.
The above Advantage Energy Ltd. (AAV), up 13 cents to $9.87 on 676,400 shares, has separately been trying to show off a different shade of green. It spent yesterday toasting its carbon capture subsidiary, Entropy Inc. Entropy has just completed a 14-day trial of its newly installed carbon capture process at Advantage's Glacier gas plant in the Alberta Montney. The process captured 90 per cent of the emissions, boasted Entropy. (Glacier remains the only project where Entropy seems to have installed the process, although it said last month that it is preparing for the first stage of installation at the Leismer oil sands project owned by Athabasca Oil Corp. (ATH: $2.56), expected at some point by year-end.)
Investors showed little interest, their attention mostly focused on the financials that Advantage is due to report on Thursday. The analysts at CIBC recently predicted that "potential catalysts" contained in the financials could include an update on the company's share buyback plans. Advantage previously announced a regular share buyback program in April, allowing for the repurchase of 18.7 million shares, and (according to SEDI) it has already bought back 12.6 million shares since then. The analysts said they "would not be surprised" to see Advantage max out this program early in 2023 and launch a special buyback program.
Further afield, Dr. Art Halleran's Turkey-focused Trillion Energy International Inc. (TCF) edged down half a cent to 44 cents on 6.04 million shares. It is accelerating warrants that it issued about a year and a half ago, when it raised about $620,000 (U.S.) through two equity financings, one at six cents and the other at five U.S. cents. Given today's close of 44 cents, subscribers have done well. The high market price has also prompted Trillion to exercise the warrants' acceleration clause. There were 12 million warrants originally issued, of which 6.09 million remain exercisable at prices ranging from 10 to 12 cents. Should all of the remaining warrants be exercised by the new expiry date of Nov. 21, Trillion expects to receive $740,000.
The extra money should come in handy as Trillion continues its much-hyped drill program in Turkey. It trumpeted "preliminary gas indications" from the first well last week, adding that production should begin by November, just in time for winter. The company is keen to take advantage of high European gas prices. Although gas prices in Europe have been falling recently as countries reach their desired storage levels, they are still trading at about $25 (U.S.) per unit, more than four times U.S. benchmarks.