by Stockwatch Business Reporter
West Texas Intermediate crude for October delivery added 27 cents to $70.56 on the New York Merc, while Brent for November added 44 cents to $74.36 (all figures in this para U.S.). Western Canadian Select traded at a discount of $11.45 to WTI, unchanged. Natural gas for October lost 18 cents to $4.81. The TSX energy index added 1.32 points to close at 127.83.
The mood in the oil patch was one of blinking bemusement as yesterday's federal election resulted in substantially no change. After calling a high-stakes snap election in the middle of a worldwide pandemic, Justin Trudeau's Liberals have a minority government, again.
Even the Canadian Association of Petroleum Producers (CAPP), which is the industry's main lobby group and does its best to avoid wading into political muck, seemed unable to resist a veiled dig. "This election result reaffirms the uncertainty in Canada as we continue to struggle with public health and economic issues," mused CAPP in a statement this morning. It issued blandly standard congratulations to Mr. Trudeau, and an equally standard reiteration of the environmental and economic superiority of Canadian energy. "Our ask of the federal government," concluded CAPP, "is to support Canadian prosperity by getting behind our own country's resources, and to trust Canadians to protect the environment, rather than relying on other nations to supply the world's need for natural gas and oil."
Others echoed that hope. "The biggest thing we need is just visual and vocal support for the industry," Andy Mah, chief executive officer of Advantage Energy Ltd. (AAV: $5.64), told the Calgary Herald. Unfortunately, this may be too much to ask for, warned former pipeline executive Dennis McConaghy (who worked for TC Energy Corp. (TRP: $61.77) from 1998 to 2014). Mr. McConaghy headed to BNN this morning to air concerns that the re-election of the Liberals is bad news for pipelines -- and therefore energy more broadly -- because the Liberals campaigned partly on promises of ambitious new climate targets. (Notably, the Liberal platform explicitly referenced "a decisive plan to ensure the oil and gas sector reaches net-zero emissions by 2050." No other industry was singled out in this way.) Lastly, there were plenty predicting that the election will not change much at all. Raymond James analyst Jeremy McCrea advised energy companies to just keep "hunkering down and not being in the limelight."
Within the sector, Mike Rose's Tourmaline Oil Corp. (TOU) edged down 27 cents to $40.49 on 2.97 million shares. It closed a $108-million secondary offering of shares of Topaz Energy Corp. (TPZ: $15.83). Topaz is the royalty and infrastructure subsidiary that Tourmaline created in 2019 and took partially public in 2020. With the closing of today's secondary offering, Tourmaline now holds 51 million of Topaz's 128 million shares, or a 39-per-cent interest. The offering also brings the amount of money that Tourmaline has been able to raise through Topaz (whether by selling shares of it or selling assets to it) to over $750-million.
Mr. Rose, chairman, president and CEO of Tourmaline, said his company will use the proceeds to reduce debt and accelerate shareholder returns as the long-term debt target is achieved." He has previously specified the long-term debt target as a ratio of 0.5 times debt to cash flow. In July, noting that Tourmaline's net debt was $1.7-billion as of June 30, Mr. Rose said he "expect[s] to hit that long-term debt target during Q4 of this year." After that, he promised, Tourmaline will provide updates on a "mix of return opportunities," which could include higher regular dividends, new special dividends or share buybacks. (Tourmaline's current 17-cent quarterly dividend represents a yield of 1.7 per cent.) Investors seem eager. The $40 stock has climbed up nicely from $30 over just the last month.
Lower down, Don Gray's Alberta- and Saskatchewan-focused Gear Energy Ltd. (GXE) added one cent to 68 cents on 788,200 shares. President and CEO Ingram Gillmore has published his latest monthly letter to shareholders on Gear's website. He was in a jolly mood, noting that Gear has just finished the last well of this year's 19-well program. Throughout the year, production has been "trending at or above budgeted expectations," cheered Mr. Gillmore. Gear had set an expectation of a full-year average of 5,500 to 5,600 barrels of oil equivalent a day. It has already reached that level, with year-to-date production (up to Aug. 31) averaging 5,501 barrels a day. Mr. Gillmore is looking forward to "a strong exit to 2021 and an equally healthy entry into 2022."
Also looking healthy is Gear's balance sheet, added Mr. Gillmore. He estimated that Gear's net debt was just $30.6-million as of Aug. 31. That is down from $80.2-million in the first quarter of 2020, thanks to an oil price rally that provided "material assistance to the delivery of strong funds from operations." Apparently "material assistance" is corporate-speak for "job-saving godsend." Mr. Gillmore also opted not to remind investors that Gear relied not just on cash flow to reduce debt, but also converted a sizable amount of debt into equity, resulting in its share count rising to 258 million from 216 million since the start of the year. In any case, the executive kept the letter humming along, cheerfully toasting Gear's "production, pricing and financial strength."
Another Western Canadian oil junior, John Jeffrey's Saturn Oil & Gas Inc. (SOIL), lost half a cent to 15.5 cents on 1.41 million shares. Investors mostly shrugged off today's resource estimate for the company's new Oxbow project in southeastern Saskatchewan. These are the assets that Saturn acquired from Crescent Point Energy Corp. (CPG: $4.84) in June for $76.8-million. Saturn boasted today that its reserve report shows over 200 drilling locations and gross 2P (proved and probable) reserves of 43.3 million barrels. They might have been perfectly nice figures, if investors had not already known about them. Very similar numbers had appeared in the June press release. They were lifted from the year-end reserve report of Crescent Point, which was quite happy to sell the assets, flagging their "minimal" free cash flow and their large future cleanup bill of $220-million.
Separately, Saturn announced the appointment of Glenn Hamilton to its board of directors. Mr. Hamilton is an accountant and the former chief financial officer of NuVista Energy Ltd. (NVA: $4.29) and the now-private Bonavista Energy Corp. Bonavista used to be public, but fell into financial difficulties and was taken private by its creditors at just five cents a share in August, 2020. Mr. Hamilton had already left four years earlier. These days, he sits on the boards of two private Alberta companies, Ember Resources and Islander Oil and Gas. He is also on the board of the public Inter Pipeline Ltd. (IPL: $19.91). With Inter Pipeline in the final tender stage of its takeover by Brookfield Infrastructure Partners, apparently Mr. Hamilton is ready to add a new board seat to his collection.
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