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Msg  719 of 759  at  5/11/2022 9:03:38 PM  by


Energy Summary - 11th

Energy Summary for May 11, 2022

2022-05-11 20:35 ET - Market Summary

by Stockwatch Business Reporter

West Texas Intermediate crude for June delivery added $5.95 to $105.71 on the New York Merc, while Brent for July added $5.05 to $107.51 (all figures in this para U.S.). Western Canadian Select traded at a discount of $12.81 to WTI, up from a discount of $13.07. Natural gas for June added 25 cents to $7.64. The TSX energy index added 3.61 points to close at 238.86.

The oil patch engaged in cautious celebration as Alberta's top court ruled against a federal law that critics dubbed the No More Pipelines Act. The law, officially named Bill C-69 and passed by Prime Minister Justin Trudeau's Liberal government in 2019, overhauled the approval process for major infrastructure projects, including by giving Ottawa the power to consider far-reaching effects relating to climate change and "indigenous knowledge." The government of Alberta filed a legal challenge in 2019. In a 209-page ruling yesterday, the Alberta Court of Appeal dubbed the law unconstitutional, as well as "a classic example of legislative creep."

Although Alberta was the one to file the challenge, it was far from the only critic of the bill. Back in 2019, the premiers of Alberta, Saskatchewan, Manitoba, Ontario, New Brunswick and the Northwest Territories jointly warned Mr. Trudeau that the bill could pose "insurmountable roadblocks for major infrastructure projects across the country." The Canadian Chamber of Commerce was "deeply disappointed" to see Ottawa "threaten the financial security of millions of Canadians." The then-chairman of the Canadian Association of Petroleum Producers (CAPP), Jeff Tonken -- also the president and chief executive officer of Birchcliff Energy Ltd. (BIR: $9.37) -- fumed during a CAPP press conference that Ottawa was angling to "let the energy industry die."

The ruling brought them some vindication. The court found that Bill C-69 "has taken a wrecking ball to the constitutional rights" of provinces to develop their resources. "It has also taken a wrecking ball to something else -- and that is the likelihood of capital investment in [major] projects," continued the court. It went on: "Capital investment does not just happen ... And it particularly does not happen where, as under this legislative scheme, the investing rules are uncertain, unpredictable, unquantifiable and unreliable."

Alas, the rules remain in effect, with no guarantee of a change. The court's ruling is non-binding and does not nullify the law. "We will be appealing this decision," stated Mr. Trudeau in Parliament. The battle will head to the Supreme Court of Canada.

Within the oil patch, quarterly reporting season charged ahead. Keith MacPhail and Ronald Poelzer's Alberta Montney producer, NuVista Energy Ltd. (NVA), up 38 cents to $11.96 on 5.1 million shares, after trumpeting a first quarter profit of $70.2-million, or 31 cents a share. Analysts were expecting earnings of 23 cents a share. Cash flow of 80 cents a share exceeded analysts' predictions of 77 cents, while production of 66,000 barrels a day edged out analysts' predictions of 65,000. NuVista also announced a "shareholder capital return framework." This currently means that it intends to launch a 10-per-cent share buyback program in the second half of the year. It did, however, make sure to leave the door open for unspecified "dividend strategies."

Shareholders seemed satisfied. There is one shareholder, however, that NuVista cannot seem to please lately. Hours after the financials, NuVista disclosed the voting results from its annual shareholder meeting, with nearly every item seeing about 40 million shares voted in opposition or withheld. This carries echoes of last year's meeting. (All items still passed in both years.)

In the circular for this year's meeting, NuVista chairman Pentti Karkkainen said the primary source of disapproval at last year's meeting was a "significant shareholder who is an industry competitor." He appeared to be referring to Paramount Resources Ltd. (POU: $31.88), which disclosed itself as a major shareholder of NuVista in 2020 and owns 37.2 million of its 228 million shares. Apparently Paramount was just as much a thorn in NuVista's side at this year's meeting. Neither company has publicly said much about the other, leaving it unclear what direction Paramount might like NuVista to take.

Elsewhere in Alberta, George Fink's Cardium-focused Bonterra Energy Corp. (BNE) up 56 cents to $11.01 on 202,300 shares, after it too released its first quarter financials. They were generally in line with what investors hoped. Bonterra turned a profit of $10.5-million, or 30 cents a share, matching analysts' predictions. Cash flow of $1.28 a share slightly exceeded analysts' predictions of $1.27 a share, even though production of 13,300 barrels a day was slightly below analysts' predictions of 13,500 barrels a day. Bonterra said it strained against "restricted production due to gas processing capacity limitations," which it expects to ease now that it has a new gas plant coming on-line this month.

Missing, as usual, was a forecast of when Bonterra might revive its long-awaited dividend. The monthly payout was once as high as 30 cents in 2014. It shrank over the years until its eventual suspension in 2020. In early 2021, chairman and CEO Mr. Fink indicated that he is as eager as everyone else to see it come back, telling The Canadian Press, "Our shareholders just want to go back to getting a cheque every month, or at least every quarter."

Investors have since kept a hopeful watch on every quarter's financials. These show Bonterra bashing away at its net debt -- now $260-million, down from $328-million a year earlier -- which it has indicated as the main barrier to a dividend revival. Yet Mr. Fink has not specified the debt level he wants to hit. He kept his silence today, merely saying that Bonterra will continue to focus on "balance sheet strengthening, ultimately supporting its goal of returning capital to shareholders."

Yet another Alberta company that released its first quarter financials is Rick McHardy and Fotis Kalantzis's Spartan Delta Corp. (SDE), up 56 cents to $12.36 on 1.32 million shares. Production of 72,600 barrels a day and cash flow of 92 cents a share were both in line with analysts' predictions. Net profit of $61-million, or 40 cents a share, fell below analysts' predictions of 45 cents a share, in part reflecting hedging losses. Investors were in a forgiving mood. President and CEO Mr. Kalantzis emphasized that Spartan will be oil-hedge-free starting next month.

Mr. Kalantzis also drew attention to Spartan's net debt, which fell to $405-million as of March 31 from $458-million as of Dec. 31. While this is still a bit too high for Mr. Kalantzis's liking, he said Spartan is already considering a "return-of-capital framework" once the debt is at a more comfortable level.

Cheerleaders are hoping to see Spartan launch a dividend or share buyback program in the second half of the year. They are also hoping to see it join the S&P Composite Index, which has been steadily adding energy companies since last fall. The next quarterly index announcement will be June 3.

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