by Stockwatch Business Reporter
West Texas Intermediate crude for June delivery added $4.36 to $110.49 on the New York Merc, ending the week higher for the third week in a row (all figures in this para U.S.). Brent for July added $4.10 to $111.55, but still posted its first weekly dip in three weeks. The volatility that has defined 2022 so far showed no signs of stopping. Western Canadian Select traded at a discount of $13.49 to WTI, down from a discount of $13.47. Natural gas for June lost eight cents to $7.66. The TSX energy index added 9.21 points to close at 245.07.
Canadian oil stocks rose with oil prices. Scott Ratushny's Alberta-focused Cardinal Energy Ltd. (CJ) added $1.17 to $8.02 on 5.44 million shares, after releasing its first quarter financials. It trumpeted a net profit of $57-million and, as promised, reinstated its dividend. The dividend was also more generous than investors were expecting. Cardinal told them in March that it would make a dividend announcement in May, but did not tell them the planned amount. The dividend was previously 1.5 cents a month before its suspension in early 2020. The most common rumour floating around ahead of the financials was that Cardinal would bring it back at four cents a month. Instead, Cardinal chose five cents a month, for an implied yield of 7.5 per cent.
The generous payout offset the other numbers in the financials, which were somewhat mixed. Production averaged 20,600 barrels a day, in line with analysts' predictions, but cash flow of 53 cents a share was a tad below analysts' predictions of 55 cents a share. Capital spending of $35-million was quite a bit higher than analysts' predictions of $27-million. Mr. Ratushny, Cardinal's chief executive officer, of course had nothing but good things to say, declaring that the company "outperformed expectations" and ended the quarter "in an enviable position."
He has good reason to be in a good mood. As he owns 3.58 million of Cardinal's 152 million shares, he can now look forward to over $179,000 in monthly dividend payments (on top of his annual salary of $316,000). Another major shareholder of Cardinal is N. Murray Edwards, the co-founder and executive chairman of oil sands giant Canadian Natural Resources Ltd. (CNQ: $78.62). He owns 17.28 million Cardinal shares, from which he will now get a lovely monthly present of $864,000.
Another Alberta producer, Neil Roszell's Clearwater-focused Headwater Exploration Inc. (HWX), added 80 cents to $7.13 on 5.6 million shares. It too pleased investors with its first quarter financials. These were right in line with analysts' predictions, showing production of 12,400 barrels a day and cash flow of 30 cents a share. Unlike Cardinal, Headwater has shown no interest in a dividend, preferring to put the focus on its "very strong growth outlook." It underscored this in the financials with the announcement of an acquisition, a higher budget and higher production guidance.
The acquisition adds nearly 100 more sections in the Alberta Clearwater. Headwater now has over 400 sections in the play, making it one of the largest landowners. Over the last five years -- and particularly since 2020, when public companies such as Headwater, Tamarack Valley Exploration Ltd. (TVE: $4.56), Baytex Energy Corp. (BTE: $6.22) and others started to rush into the play -- production from the Clearwater has gone from virtually nothing to over 70,000 barrels a day. Most of Headwater's production comes from the Marten Hills area. Its new assets are in the Peavine area, an exploration-stage region about which chairman and CEO Mr. Roszell feels "extremely excited."
(Mr. Roszell would have many reasons to feel fond of the Clearwater, likely including its very name. His three prior promotions all had watery names -- Wild Stream, Wild River and Raging River, which he sold from 2012 to 2018 -- and he named his current promotion Headwater in 2019, a year before entering the Clearwater. That his water-themed promotion now has a water-themed core play is a congenial coincidence.)
Mr. Roszell's extreme excitement, in this case, took the form of an extra $50-million that Headwater is earmarking this year for Peavine, or over one-third of the company's original full-year budget of $145-million. The company is now hiking the full-year budget to $230-million (including some extra spending at Marten Hills). The increase in the production guidance is less dramatic -- 13,000 barrels a day instead of 12,500 -- but that is to be expected when most of the extra money is for exploration. Mr. Roszell kept up a steady stream of hype, talking up Headwater's "material leg of long-term growth" and "very strong and profitable future."
Another company active in Alberta, though its most productive assets are far away in Egypt, is Randy Neely's TransGlobe Energy Corp. (TGL), up 30 cents to $5.22 on 265,800 shares. It is saying goodbye to founder, director and former CEO Ross Clarkson. More interestingly, the departure was not exactly planned. Mr. Clarkson was listed as a nominee in TransGlobe's circular for its annual shareholder meeting held two days ago. Yesterday, TransGlobe announced that Mr. Clarkson had decided not to stand for election after all, a decision "driven by the preliminary voting results of the shareholders."
This is an abrupt farewell for Mr. Clarkson, who has been a fixture at TransGlobe for more than two decades. He served as president and CEO from 1996 until retiring and becoming a director in 2018 (at which point the president and CEO roles went to Mr. Neely, formerly TransGlobe's chief financial officer). During Mr. Clarkson's tenure as CEO, TransGlobe's stock got as high as $20 in 2010 but then fell to about $1.50 in 2016 (partly because of the oil price downturn and partly because of Egypt's unfortunate tendency to erupt into violent political protests). By the time he retired and switched to being a director in 2018, the stock was back up around $3. (It then got as low as 45.5 cents during the 2020 downturn, but that was Mr. Neely's problem. The subsequent rally in oil prices has helped send it up to today's close of $5.22.)
TransGlobe did not disclose the specifics of the preliminary voting results that apparently led Mr. Clarkson to step down. In the three meetings prior to this one, Mr. Clarkson received 83- to 97-per-cent voting support, which was often more than his fellow directors. Yet this annual popularity contest has grown less and less popular with shareholders since 2019. That was a year in which every single director got at least 95-per-cent support. Of the five directors who stood for election this year, the most popular was Ed LaFehr (who is also the CEO of Baytex Energy Corp. (BTE: $6.22)), with 87-per-cent support. The least popular was Dr. Tim Marchant (a 71-year-old former Amoco executive) at just 61 per cent.