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Msg  723 of 766  at  5/17/2022 8:52:09 PM  by


Energy Summary -17th

Energy Summary for May 17, 2022

2022-05-17 20:33 ET - Market Summary

by Stockwatch Business Reporter

West Texas Intermediate crude for June delivery lost $1.80 to $112.40 on the New York Merc, while Brent for July lost $2.31 to $113.93 (all figures in this para U.S.). Western Canadian Select traded at a discount of $13.75 to WTI, down from a discount of $13.49. Natural gas for June added 34 cents to $8.30. The TSX energy index added 3.86 points to close at 255.14.

Grant Fagerheim's Alberta- and Saskatchewan-focused Whitecap Resources Ltd. (WCP) added 16 cents to $10.57 on 5.15 million shares, mildly pleasing investors with the launch of another buyback program. It can now repurchase up to 58.3 million of its 619 million shares over the next 12 months. Under the prior program, launched in May of last year, Whitecap bought back 33.3 million shares for a total of $264-million.

Management gave the standard reason for the buybacks, namely the belief that "the prevailing share price does not reflect the underlying value of the shares." Presumably it is dissatisfied with the stock's performance relative to competitors. Since the start of the year, Whitecap's share price has risen by 41 per cent, while the TSX energy index has climbed by 56 per cent. The company is hoping that shovelling money at shareholders will help close the gap. In addition to the buybacks, Whitecap's president and chief executive officer, Mr. Fagerheim, has been strongly hinting at a potential dividend increase in the third quarter. (The current dividend is three cents a month, for a yield of 3.4 per cent.)

Mr. Fagerheim has also been polishing Whitecap's brand elsewhere. The company won a prominent spot in an announcement yesterday from the government of Saskatchewan, which proudly proclaimed itself to be "Going Blue." The blue is for blue hydrogen. In the energy industry, the colour before hydrogen is the shorthand for how it was produced. Green hydrogen, for example, is produced using wind, solar or other renewable sources. Grey, brown, black, and even pink and turquoise are just some of the other colours on the increasingly whimsical spectrum, but Saskatchewan is mainly interested in blue hydrogen, which is derived from natural gas. The process creates carbon dioxide emissions that are then captured and stored underground, a process itself known as CCUS (carbon capture, utilization and storage).

Saskatchewan now has set its sights on becoming a blue hydrogen powerhouse. "We're a world leader in CCUS and enhanced oil recovery [EOR], which have natural connections to blue hydrogen," declared Energy and Resources Minister Bronwyn Eyre yesterday. She added that the government is helping to launch a "foundation report study" on a potential hydrogen and CCUS hub in the Regina-Moose Jaw region.

Getting back to Whitecap, it operates one of the largest carbon storage projects in the world, the Weyburn EOR field in Saskatchewan (where it pumps carbon in to coax oil out). Last year, Whitecap and Federated Co-operatives Ltd. (FCL) signed an agreement to consider potential future CCUS projects in Saskatchewan. To that end, both of them have decided to help with the above-noted study. They were thus rewarded with some good PR in the government's announcement, including a boosterish quote from Mr. Fagerheim about "leverag[ing] expertise to take a leadership role in the new hydrogen economy." The contribution from Whitecap and FCL will be a grand total of $50,000 -- combined, not each. It is not clear when the research project will be finished.

Over in Alberta, Stephen Loukas's Cardium-focused Obsidian Energy Ltd. (OBE) added seven cents to $10.44 on 757,600 shares. It has filed the circular for its next annual meeting on June 16. A new director is standing for election, Shani Bosman, an engineer by training who now bills herself on social media as a "business transformation and performance adviser." She is the founder of her own consulting firm. Prior to that, she was vice-president, corporate strategy, of Husky Energy (now part of Cenovus Energy Inc. (CVE: $27.01)) until 2021.

Obsidian previously announced on May 4 that Ms. Bosman would be standing for election. That news was overshadowed by the rest of the May 4 update, namely the financial results for the first quarter. While these held few operational surprises (the company having already released a lengthy operational update on April 12), investors were miffed to learn that of Obsidian's $101.3-million in cash flow for the quarter, a lofty $22.7-million was gobbled up by share-based compensation charges. Obsidian said this was a function of its higher share price. Even so, at a time when other companies were announcing big dividend boosts and other treats for shareholders, Obsidian's update drew scowls.

The update also did not contain the long-awaited news of a debt financing that Obsidian has been hyping for months. Its interim president and CEO, Stephen Loukas -- still holding on to the interim tag, years after taking charge in 2019 -- said in January that the company would aim to finish the refinancing by midyear. With June 30 fast approaching, he said in the May 4 update that news on this front would arrive "within the next six weeks."

Further afield, the Lundin Group's Africa Energy Corp. (AFE) added 1.5 cents to 28 cents on 20,000 shares, after releasing its own first quarter financials. Being an exploration-stage company, it had no revenue or production to speak of. It therefore focused on its balance sheet -- which showed $9.5-million (U.S.) cash and no debt as of March 31 -- while trying to stir up exploration hype. "We are excited to drill the Gazania oil exploration well offshore South Africa this year," cheered president and CEO Garrett Soden (who has been with the Lundin Group for about 15 years). He opined that the well "has a high chance of success, with material upside for our shareholders."

Gazania -- a family of daisy-like flowers native to South Africa -- has taken a long time to bloom. It will be drilled on a concession known as block 2B, in which Africa Energy acquired a 90-per-cent interest way back in 2016. It then began looking for farmees that could help with the drilling of a "high-impact exploration well ... in 2019." While the "high-impact" spiel never wavered, the timeline certainly did. Eventually, Africa Energy managed to find its farmees -- reducing its interest in the block to 27.5 per cent -- and in March of this year, it proudly entered a contract for a drill rig. The rig should set sail this August and drill the well in September or October.

The main farmee (with a 50-per-cent interest) was the Azinam Group, which in March was taken over by Eco (Atlantic) Oil & Gas Ltd. (EOG: $0.53). Eco and Africa Energy have a major shareholder in common, owning 17.2 per cent and 19.8 per cent of their shares, respectively. That would be fellow Lundin promotion Africa Oil Corp. (AOI), up four cents to $2.54 on 689,200 shares. Africa Oil seemed pleased with today's status update. Indeed, it has been helping Africa Energy promote the well, mentioning Gazania no fewer than four times when it released its own quarterly financials last week.

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